Nevada Appears To Have The Winning Hand For Tesla's Gigafactory

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Tesla Motors TSLA -1.01% and the Nevada governor’s office say there will be a significant economic announcement in Carson City, the state capitol, on Thursday. All signs point to Nevada winning the race among five states for Tesla’s $5 billion gigafactory.

Both Bloomberg News and CNBC reported the electric car company has decided to award the project to Nevada. It was easily the farthest along in bidding for the plant in a battle that also included Arizona, California, New Mexico and Texas.

“We continue our discussions with the State of Nevada, and look forward to joining the Governor and members of the legislature,” at Thursday’s announcement, Tesla vice president Simon Sproule said in an email to FORBES.  ”More details to come tomorrow.”

 Last month, Tesla confirmed that it had cleared land near Reno that will be required for the 10 million square foot factory, which will produce up to 500,000 battery packs a year by 2020. They will be installed in  automobiles including Tesla’s upcoming Model 3, meant to be much cheaper than its Model S luxury car and the Model X sport utility due on the market next year.

Nevada’s victory seemed apparent after California lawmakers failed to act last weekend on a measure that could have included incentives for a Tesla plant, expected to employ 6,500 workers. One reason there was no action was that a deal had not been reached between Tesla and California officials, which might have generated the incentives for a California gigafactory.

Tesla actually slowed its aggressive gigafactory timetable somewhat in order to give California, its home state, a chance to compete. California was not one of the original four states that Tesla named last February, when it announced plans for the gigafactory. Tesla subsequently said it planned to name an initial finalist in June, and up to two more in July or August, then make a decision on the winner by year’s end.

But on the urging of California officials, Tesla agreed to look at the Golden State’s case. That delayed the announcement of the first finalist to August. And ultimately, a California deal failed to come about. California lawmakers are not set to re-convene until Dec. 1, meaning Tesla had to decide whether to wait for an agreement, go with what it had in its deck, or give other states time to match Nevada.

The gigafactory would be a major victory for a state that has been itching to shift from gambling and tourism to industry. It makes geographic sense for Tesla, whose factory in Fremont, Calif., is about five hours away. Nevada already has air transportation and rail lines, and it’s a quick helicopter or private plane ride from Tesla’s headquarters in Palo Alto.

Even after Thursday’s announcement, Tesla and the state still need to finalize some details, and the price tag will be significant.

Elon Musk, the CEO of Tesla Motors. (Photo credit: Wikipedia)

Tesla CEO Elon Musk said last month that the winning state will need to contribute about 10 percent of the total price of the plant, or around $500 million. While that’s not a record for an economic development project, a number of advocacy groups questioned whether states should be competing for the factory at a time when budgets are strapped.

Word of Nevada’s victory comes as one research firm questions whether the gigafactory will wind up being as big as Tesla has claimed. Lux Research, which follows emerging technologies, predicted that Tesla will be able to produce only 240,000 battery packs, or fewer than half the number it says it plans to build.

That could spell trouble for Tesla’s major supplier, Panasonic , which will invest $1.4 billion in what looks to be the Nevada facility.

Still, Nevada officials are looking on the bright side.

Lance Gilman, developer of Tahoe-Reno Industrial Center where Tesla did preparation work earlier this summer for possible gigafactory site, told theReno Gazette-Journal that he has been invited to Thursday’s event, although he would not discuss specifics.  He added, “I believe we’ll get a very positive announcement of some kind.”