Although Tesla has selected four states that might be in the running for the
plant, Boyd said that only two really made sense; Reno, Nevada, and San
Antonio, Texas.


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Expert handicaps where Tesla might put the gigafactory battery plant, and
why


Wednesday, Tesla shocked the world by saying that there would be not one,
but twosites chosen for the "gigafactory," a stupendously large battery
factory that is expected to bring 6,000 jobs and countless economic benefits
to the region eventually chosen for it.
Having two factories, Tesla CEO Elon Musksaid, would help the company hedge
its risks for the potentially very risky proposal of building a $4 billion
to $5 billion manufacturing facility in the continental U.S.
But at least one person wasn't surprised at all. John Boyd Jr., principal at
the site selection firm the Boyd Company Inc., said this was exactly what he
was expecting Tesla to announce because it lets the company keep details
about the project confidential as it moves forward — and play the two
potential sites off of each other to secure better concessions from the
local governments.
It's a common tactic for smart companies looking to place a high-profile
facility, and Tesla has been extremely savvy with the process so far, Boyd
said. Although his Princeton, New Jersey, firm is not involved in the Tesla
project, it's a leading site selection consultancy, having helped place
facilities for customers including PepsiCo, Chevron and Hewlett-Packard.
Although Tesla has selected four states that might be in the running for the
plant, Boyd said that only two really made sense — Reno, Nevada, and San
Antonio, Texas. Here's what he had to say about each site's strength and
weaknesses, and what it would mean if Tesla chose to build there.
Tesla didn't immediately respond to a request for comment.

Albuquerque, New Mexico

New Mexico was always a bit of a long shot for one reason — unlike the other
possible locations, it's not a right-to-work state. That means New Mexico's
laws are generally more favorable to factory worker unions. In general, that
means higher labor costs.
New Mexico also doesn't have a large native workforce, although Boyd doesn't
think that's as big a deal as some other people who have looked into it —
something as big as the gigafactory is very much an "if you build it, they
will come" sort of situation.
So why was the state even in play? Simple, Boyd said: Franchise laws. New
Mexico is one of the states where Tesla is facing legal troubles over its
controversial direct sales model, so the gigafactory might have been a
carrot to get the government to the negotiating table. Tesla was able to
sponsor a bill that would have amended New Mexico's franchise laws to allow
direct sales, but it was defeated in the state assembly.

Phoenix, Arizona

Arizona has a few advantages over its neighbor to the East — it is a
right-to-work state, it has no corporate income tax, and the state has put
together a good set of incentives, modeled after those of Texas, which are
among the most aggressive in the nation. But while Arizona is good in many
respects, it also doesn't stand out, which is a weakness against very strong
competitors like Nevada and Texas.
"To the governor's credit, the state has put together a very good set of
incentives. They've really streamlined their process," Boyd said. "But it's
just not quite as good as Texas. Next to Texas and Nevada, it's probably a
third choice."

Reno, Nevada

Nevada's advantages are geographic: It's the closest site to Tesla's
existing plant in Fremont. More important, it has something that no other
location has — a direct connection to Fremont by rail. Reno has a rail
interchange that makes it ideal to ship the batteries by train, and that
could save Tesla millions in shipping costs, Boyd said.
"When you look at overland shipping costs, we're expecting costs-per-gallon
for fuel to hit $7 a gallon very soon," Boyd said. "Rail is like a third of
that cost. And it's green, which is something Tesla cares about."
Northern Nevada also has a mineral advantage: It's the most lithium-rich
area in the country, and it sports the U.S.'s only currently operating
lithium mine. Given that Musk has said he wants to source all of his lithium
domestically, it's impossible to overstate what having the plant in Reno
does to simplify Tesla's supply chain.

San Antonio, Texas

The Texas site is the leading contender, Boyd said, because it's basically
the total package. It's a right-to-work state. It's got no corporate income
tax, a large and diverse workforce, as well as an existing automotive
industry (which aids in finding and retraining the types of workers Tesla
needs). Plus, it has put together a very good package of enticements to
bring business to the state, and Boyd says the governor has a very personal
stake in bringing the gigafactory home.
"(Texas) Gov. Rick Perry is out of office right now, and this will be his
last vanity project he brings to the state," Boyd said. "You know he'll move
heaven and earth to get this deal done."
Taken as whole, that makes Texas the best state in the union to locate a
manufacturing facility in, Boyd said. But San Antonio has one other
under-the-radar attribute that makes it ideal for Tesla in particular: The
port of Houston. The proximity of a major seaport means that the Texas
location is ideal if Tesla wants to pursue an aggressive strategy of
exporting batteries to Asia. (And remember, it already has partnerships with
big Asian manufacturers like Panasonic.)
If Tesla chooses Texas, which is ideal for shipping overseas, over Reno,
which is ideal for shipping to Fremont, that could be a sign of how
aggressive it plans to be with its export strategy.

BONUS: California!?!

Don't get too excited, but Boyd also said he'd heard rumblings that Tesla
was still in talks with Gov. Jerry Brown about building the factory in
California. That is surprising news, since the state was reportedly
disqualified fairly early in the process because of taxes and labor cost
concerns.
At this point, California would still be the darkest of dark horses in this
race, but Boyd said it was not totally inconceivable that the factory could
go to California, if Gov. Brown came up with a truly stellar enticement
package.
The state does, after all, have some inherent advantages that the other
states lack — it's the same state as Tesla's headquarters, has excellent
access to Asia in the event that Musk wants to start exporting batteries,
and doesn't have the workforce sourcing problems some of the other states
have.
But as with anything in the factory selection process, it's hard to say how
serious Tesla actually is about the California site, and how much it's
simply playing politics. Boyd said that Musk might simply be using the
gigafactory as a lure to keep negotiations going with the state, in the
interest of eventually wringing concessions out of it that might help it in
other business ventures.

"Elon Musk is playing chess here, and he's very good at it, no question
about it," Boyd said.





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