Texas and Its Aggressive Attempt to Woo Tesla Motors, Inc.

Texas wants Tesla, but Tesla wants speed. Can Texas move fast enough to lure the company to the Lone Star State?

Jun 16, 2014 at 6:03PM

Tesla Motors (NASDAQ:TSLA) is rapidly becoming a big deal in the U.S. With the help of the wild success of its fully electric Model S, Tesla is now the largest auto-industry employer in California, edging out Toyota. But Tesla's U.S. manufacturing presence is about to become much bigger, and Texas wants to do whatever it takes to get America's hottest growth company to bring those jobs to the Lone Star State.

Last Tuesday, Texas Gov. Rick Perry showed his enthusiasm for Tesla Chief Executive Officer Elon Musk and his fast-growing electric vehicle start-up when he drove around in the state of California in a Tesla Model S.

In Sacramento, after stepping out of his metallic grey Model S ride, he told reporters that he would prefer the vehicle "had a 'made in Texas' bumper sticker."

Gov. Perry's enthusiasm has merit. After all, Tesla's planned Gigafactory is no small project. The $5 billion project will employ about 6,500 people, Tesla says. Scheduled to begin production in 2017, Tesla says that, by 2020, the factory will produce more lithium-ion batteries annually than the entire world produced in 2013. The factory will enable Tesla to reduce the costs of its batteries by 30%, produce an affordable fully electric car, and sell 500,000 vehicles per year by 2020, Tesla predicts.

Gigafactory

Rendering of Tesla's planned Gigafactory. Image source: Tesla Motors.

There are still other states in the running, including Arizona, New Mexico, possibly California, and tax-friendly Nevada, but Gov. Perry thinks Texas can compete.

"If you want to lure companies, you've got to be competitive," Perry said in an interview with CNBC. How can Texas be competitive? "The pitch has been made now for a decade to come to the state of Texas: You'll have taxes that are reasonable, or regulatory climate that's fair and predictable."

But it's going to take more than a capitalist-friendly regulatory and tax climate.

For Tesla, time is key
Whether or not Texas gets the job will probably be a function of how rapidly the state can complete the project. Musk has voiced on several occasions that time is the biggest concern for the company. California, for instance, only has a slim chance of getting the factory due to the lengthy time required for appropriate permits, Musk said last month at the World Energy Innovation Forum in California.

To reduce the risk of delays, Tesla is going as far as to break ground in multiple sites before deciding the final location for the factory. A final decision for the actual Gigafactory location won't be made until the end of the year, Musk told shareholders at the annual investor meeting earlier this month.

Wherever Tesla decides to build the Gigafactory, the most important announcement the company can make for investors right now is that it is breaking ground and beginning construction. With nearly flawless execution priced into the stock, Tesla needs to get moving.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (That's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Daniel Sparks 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.

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