In 2014, New Mexico was gripped by “Tesla” fever. The talk centered on the possibility that the electric vehicle company was considering locating its “gigafactory” to produce batteries for its cars right here in New Mexico. Needless to say, that didn’t happen. They went to Nevada instead.
While the Rio Grande Foundation supported efforts to lure Tesla here, most of our attention was focused on the zero income tax, “right to work,” and zero corporate income tax laws that make Nevada more attractive than New Mexico when it comes to business. We were (and remain) leery of massive incentives for a single business. Nevada offered those to the tune of $1.25 billion, a figure that was quite high given that Nevada was likely better-suited than any other state as a site for the factory to begin with.
Of course we have also stated our concerns at the time about Tesla’s business model producing high-end electric vehicles. With oil having dropped from then- $110/barrel to $30/barrel today, Tesla’s mass-market appeal is further limited.
Now, some analysts (including this one at Seeking Alpha) are saying that the gigafactory is a “dud” for Nevada. Salient facts from the Seeking Alpha article include:
- The 2014 bond proceeds that were to be spent on the Gigafactory are long gone.
- But Tesla’s need for cash has continued. Only 15 months after raising the bond funds, Tesla pledged the bulk of its assets to secure a $500 million collateralized loan facility with a consortium of banks.
- Two months after that, Tesla raised an additional $738 million of capital by issuing additional stock.
- Tesla has not come close to its own estimate that it would complete the Gigafactory structure by the end of 2015.
- Tesla has spent about $300 million on the Gigafactory – far less than Nevada estimated would have been spent by now.
- Tesla’s only announced “partners” at the Gigafactory are Panasonic and two fledgling mining companies with contingent contracts for the supply of lithium-hydroxide.
- Tesla recently issued, at page 22 of its November 10Q filing, a caution that “we may have difficulty signing up additional partners.” (This was added to existing disclosures that “the cost of building and operating the Gigafactory could exceed our current expectations” and “the Gigafactory may take longer to bring online than we anticipate.”)
- As of September 30, 2015, Tesla had 50 employees at the Gigafactory and Panasonic had 32. During the third quarter, there were (on average) another 847 construction workers on site. Based on drone flyovers (which unfortunately are removed from the web soon after they appear), it appears that many, if not most, of the construction workers have now left the Gigafactory site.
7 Replies to “Is Tesla’s Nevada “Gigafactory” a dud?”
And so it is with many green schemes. Look, I like the concept of an electric vehicle or at least a motor driven one but Tesla has been elevated by much marketing hype like wind and solar. But I don’t like the agenda of- “We got to promote these technologies for the sake of the Earth and climate hype”
If these technologies will one day become sustainable then let them do so on their own merits and not government mandated ideologies and subsidies. This is no solution for energy progress.
Oil Gods like nothing more than to reduce costs/prices at a time when electric powered motor vehicles begin slamming the petro burner automotive market. Oil Gods should do what they generally do. Increase oil prices and blame the competition for doing so:). Then heavily regulate the petro burner automobile market.
Not sure that electric vehicles are “slamming” petroleum-based vehicles just yet. Would like to see how they perform w/o all the government subsidies. There are no oil gods. The Saudis come close, but if they were truly gods, they would be getting THEIR price for oil right now, not having to compete with American producers.
Hybrids and more fuel efficient gasoline vehicles were developed largely absent government subsidies because there is a market for them (some federal nudging). Would love to see EV’s develop the same way.
Paul it looks like the oil Gods are worried, if not why go through all the trouble this article has done to misrepresent the truth? Make a deal with the oil Gods. They stop taking subsides, and the electric car industry will stop taking subsides. Probably not, huh? lol
You overestimate our influence in Washington, unfortunately. If it was up to me, I would indeed eliminate any and all REAL subsidies to the oil and electric vehicle industries. That includes the supposed positive impact of American military intervention which may or may not be an indirect subsidy to the oil industry (it’s certainly debatable). Anyway, hard as it is to believe, neither the Republicans nor the Democrats are especially ardent advocates of the free market….
What do you mean by “REAL” subsidies? It still appears that you are hedging your words. Why not go for “all” subsidies? The Koch brothers wanted to do away with the Ex-Im Bank, but I noticed they didn’t make near as an effort to do away with the subsidies that profit them. I would really like to believe the conservative movement, but they are not any where better than the left. They want to “pretend” that they are consistent with their positions, but sadly they are not any better then the rest of the crowd.
By “real” subsidies I mean outright favoritism for one industry or another. When it comes to the oil and gas industries, too often the left has called income tax loopholes and provisions that are available to ALL businesses “oil and gas subsidies.” We can discuss whether or not these are good policy, but they are not inherently “oil and gas” subsidies in the same way that a wind or solar tax credit or “renewable” mandate is a subsidy for those fuel sources.
I don’t speak for the Koch Brothers, but I’d be interested in more details about your assertions. They were active on Ex-Im because they thought they could win and they almost did. I haven’t seen them outright defend corporate welfare or subsidies for their own industries, but I’d love to see some examples. Nobody is perfect, but they are a lot more philosophically-consistent than most people out there even if they make mistakes (like supporting Romney in 2012).