Tesla Motors Dangles a $5 Billion Carrot in Texas' Face

Tesla Motors' proposed Gigafactory gives the automaker the upper hand in negotiations with Texas.

Feb 27, 2014 at 5:35PM

Tesla Motors (NASDAQ:TSLA) officially announced plans for its $4 billion-$5 billion Gigafactory to manufacture lithium-ion batteries for use in its all-electric cars. Tesla is directly investing $2 billion in the project, with the remaining cash coming from the EV maker's battery supply partners, including Panasonic. Tesla will fund its portion of the venture with cash from a $1.6 billion convertible bond. However, perhaps more interesting, is the fact that Tesla is considering Texas as one of four states now in the running for where the massive plant will be located. 

Screen Shot

Source: Tesla Motors.

If Tesla were to build its Gigafactory in Texas, it would contribute billions of dollars and upwards of 6,500 manufacturing jobs to the Lone Star state. Importantly, this gives Tesla a serious advantage over the Texas Automobile Dealers Association, which, up to this point, has been successful in getting Texas lawmakers to ban the sale of Tesla cars in the state.

Giving Tesla the boot
Last year, Tesla lost a crucial fight with the Texas dealers group to sell its zero-emissions cars directly to Texans. Texas currently has strict regulations in place that forbid manufacturer-owned dealerships in the state. However, that could change now that Tesla's bringing a multibillion-dollar opportunity to the table. Perhaps the red star in Tesla's rendering above is a subtle jab at what the company really wants: Texas.

Tesla Factory Worker

Source: Tesla Motors.

After all, being shut out of Texas is a major setback for the upstart auto company, particularly given the sheer size of the Texas market. Let's not forget that Texas is the second largest and second most populous state in the entire United States. On top of this, the Texas Auto Dealers Association spends millions of dollars each year lobbying for bogus laws that protect the big auto dealers from competition. This hardly seems fair, as this country was built on competition.

In fact, the Texas Auto Dealers group spent a whopping $2.5 million on legislative elections in Texas in 2012, according to a CNBC report. Not to mention, franchised dealerships generate significant amounts of sales tax for the various counties within Texas. Yet, instead of crying injustice in the corner, Tesla's visionary chief executive Elon Musk has come up with a better plan: Make Texas an offer it can't refuse.

Wake up, Texas! Tesla is an American company, creating American jobs -- and what's more American than Texas? The way I see it, this is a win-win for the state. Not only would the Gigafactory create more than 6,000 new jobs in the state, but allowing Tesla to sell its cars in Texas would mean Tesla investing "tens of millions of dollars" in the state to open new stores and service centers there. 

Shares of Tesla are trading at record highs this week amid wild optimism over the company's plans for a Gigafactory. However, things could get even better for Tesla shareholders if the EV maker's ploy for Texas works in its favor.

Six winning growth stocks that are much cheaper than Tesla today
With shares of Tesla Motors trading near all-time highs, there are more attractive growth stocks available to investors today. Find out which stocks I'm talking about in this free report from The Motley Fool. In it you will get the Fool's top six stock picks for market-beating growth stocks. This special report is free for a limited time, so click here to get your copy now and start profiting today.

Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers