Tesla Eyes 4 States for $5B Battery Factory

By Gail Kalinoski, Contributing Editor

Saam Jaffe, Navigant Research

According to The Dallas Morning  News, four Southwest states – Texas, Arizona, New Mexico and Nevada – are in the running to be the home of Tesla Motors Inc.’s $5 billion “Gigafactory” that would mass produce lithium-ion batteries for electric cars and create about 6,500 jobs.

In a blog post on its website, Tesla said it expects to make a final site selection and begin construction this year. The company said it is looking to build a 10 million-square-foot facility on 500 to 1,000 acres of land. A rendering showed pictures of new solar and wind farms nearby to power the factory. Once construction ia completed in 2015, equipment would be installed the following year and production of the batteries for Tesla’s third-generation electric cars would begin in 2017. The Palo Alto-based company expects to be producing up to 500,000 vehicles a year at its Fremont, Calif., plant by 2020.

“In cooperation with strategic battery manufacturing partners, we’re planning to build a large-scale factory that will allow us to achieve economies of scale and minimize costs through innovative manufacturing, reduction of logistics waste, optimization of co-located processes and reduced overhead,” the company said in the blog posting.

Tesla said it plans to invest about $2 billion in the factory and partners would invest another $2 billion to $3 billion. Panasonic, which is the primary battery supplier for Tesla’s Model 6 vehicle, is expected to be one of the partners.

The statement said that by 2020 the Gigafactory would produce more lithium batteries than were made around the world in 2013.

Tesla didn’t give locations within each state. The Reno Gazette-Journal in Nevada reported that a site near Reno-Stead Airport and the Tahoe Reno Industrial Center was being considered. The newspaper noted it is the site closest to the Fremont car plant.

Steve Hill, director of the Nevada Governor’s Office of Economic Development, said in a prepared statement this week that the state was “honored to be included in their list of finalists.”

“Our office has been working with the regional development authorities and local governments to highlight what Nevada offers: a skilled workforce, responsive workforce development and training programs, exceptional quality of life, great schools, low operating costs, and a commitment from the State of Nevada to provide the climate necessary for innovative businesses to thrive.”

Sam Jaffe, an analyst at Navigant Research, said the main things Tesla is probably considering are close access to rail lines, incentive packages from the states, renewable energy issues and environmental regulations.

“There are so many things you can get from a government like lower electric rates, certain benefits for employees,” he told Commercial Property Executive. “This thing is so big and so important to the economies of these states, he’s (CEO Elon Musk) going to be inundated with all kinds of creative ideas.”

Jaffe said there may be other contenders out there as well.

“The four states they mentioned are not the only states that could end up being the winner,” he added. “They are essentially announcing let the games begin. I am not counting out California.”

He said Tesla’s goal is to make batteries as cheaply as possible.

“One way to do that is putting it close to where you are actually assembling the car,” Jaffe concluded.

He doesn’t rule out West Texas, though, because of Tesla’s plan to install solar and wind farms at the site.