Tesla Wants to Put 'Gigafactory' Battery Plant in Nevada

NLPC ^ | September 4, 2014 | Paul Chesser

[jazusamo]

Only a year after Tesla Motors and CEOElon Musk extracted themselvesfrom the $465-million taxpayerstimulus loan that brought critical scrutiny to the company’s performance, the electric automaker has once again put itself under the spotlight that comes with taking government corporate welfare.

Today the company will announce its plans to build a battery manufacturing plant near Reno . The new gambit was the culmination of competition that pitted at least five states against one another for the “privilege” of hosting Tesla’s “Gigafactory” – named so because of the amount of stored power they plan to produce. Cost to build the plant is estimated to be $5 billion, and Musk said he expected the winning bidder to cover at least 10 percent of that, according to the Associated Press. That means at least $500 million in some form of incentives or conciliations from Silver State taxpayers.

The dance has been a marathon, with speculation about the competitors – the others being California, Arizona, New Mexico and Texas – rampant. Who would bid the most? Who will “win?”

“The effect is a game of high-stakes poker…,” AP reported. “The factory promises something that every state wants but rarely gets these days: thousands of good-paying factory jobs and all the residual economic benefits they bring.”

Much was said about the secretive nature of the states’ bids. AP said it filed public records requests for information about the negotiations with the five competing states, and predictably got nothing of value. Most states exempt economic development documents from public disclosure laws, at least until after companies who consider relocation have made decisions. The process is not unique to the Gigafactory project.

Nonetheless the desire to lure Tesla was outsized in light of its performance (unprofitable) and history (short). NLPC has outlined in the past how Musk jiggered accounting records and vacuumed up valuable credits from California’s zero emissions program to appear profitable. It’s most recent earnings release for the second quarter of 2014 showed a $61.9 million lossunder Generally Accepted Accounting Principles (also known as Non-Muskian Math). Last month analyst Herb Greenberg noted the phenomenon of enthusiasm for Tesla despite its actual financial performance, and explained how the company “stretches earnings quality.”

“As slick and cool as its Model S and upcoming models may be – and as smart, creative and ingenious as Musk clearly is – Tesla management is not beyond pulling out all stops to make its financials look better than they really are,” Greenberg wrote. “It strikes to the company’s ambitious culture, which is good when it comes to cars, bad when it comes to its financials.”

Which ought to serve as a caution to Nevada lawmakers, who are expected to be called into a special session by Gov. Brian Sandoval to vote on the incentives for Tesla. While there has been (and still is) an irrational exuberance for Tesla on Wall Street, the company is still in its infancy, produces only one model, is struggling to deploy its specialized and costly “Supercharger” network, has apparently abandoned its battery “quick-swapping” scheme , and is only a year away from its emancipation from its $465 million stimulus loan – which at least one analyst said it had to repay because of failures to reach earnings and loan ratio milestones.

Nevadans should also look eastward, where Delaware was burned by another electric vehicle company that once held great promise and enjoyed more than $1 billion in public and private investment: Fisker Automotive. The California-based manufacturer of the electric (Bad) Karma had plenty of money and supporters, including the Department of Energy (with a $539 million stimulus loan), former Vice President Al Gore, and current Vice PresidentJoe Biden. Delaware Gov. Jack Markell cut a $21-million deal with Fisker to occupy a former General Motors plant in the Wilmington area, where the company planned to build a follow-up model to the Karma. But Fisker burned through its money so fast that it never made it to Delaware for any meaningful activity, and state taxpayers were left holding the bag – including having to pay utility bills for the empty plant . Fisker went bankrupt and its carcass was sold to a Chinese company.

Musk loves media attention so long as it’s positive, and he’s bathed in a lot of it – especially since he extracted Tesla from the harsh spotlight that came with the Department of Energy’s stimulus loan program, which had seen a number of failures(like Solyndra). It’s not surprising that Musk would look to government to help his bottom line again, like he has with California’s zero emissions credit scheme. But with the acceptance of what will be an enormous amount of public investment for the “Gigafactory,” will also come (once again) the likely unpleasant and unrelenting rectal exam from the media with regard to company performance, job creation, economic impact, and overall behavior in the state.

