California very much in running for Tesla Gigafactory

Andrew S. Ross

Published 3:03 pm, Saturday, July 19, 2014

Tesla has a decision to make, and soon.

Where to build a "Gigafactory" employing 6,000 people churning out batteries, not only for Tesla's range of electric vehicles, but for solar panels and other energy-saving devices, which analysts believe could truly disrupt the auto industry and a whole lot of others.

The decision should have been made by now, and ground broken, according to the company's timeline, but is on hold, allowing California, which was not in the race initially - CEO Elon Musk has called California an improbable choice, citing regulations - to throw its hat in the ring.

"In terms of viability, California has progressed. Now it's a four-plus-one race,'" said Simon Sproule, Tesla's vice president of global communication and marketing, referring to the four named finalists - Texas, Arizona, New Mexico and Nevada - for the prize.

That's heartening. Having the Gigafactory would be a vindication of Gov. Jerry Brown's drive to make California the home of advanced manufacturing, of which Tesla's battery technology is a prime example. With its technology, "Tesla may be in position to disrupt industries well beyond the realm of traditional auto manufacturing. It's not just cars," a Morgan Stanley analyst told Quartz, an online business publication last year.

But there are serious obstacles. For one thing, "timing is critical," said Sproule. Tesla is scheduled to ramp up production of its mass market, $35,000 Model 3 in 2016, which means the advanced lithium-ion batteries need to be rolling off the Gigafactory assembly line by 2016, too.

Tesla announced the first four finalists in February, but it appears to have taken months for state officials to realize what was at stake. "Let's say I was really concerned and expressed it," said Jim Wunderman, CEO of the Bay Area Council, who talks regularly with Brown's office and state lawmakers and is working with Tesla on its China venture.

Officials went into action in late spring. Brown reportedly met with Musk, his Office of Business and Economic Development (GO-Biz) got involved in the push, and Brown inserted a number of clean-energy financial incentives in his budget.

On the legislative front, state Senate President Pro Tem Darrell Steinberg, D-Sacramento, co-authored a bipartisan bill, yet to be fleshed out, enabling Mather Field's business park, outside Sacramento, to avoid time-consuming environmental reviews. Large tax breaks were floated, like the $425 million tax break passed earlier this month for Lockheed Martin to persuade the company to build a new generation of bombers at its Los Angeles plant,

"Everything that can be done is done," Michael Rossi, Brown's senior adviser for jobs and business told the Sacramento Bee last month. "I'm feeling very good about it. I think the issues that can be addressed are being addressed."

But are those issues - especially the regulatory ones - being addressed sufficiently and in time. Steinberg's bill exempting Mather Field from painstaking environmental reviews has yet to be drafted, let alone sent to the Legislature, which doesn't return to work until Aug. 4.

Meanwhile, other sites have been suggested, including, I'm told, Concord Naval Weapons Station in Contra Costa County. That could further delay a formal package of proposals from California, which is up against a deadline set by Tesla. Sproule would not disclose the deadline, nor when the decision would be announced.

Wunderman is optimistic that the Gigafactory is "trending in our direction. I think we're in the game," he said. But, he added, California can't always get the business it wants, and, despite the progress the state has made in becoming more business-friendly, "We're still left with a high-tax, over-regulated place, especially when it comes to building plants."

Spurred by the Gigafactory issue, the Bay Area Council board will discuss how to further improve the state's business appeal, he said. "The Tesla situation underscores the opportunities we have."

Losing the Gigafactory, though aggravating, would not be the end of the world. Tesla is thinking about building one or two more Gigafactories, although at this point they might feel like a consolation prize. More importantly, wherever the first Gigafactory is located, the batteries will go into the mass-produced Model 3, manufactured in the Tesla plant in Fremont.

On the other hand, there will be crows of delight and I-told-you-so's in certain quarters. I'm talking, for example, about you, Gov. Rick Perry from the oil-dependent state whose regulations prohibit buying Teslas there. (And in Arizona.)

http://www.sfgate.com/business/bottomline/article/California-very-much-in-running-for-Tesla-5633147.php