Tesla Chooses Nevada for Gigafactory Construction
Tesla Motors, Inc. (TSLA) will build its $5 billion Gigafactory in Nevada. The chosen site is the Reno Tahoe Industrial Center, which is about 15 miles east of Sparks, a Reno suburb in Nevada. Tesla has already prepared the site for the construction.
While the automaker had revealed earlier that in June it held the ground-breaking ceremony at this site for the potential construction of the Gigafactory, Tesla had said that the final location was undecided as it was planning to break ground in three sites. Arizona, California, New Mexico and Texas were the other states being considered.
Tesla expects the state to cover about 10% of the cost of the Gigafactory. Nevada provides the added advantage of low tax rates. Moreover, the site is close to a lithium deposit, which is essential as the electric carmaker plans to manufacture lithium-ion batteries on a large scale in the factory.
However, the construction of the Gigafactory in Nevada will depend on the delivery of the incentives promised by the state. Hence, Tesla will prepare a second site in another state as a backup, in case Nevada is unable to deliver on the incentives. It may even build a second Gigafactory on the backup site in future.
The concerned states are trying to attract Tesla as the Gigafactory will not only lead to a $5 billion investment, but will also create around 6,500 manufacturing jobs, which provide better wages and benefits compared to service sector jobs.
Tesla plans to finish the Gigafactory construction by 2017. By 2020, the company expects the annual lithium-ion battery production of the Gigafactory to exceed the global production in 2013.
The factory will produce enough battery packs to enable Tesla to build around 500,000 electric cars by 2020. It will also reduce the ‘per kWh’ cost of production of battery packs by over 30%. The automaker expects the factory to provide economies of scale and reduce production costs based on innovative manufacturing techniques, reduced logistic wastes, optimization of co-located processes and lower overhead costs.
Currently, Tesla sports a Zacks Rank #1 (Strong Buy). Other auto stocks worth considering include CarMax Inc. (KMX), O'Reilly Automotive Inc. (ORLY) and Fox Factory Holding Corp (FOXF). All these stocks have a Zacks Rank #2 (Buy).
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