Elon Musk

Elon Musk, chair and CEO of Tesla Motors, speaks at a Dealbook conference in New York in November 2013. The company says it has broken ground for a gigafactory in Nevada, but in an earnings call last week, Musk said that doesn’t mean it will be the location of the massive project.

Tesla Motors Inc. on Thursday confirmed Reno, Nevada, as a finalist for its planned “gigafactory,” saying the company had broken ground in the area in June. But the electric-car maker didn’t rule Texas out of the running for the $5-billion project.

In an earnings call with Wall Street analysts, Tesla CEO Elon Musk said construction crews had “substantially” completed foundation work on a site near Reno. He also made it clear that the Silicon Valley-based company wasn’t committing itself to pouring concrete there just yet.

“There’s still a little bit of work ongoing,” Musk said. “We’re going to be doing something similar in one or two other states, which is something I previously said we’d do because it makes sense to have multiple things going in parallel.

“Before we actually go to the next phase of pouring concrete, though, we want to make sure we have things sorted out at the state level.”

Referring to the hefty economic incentives that Tesla likely will win for the gigafactory, Musk emphasized that the company wouldn’t pursue a deal that was “unfair” to Nevada or one of the other finalist states: Texas, Arizona, California and New Mexico.

“We want to make sure it is compelling for all parties,” he said. As for the Nevada site, “at this point the ball is in the court of the governor and the state Legislature,” Musk added. 

Since Tesla first announced plans for the gigafactory, which it estimates will create 6,500 jobs by 2020, officials at the state and local level have scrambled to craft legislation, propose regulatory reforms and cobble together enough in tax breaks to lure the manufacturer. Experts had considered Reno one of the strongest contenders for the manufacturer’s massive lithium-ion battery factory. During the earnings call, Musk finally hinted at what he expects from the eventual winner. 

He estimated Tesla would fund about 40 percent to 50 percent of the gigafactory’s total $5-billion price tag. Panasonic, which on Thursday signed an agreement as a lithium-ion cell supplier for Tesla, would chip in about 30 to 40 percent, Musk said. 

As for the state, he expected an investment of up to 10 percent, or $400 million to $500 million. Representatives for Gov. Rick Perry were unavailable for comment Thursday, but his staff recently told the Austin American-Statesman that $76 million remains in the Texas Enterprise Fund, the state’s “job-closing” fund. Since the fund’s creation in 2003, Perry has awarded more than $500 million in grants to corporations such as Apple, Caterpillar and recently Toyota, for the relocation of its Torrance, California, headquarters to Plano. 

In contrast, the largest economic incentive ever offered in Nevada delivered $89 million in property tax abatements for construction of an Apple data center just across the highway from the site that Tesla has prepared for its gigafactory. 

Karl Brauer, senior analyst with Kelley Blue Book, said the construction work in Nevada didn’t mean much beyond offering Tesla the opportunity to squeeze more money out of every finalist state. 

“Elon knows that it’s relatively inexpensive to ‘break ground,’ which means you maybe own the land and pay some guys to stick a shovel in it,” Brauer said. “In the meantime, you can make all the other cities and states think they might lose their shot at this thing.”

Musk just wants as much leverage as possible for tax breaks and incentives, he added. That concerned Ray Bacon, executive director of the Nevada Manufacturers Association. In an interview in May, he said he didn’t have much hope for his state considering that Nevada’s constitution prohibits monetary gifts to private corporations.

“When the state was formed, people were afraid the mining guys would rob the state treasury,” Bacon said. “So if we’re talking half-a-billion dollars and up, Nevada just doesn’t have it. That’s not an option. “If it’s about how much a state gives, we’ll lose pure and simple,” he said.

 
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