Tesla Stays Put in California

Today’s headline in the Albuquerque Journal says it all: Tesla will be making its electrically-powered roadsters in California, not New Mexico. According to the San Francisco Chronicle:
California’s offer includes the state’s purchase of $100 million in manufacturing equipment, which it will then lease to Tesla. The company will have the option to buy the equipment at the end of the lease term tax-free, for an estimated savings of $9 million. California will also make job training grants to Tesla of up to $1.5 million.
The Rio Grande Foundation has been critical of such payouts in the past for the very fact that companies like Tesla are simply playing governments against each other to extract the largest payout possible. This certainly seems to be the case with Tesla.
While the loss of Tesla will undoubtedly be portrayed as a major loss for New Mexico, the reality is that Tesla’s cars are based on unproven technologies and the company needs a sweetheart deal because no private investor — at least one who is concerned about earning a reasonable return on his investment — would consider making such a significant investment.
As the Wall Street Journal points out, California Governor Arnold Schwarzenegger has a terrible economic record and faces extreme economic difficulty. While the payouts to Tesla will be extremely small relative to California’s overall economy, New Mexicans shouldn’t lose any sleep over losing Tesla to Arnold and his big payoff.

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