In retrospect, the odds were always in Nevada’s favor. In June, the electric automaker actually purchased land in the town of Sparks, just a short drive east of Reno. The company got as far into the construction phase as pouring the concrete before halting operations.
That’s when the other states started making their best offers.
For the past year, Elon Musk, Tesla’s CEO, has been talking about bringing a more affordable electric car to the masses. The company’s current model, the Tesla Model S, is a modern marvel. It has an EPA-rated range of 265 miles per charge (much more than any competing electric vehicle) and in August the National Highway Traffic Safety Administration awarded it a five-star safety rating – in every single subcategory. That’s a feat achieved by only one percent of all cars tested by the federal government.
The only catch, of course, is that the car is expensive. At a $70,000 base price that can increase to over $100,000 with all the bells and whistles, the Tesla Model S is beyond the average family’s budget.
In an attempt to cut the sticker price in half, Musk proposed a “gigafactory,” where the company’s lithium-ion batteries will be manufactured in bulk, cutting down their price and allowing the company to sell a $35,000-$40,000 electric car.
Five states were in the running for the gigafactory – Nevada, Arizona, New Mexico, Texas and long shot California. Not only would the state chosen become the new EV capital of America, it would also get 6,500 new jobs to boot. California’s environmental and business regulations meant that it was never the automakers first choice, but that didn’t stop the state government from offering $500 million in tax breaks and an exception to its own environmental law.
Ultimately, the factory will be staying in Nevada, and the state put together quite a deal to keep it there.
As the Los Angeles Times put it, Nevada’s package of subsidies allows the automaker to operate in the state “essentially tax-free for a decade.”
For the next 10 years, Nevada has agreed to a 100 percent tax abatement for the factory’s property taxes and modified business taxes. For the next 20 years, the factory will owe zero sales tax. The state has also pledged to pay the company $12,500 in tax credits for every job (up to the first 6,000 jobs) the company creates.
In return for this package of subsidies (valued at nearly $1.3 billion), Tesla will sell cars directly to Nevada consumers, provide residents an extended economic development rate rider electric program, and donate $1 million to advanced battery research at the University of Nevada, Las Vegas.
Those in favor of the deal say the gigafactory, in which Tesla will invest $5 billion, will be worth $100 billion to the state. Governor Brian Sandoval says it “will change Nevada forever.”
Others aren’t so sure.
“There’s a lot of euphoria and hoopla around this whole deal, but there are a ton of questions that come up and very little information so far,” said Andy Matthews, president of the Nevada Policy Research Institute.
Critics say the local property tax breaks that make up a quarter of the incentives will rob the local government and schools of funding.
“There’s no such thing as free growth,” said Greg LeRoy, executive director of Good Jobs First, a Washington research group.
Tesla plans to release the first batteries for its new Model 3 sedan by 2017.