Renée C. Byer / rbyer@sacbee.com

Stephan Brown, left, of Gold River came to test drive a Tesla last September at Folsom Premium Outlet Mall. Tesla, a beneficiary of many perks from the state, plans to build a new battery factory – but not in California.

Editorial: Despite tax breaks, Tesla looks elsewhere to open new battery factory

Published: Sunday, Mar. 9, 2014 - 2:00 am
Last Modified: Sunday, Mar. 9, 2014 - 12:07 pm

Manufacturing jobs are golden, providing workers living wages and decent benefits. They’re also disappearing.

The California Manufacturers & Technology Association points out that California lost a third of its industrial base – 607,000 manufacturing jobs – between 2001 and 2011, a major reason why the state’s middle class is shrinking.

So it came as a punch to the gut when Tesla Motors Inc., one of the few bright spots in California manufacturing, announced two weeks ago that it plans to build a “gigafactory” in some Western state not named California.

Tesla’s main domestic manufacturing line is in a Fremont factory. But it is planning a new factory to produce lithium-ion batteries that power Tesla’s high-end all-electric vehicles, employing as many as 6,500 workers, the Los Angeles Times reported.

The kicker: the factory would be open in 2017 in Nevada, Arizona, New Mexico or Texas. The investment by Tesla and other funders would be on the order of $4 billion to $5 billion.

Of course, Tesla founder Elon Musk and the others who run Tesla can move their operations wherever they see fit. That’s the American way.

But California has plenty of green invested in Tesla Motors; policymakers ought to think hard about the incentives they provide private enterprise.

It’s not an exaggeration to suggest that Tesla might not exist without California. The Legislature has passed numerous environmental laws that have all but forced auto manufacturers to produce electric vehicles.

Wealthy Californians with environmentalist sensibilities purchase more than their share of Tesla’s products – about one-third.

And it’s important that the state has been generous with its tax dollars.

In December 2009, an obscure arm of the California treasurer’s office, the California Alternative Energy and Advanced Transportation Financing Authority, approved a sales tax exemption for Tesla’s purchase of manufacturing equipment that is expected to save Tesla $31 million.

In January 2012, Tesla finalized a second agreement with the authority that would result in $24 million in tax savings. In December 2013, Tesla struck yet another deal with the authority that will save it $35 million.

The California Energy Commission has awarded Tesla $10 million to manufacturing its Model X at the Fremont factory. California’s Employment Training Panel spent $648,000 to help train Tesla workers.

Through California’s Clean Vehicle Rebate Program, the California Air Resources Board has given $2,500 rebates to more than 3,000 Tesla buyers, amounting to $8.6 million.

Exactly why Tesla decided to build its battery factory outside California is not clear. A company spokesman sent an email to The Sacramento Bee’s editorial board saying: “No comment at this time. However, please note that a location has not been finalized.”

Gov. Jerry Brown’s much-touted Go-Biz, an operation that is supposed to encourage business development in California, offered little explanation.

“The company employs thousands of Californians in its facilities here, and we are proud of its success. Go-Biz continues to work with them on future opportunities in California,” a spokesman said in an email.

In the coming months, Hollywood will lobby for an expansion of the film tax credit, contending productions are leaving for New York, Louisiana and other states that have generous incentives. Perhaps that is true. What’s also true is that tax breaks may work to a point. Business owners owe loyalty to investors and stockholders, not to states that give them money.

Read more articles by the Editorial Board



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