Our View: Despite tax breaks, Tesla looks elsewhere to open new battery factory

03/11/2014 4:39 PM

03/11/2014 4:41 PM

Manufacturing jobs are golden, providing workers living wages and decent benefits. They’re also disappearing.

The California Manufacturers & Technology Association points out that California lost a third of its industrial base – 607,000 manufacturing jobs – between 2001 and 2011, a major reason why the state’s middle class is shrinking.

So it came as a punch to the gut when Tesla Motors Inc., one of the few bright spots in California manufacturing, recently announced that it plans to build a “gigafactory” in some Western state not named California.

Tesla’s main domestic manufacturing line is in a Fremont factory that once produced Saturns. But it is planning a new factory to produce lithium-ion batteries that power Tesla’s high-end all-electric vehicles, employing as many as 6,500 workers, the Los Angeles Times reported.

New United Motor Manufacturing Inc. employed 4,700 workers at that Fremont plant before closing in April 2010. Of those, about 900 NUMMI workers were from San Joaquin County and 300 from Stanislaus County. So a factory nearby that produces lithium-ion batteries could ease some of the jobless numbers in the Central Valley.

The kicker: The factory would open in 2017 in Nevada, Arizona, New Mexico or Texas. The investment by Tesla and other funders would be on the order of $4 billion to $5 billion.

Of course, Tesla founder Elon Musk and the others who run Tesla can move their operations wherever they see fit. That’s the American way.

But California has plenty of green invested in Tesla Motors; policymakers ought to think hard about the incentives they provide private enterprise.

It’s not an exaggeration to suggest that Tesla might not exist without California. The Legislature has passed numerous environmental laws that have all but forced auto manufacturers to produce electric vehicles.

Wealthy Californians with environmentalist sensibilities purchase more than their share of Tesla’s products – about one-third.

And it’s important that the state has been generous with its tax dollars.

In December 2009, an obscure arm of the California treasurer’s office, the California Alternative Energy and Advanced Transportation Financing Authority, approved a sales tax exemption for Tesla’s purchase of manufacturing equipment that is expected to save Tesla $31 million.

In January 2012, Tesla finalized a second agreement with the authority that would result in $24 million in tax savings. In December 2013, Tesla struck yet another deal with the authority that will save it $35 million.

The California Energy Commission has awarded Tesla $10 million to manufacture its Model X in Fremont. California’s Employment Training Panel spent $648,000 to help train Tesla workers.

Through California’s Clean Vehicle Rebate Program, the California Air Resources Board has given $2,500 rebates to more than 3,000 Tesla buyers, amounting to $8.6 million.

Exactly why Tesla decided to build its battery factory outside California is not clear.

Gov. Jerry Brown’s much-touted Go-Biz, an operation that is supposed to encourage business development in California, offered little explanation.

“The company employs thousands of Californians in its facilities here, and we are proud of its success. Go-Biz continues to work with them on future opportunities in California,” a spokesman said in an email.

In the coming months, Hollywood will lobby for an expansion of the film tax credit, contending productions are leaving for New York, Louisiana and other states that have generous incentives.

Perhaps that is true. What’s also true is that tax breaks may work to a point. Business owners owe loyalty to investors and stockholders, not to states that give them money.

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