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Why Nevada Is the Frontrunner for the Tesla Motors Inc. Gigafactory

Four states are in the running for Tesla Motors (NASDAQ: TSLA  ) multibillion-dollar Gigafactory (link opens a PDF), including Arizona, Texas, New Mexico, and Nevada. As much as $5 billion dollars and 6,500 manufacturing jobs are at stake. It makes sense, then, that Tesla is using this massive factory as an opportunity to help convince states like Texas and Arizona to allow the electric-car maker to sell its vehicles directly to consumers in those states. As it stands, Tesla's direct sales model is currently banned in Texas and Arizona.

Texas is a particularly important state for Tesla because it is the second largest and most populous state in the United States. Down the road, it would be hard for the company to achieve its goal of selling 500,000 zero-emissions cars annually without being able to sell its vehicles in Texas. However, despite the obvious benefits for a Tesla Motors plant in Texas, it seems that Nevada could now be the frontrunner in this $5 billion arms race.

Why Nevada?
In an interview with Bloomberg, Matt Hardigree of says Nevada is most likely in the lead for Tesla's planned lithium-ion-battery factory. As Hardigree points out, Nevada has a railroad line that connects directly to Tesla's Fremont, Cali., assembly plant. This could play a critical role in the final decision because, ultimately, Tesla will need to transport hundreds of thousands of heavy batteries from the Gigafactory to its assembly plant in California.

Another reason that Nevada seems to make the most sense these days is because the state is rich with lithium pools -- one of the key elements Tesla needs to make its battery cells. In fact, Nevada is the only state in North America with a lithium producing mine today. Lithium demand in this country is growing at breakneck speed, with demand for industry-grade lithium expected to top 320,000 tons by 2020, up from just 102,000 tons in 2010.

These two factors, together with the fact that Nevada is home to the world's largest solar power plant, could make it the new home of Tesla's Gigafactory. Making its massive battery factory both green and self-sustainable to as great an extent as possible is a priority for Tesla. Moreover, the company's chief executive, Elon Musk has already said the plant will be solar and wind powered. While Texas would be a better location for wind power, the arid conditions in Nevada make it ideal for solar power generation.

Source: Tesla Motors

From its direct rail line and lithium mines to the state's sun-filled landscape, Nevada looks like the ideal place for Tesla Motors to build its massive Gigafactory today. Moreover, Tesla needs to make a decision soon if it plans to begin construction on the factory before year's end.

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Read/Post Comments (7) | Recommend This Article (6)

Comments from our Foolish Readers

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  • Report this Comment On April 22, 2014, at 12:56 PM, dlwatib wrote:

    Air travel and auto travel are also easier between the Bay Area and Reno. Reno has lots of low cost housing and out of work workers. But none of that may matter if Texas, New Mexico, or Arizona decides to sweeten their deals sufficiently.

  • Report this Comment On April 22, 2014, at 1:14 PM, speculawyer wrote:

    I've been saying it for a while . . . Nevada is the best place . . . low taxes, a Lithium mine, lots of sun for solar power, close to the California car factory, good dry climate for making batteries, etc.

  • Report this Comment On April 22, 2014, at 2:13 PM, jameshall69 wrote:

    It has been a few days since Mr. and Mrs Tesla stock pump aka Sparks and Walsh have been pumping the stock, i guess the recent uptick of TSLA with the usual hyperbole with no solid information around Tesla manufacturing in China is a good reason for a $10 jump and follow up article. Okay so we find a place to build the giga-outa-data factory, what about the battery partner? Where is the $2billion fanfare announcement from the Panasonic partner? could it be... they can see sales data and have shareholders who have expectations based in reality? why not steam ahead with this opportunity of a lifetime? There will be one more false dawn with 1Q sales of 7350 beating the lowball 6400 deliberately peddled by the spin masters at Tesla then as 2Q shows the 2014 sales figures are truly doomed coinciding with the end of QE3, it will be free-fall time! Enjoy!

  • Report this Comment On April 22, 2014, at 2:49 PM, countrarian wrote:

    I've been saying Nevada was an given, as soon as the pie in the sky Gigafactory was announced.

    It is payback to the Obama administration and the Democrats for past funding, and future contracts: (Sen Majority leader Harry Reid D-Nevada)

  • Report this Comment On April 22, 2014, at 6:19 PM, djplong wrote:

    Countrarian, don't let some facts get in the way of a good piece of bluster. "Past funding"? You mean the DOE loan program that was done under the BUSH administration? Or are you talking about the tax credit that was ALSO started under the Bush administration?

  • Report this Comment On April 24, 2014, at 11:00 AM, joeinslw wrote:

    If you believe that Nevada would be a choice for that giga factory, I don't because Nevada is to far north for the sun to do the best job it can if Elon wants his factory to be solar, the best choice would be further south in Arizona. The sun is much more intense and I believe the desert west of Tucson is the best choice.

    I used to live in Tucson and west of that city and that is the best choice, it's all desert out there hot and dry with the sun shining about 360 days a year, if you get one week of rainy weather that would be a lot, and even then the sun would shine in the morning, and rain or storm in the late afternoon with the monsoons they get in the summer.

    I don't have any reason to recommend Tucson Arizona like some others are recommending their State I don't live there anymore, it's my experience that tells me west of Tucson would be the best choice for this giga factory.

  • Report this Comment On April 25, 2014, at 3:02 PM, rw1000 wrote:

    While I agree that out of the 4 mentioned states, Nevada is probably the best choice, this article is wrong on two points. Firstly, the largest solar plant in the world is in California (Ivanpah). Secondly, Nevada is not the only source of lithium in the country, California also has a source, the Salton Sea. California's Simbol Materials has already deployed ground breaking technology to successfully extract large amounts of lithium from geothermal sources in its prototype plant and is currently building a large plant to do this at the Salton Sea (the geothermal energy emanating from the San Andreas fault), in Imperial County. What's more, the factory is scheduled to be completed the same time the Gigafactory is. In fact, officials from California, Imperial County and Tesla have been in quiet talks for some weeks lately, meaning California has now been reconsidered as a location by Tesla. With a major source of lithium, ample cheap land, already a major center for geothermal, solar and wind power generation, nearby rail connection, relative close proximity to Tesla's manufacturing in Fremont, surely lucrative state subsidies and access to skilled labor from the most technologically advanced state, Imperial County is now a very strong contender and in my opinion, this will be the location of the Gigafactory.

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Tamara Rutter

I've been an analytical writer for The Motley Fool since 2011. I cover the sectors of Consumer Goods, Technology, and Industrials. Connect with me on Twitter using the handle, @TamaraRutter -- I'd love to hear from you!

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