In the past Musk has bristled when negative attention has hit Tesla, such as when its vehicles were involved in fire incidents. His typical tactic is to deflect blame and issue other news so the pack-mentality media will again refocus on the positive. A current example is Musk’s recent announcement that Tesla will provide Model S owners with a new 8-year, unlimited mileage warranty for its drive unit and battery pack, which he said will have “a moderately negative effect on Tesla earnings in the short term, as our warranty reserves will necessarily have to increase above current levels.” That’s a nice, tactical way to lower expectations for the coming quarters.

But like much of the Wall Street media now says, Tesla hasgrown into its own cult. Nevada, be careful about drinking its Kool-Aid.

[4rcane]

Its only not profitable because he’s putting almost all profit into research/development and expansion. Don’t think short term, think long term

[Obadiah]

Consumer Reports' Tesla Model S has more than its share of problems

-Consumer Reports, 8/2014

[Jonty30]

Unless they can create a battery that can be fully recharged in the time it takes to fill a gas tank, it’s not going anywhere.

[wjcsux]

The Tesla is a very expensive battery operated toy.

[TurboZamboni]

Follow the money to a Hairy Reed.

[FatherofFive]

I doubt there’s much happen in NV that Dingy doesn’t get a cut of.

SENATOR GEARY
Alright, Corleone. I'm going to be very frank with you. Maybe more frank than any man in my position has ever spoken to you before.

Michael nods, indicating that he should do so.

SENATOR GEARY
The Corleone family controls two major hotels in Vegas; one in Reno. The licenses were grandfathered in, so you had no difficulties with the Gaming Commission. But I have the idea from sources... (takes the water from Neri and swallows his pills) ...that you're planning to move in on the Tropicana. In another week or so you'll move Klingman out, which leaves you with only one technicality. The license, which is now in Klingman's name.

MICHAEL
Turnbull is a good man.

SENATOR GEARY
Let's forget the bull$hit, I don't want to stay here any longer than I have to. You can have the license for two hundred and fifty thousand in cash, plus a monthly fee equal to five percent of the gross...

Michael is taken aback; he looks at Hagen.

SENATOR GEARY
...of all three Corleone hotels.

Hagen is frustrated; all his information was wrong.

MICHAEL
Senator Geary, I speak to you as a businessman who has made a large investment in your state. I have made that state my home; plan to raise my children here. The license fee from the Gambling Commission costs one thousand dollars; why would I ever consider paying more?

SENATOR GEARY
I'm going to squeeze you, Corleone, because I don't like you; I don't like the kind of man you are. I despise your masquerade, and the dishonest way you pose yourself and your fu*king family.

[jazusamo]

LOL! Great scene which Geary came to regret.

[FatherofFive]

LOL! Great scene which Geary came to regret.

Godfather I & II are both in my top 5 movies of all time. Every time I see Dirty Harry Reid I think of this scene

[asinclair]

There is quite a bit of geothermal power already being generated in the Reno area, with additional geothermal sites surveyed. East of Reno, there is plenty of desert onto which to put solar farms, particularly designs that don't burn up birds. (NV Energy has been building solar power in Northern Nevada since they were Sierra Nevada Power.)

Apple, who is "next door", has expressed its desire to expand solar, so they and Tesla could cooperate on building additional capacity nearby.

[TexasGator]

” and still have almost nothing to show for it.”

They only have the #1 best selling luxury sedan in the US ...

[Obadiah]

Yeah, all the limousine liberal dolts ran right out and bought one to show their support for another member of their leftist religion, kinda like Scientology.

Tesla sucks and I doubt they will ever mass produce anything, apart from direct government intervention or compulsion.

[SampleMan]

How much grant money is involved?

The new business model is not return on investment, but grant acquisition. The management team doesn’t need to make money, they only need to milk the grant.

[jazusamo]

Right off the bat this is $500Mil in incentives, it’s anyones guess how much more down the road.

[fella]

I wonder what big politician in D.C. are they in bed with.

[catnipman]

Musk is a con artist. He’s going to build exactly as many five billion dollar battery plants as the number of “battery swapping” stations he built for public usage.

[bray]

See how lowering taxes for preferred businesses bring them to certain states. These same people will not give similar tax cuts to the rest of the economy and cry when businesses flee the country.

Pray America wakes up

[M Kehoe]

Musk: Thank Harry and Rory Reid for all their hard “work.”

5.56mm

[jazusamo]

His “battery swapping” stations were definitely a scam and I think your right on the rest.

[TexasGator]

“Tesla sucks and I doubt they will ever mass produce anything, apart from direct government intervention or compulsion. “

Tesla is the only car company to have fully repaid its government loans.