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How Tesla got Nevada to give it $1.4B in exchange for a giant battery factory

How Tesla got Nevada to give it $1.4B in exchange for a giant battery factory

How Tesla got Nevada to give it $1.4B in exchange for a giant battery factory

How Tesla got Nevada to give it $1.4B in exchange for a giant battery factory

Above: Tesla’s “Gigafactory” will produce an enormous quantity of lithium batteries — and will be powered by renewable energy, Tesla says.

Image Credit: Tesla Motors

Elon Musk is riding high.

He’s running two acclaimed companies, SpaceX and Tesla. The former recently scored a multi-billion-dollar contract with NASA to shuttle supplies and astronauts to the International Space Station. The latter is building one of the most highly-acclaimed cars ever, simultaneously legitimating the electric car and proving that radical innovation in auto design is still possible. He’s been compared to Steve Jobs, Henry Ford, and Tony Sark.

And on the strength of his extraordinary reputation, Tesla has been able to win some extraordinary concessions from the state where it will be building its gigantic “Gigafactory” (.pdf) a huge plant that, once it’s at full capacity, will single-handedly double the worldwide production of lithium ion batteries.

A recent Fortune story explains, step by step, what went on behind the scenes as various states jockeyed for Tesla’s favor. Ultimately, Nevada won out, by giving Tesla a generous package of incentives, including:

  • 20 years without paying sales tax on equipment and construction materials (worth $725.8 million),
  • 10 years of zero property taxes ($349 million)
  • 10 years of discounts on payroll taxes ($29.4 million)
  • $195 million in tax credits from a program originally meant to benefit filmmakers and insurance companies
  • $113 million in Nevada state funds committed to building a new, four-lane highway from U.S. Route 50 to the Gigafactory location
  • $8 million in electricity discounts for Tesla
  • 980 acres, paid for by the state, in a desert location east of Reno
  • A bill to legalize direct car sales in Nevada, a serious point of contention between Tesla and most other states.

The price tag could have been even higher: At one point, Tesla negotiators were asking for $500 million in cash as part of the deal. Nevada managed to stave that off in part by offering richer tax credits.

In exchange, here’s what Tesla is giving Nevada:

  • $37.5 million in donations to local public schools starting in 2018
  • $1 million to support battery research at the University of Nevada
  • It’s also building its factory there, which it claims will create 6,500 jobs.

All told, Fortune notes, Nevada is paying about $200,000 for each of those 6,500 jobs. (It’s not clear how many of those jobs are temporary jobs pertaining to the construction of the factory, and how many are permanent factory jobs.)

Nevada governor Brian Sandoval sees it more optimistically, claiming that the factory will, over the next 20 years, have a net effect of creating 22,000 jobs in the state while adding $100 billion to the Nevada economy. But Fortune says several outside experts dispute those figures.

Regardless, Musk has proven that he’s a tough and ruthless negotiator — whether he’s dealing with competitors, suppliers, or governments.

Tesla’s goal is to accelerate the world’s transition to electric mobility with a full range of increasingly affordable electric cars. Palo Alto, California-based Tesla designs and manufactures EVs and EV powertrain components. Tesla ha… read more »

SpaceX designs, manufactures and launches the world’s most advanced rockets and spacecraft. The company was founded in 2002 by Elon Musk to revolutionize space transportation, with the ultimate goal of making life multiplanetary. In … read more »

Elon Musk SpaceX is the third company founded by Mr. Musk. Prior to SpaceX, he co-founded PayPal, the world’s leading electronic payment system, and served as the company’s chairman and CEO. PayPal has over twenty million customers i… read more »

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