Musk’s $5 Billion Tesla Gigafactory May Start Bidding War
Tesla Motors Inc. (TSLA)’s plan to build what co-founder Elon Musk bills as the world’s largest battery factory could not only shake up the power industry but trigger a bidding contest between states eager for the 6,500 jobs the $5 billion investment could create.
The luxury electric-car maker announcedyesterday that it’s selling at least $1.6 billion of convertible notes to finance the project and exploring locations in Texas,Nevada, Arizona and New Mexico for a 10 million-square-foot facility. Tesla declined to comment on whether any negotiations had begun.
“This would rank as the most attractive industrial project out there,” said Dennis Cuneo, president of DC Strategic Advisors LLC and a former Toyota Motor Corp. executive who helped that carmaker select manufacturing sites.
Tesla has dubbed the project the “gigafactory,” and it would make Musk a force in both U.S. manufacturing and electric power. The plant he envisions would have more capacity than any other to make lithium-ion batteries.
“This has a huge impact beyond Tesla,” said Harley Shaiken, a labor economist at the University of California, Berkeley. “It gives enormous legitimacy to battery production and the future of the electric car because that lies in the battery. It’s high stakes, high technology.”
Tesla plans an investment of $4 billion to $5 billion by 2020 and will fund about $2 billion of the total, the Palo Alto, California-based company said in a statement. It said the convertible bond offering could grow to $1.84 billion.
Musk said in the statement that the plant is key to Tesla becoming a mass-market automaker capable of producing 500,000 or more electric vehicles a year. The company’s cheapest model, the Model S, starts at $71,000.
The 42-year-old billionaire could also get closer to achieving his goal of being a leader in the power-storage industry in the U.S., as utility customers continue to turn to batteries and solar panels to reduce electricity bills.
The scale of production at the planned factory would be so immense that Tesla estimates it would drive down lithium-ion battery costs by at least 30 percent.