Nevada And Tesla Agree On Gigafactory Deal

After months of speculation and political maneuvering in five states to woo Tesla’s Giga Factory, yesterday afternoon Nevada was named the winner.

The deal, with provisions subject to state legislative approval, was announced in a press conference with Tesla CEO Elon Musk and Nevada Governor, Brian Sandoval.

As previously reported, Tesla aims to produce as much as 50 gigawatts of battery storage by 2020, with 35 gigawatts for cars, and 15 gigawatts for stationary energy storage systems.

One benefit to alternative-energy car fans from the Giga Factory is Tesla’s promised 200-mile range Model 3 which it wants to sell from the $30,000 level as a BMW 3-Series fighter. Naturally, also Tesla has other plans, but the idea is to create economies of scale to make this and subsequent cars financially feasible.

And speaking of financially feasible, Tesla has been promised much more than the half billion in tax breaks it wanted from whichever state it decided to work with – initially Arizona, New Mexico, Texas, Nevada, and later, California.

Nevada came through and then some with an estimated $1.25 billion in various financial incentives over 20 years.


In short, Nevada negotiated a business development package that trades unprecedented tax breaks in exchange for a factory that stands to employ 6,500 and contribute an estimated $100 billion to the state over 20 years.

The Nevada state legislature is also going to be asked to let Tesla freely sell factory direct, and bypass the auto dealer franchise system.

It’s hoped Tesla will more than pay back the huge vote of confidence that in the process reduced breaks to which other industries are now entitled.

“This is great news for Nevada,” said stated Gov. Sandoval in a brief prepared statement issued by Tesla. “Tesla will build the world’s largest and most advanced battery factory in Nevada which means nearly one hundred billion dollars in economic impact to the Silver State over the next 20 years. I am grateful that Elon Musk and Tesla saw the promise in Nevada. These 21st century pioneers, fueled with innovation and desire, are emboldened by the promise of Nevada to change the world. Nevada is ready to lead.”

According to the Reno Gazette-Journal, the deal is by far the biggest Nevada has ever offered. It eclipses the state’s previous record-breaking $89 million for Apple Computer, and Good Jobs First estimates it as the 10th largest incentive package ever offered in the U.S.

In brief, according to RGJ, the breakdown is as follows:

56 percent ($725M): 20-year 100-percent sales tax abatement
26 percent ($332M): 10-year 100-percent property tax abatement
9 percent ($120M): Transferable tax credits
6 percent ($75M): $12,500 per job transferable tax credits (6,000 jobs)
2 percent ($27M): 10-year 100% modified business tax abatement
1 percent ($8M): Discounted electricity rates for eight years

In essence, Tesla will be 100-percent tax free for the first decade, and at 2024, it’s expected to begin contributing substantially to the state and local Storey County and school district.

The sales tax abatement was to make Nevada competitive with other states including Arizona and Texas which charge no sales tax on manufacturing equipment and other states that charge no sales tax at all.

Previous artist's rendering issued by Tesla.

Previous artist’s rendering issued by Tesla.

In return, Tesla is committed to invest at least $3.5 billion in manufacturing equipment and real property in Nevada. This is reportedly well below the $10 billion state officials expect from Tesla over the next 20 years.

SEE ALSO: Panasonic To Provide Machinery For Tesla’s Battery Plant

While the legislature must approve, Tesla’s press release sent the signal that the tracks have already been greased.

“On behalf of the State of Nevada, I would like to acknowledge this monumental day and provide my initial support,” said Speaker Marilyn Kirkpatrick. “This is a significant opportunity to make a major stride to improve our statewide economy. I look forward to receiving the necessary information so the Legislature can meet and take necessary action to support this major industry coming to Nevada.“

To be sure, Nevada is betting big on Tesla – and the EV industry.

“What this can do for the region … It will allow every under-employed person to reach full employment,” said Gov. Sandoval’s economic development director Steve Hill to the Reno Gazette-Journal. “It will lift up everyone in the region. Property values will go up. The prosperity of the region will be materially changed.”

But the monies promised had to come from somewhere, and financial “losers” to winners Tesla and Storey County, and Nevada itself, include insurance companies, film producers, and car dealers.

SEE ALSO: Is Tesla Building Towards Gigafactory Overcapacity?

Insurance companies headquartered in state, and film producers will lose all or most of tax breaks, and car dealers who’ve lobbied against Tesla’s factory direct model stand to lose their appeal.

But winners include Storey County School District which beginning 2024 stands to get $10 million per year compared to its present $4.9 million budget. Also tiny Storey County is to net massively above its current $2.5 million annual property tax revenues to $20 million.


A previous groundbreaking and construction permits granted for the area outside Reno have been reported.

Also word that groundbreaking at two giga factory sites would be undertaken has been issued. Unofficial reports say Nevada is now it, and this appears to be the case, though legislative approval is as mentioned, still pending.

For his part, Musk acknowledged only Nevada and what appears to be a done deal.

“I would like to recognize the leadership of Governor Sandoval and the Nevada Legislature for partnering with Tesla to bring the Gigafactory to the state,” said Musk. “The Gigafactory is an important step in advancing the cause of sustainable transportation and will enable the mass production of compelling electric vehicles for decades to come. Together with Panasonic and other partners, we look forward to realizing the full potential of this project.”

The “full potential” thus means more winners too. These include the EV industry – and automakers may be forced to follow, a definite hope of Tesla’s – and maybe even you, assuming the gambit pays off.

RGJ, Tesla.