Shares of Tesla Motors, Inc. (TSLA) gained 3.6% to hit a new all-time high of $291.42 on Sep 4, 2014, driven by the news that Nevada has been selected as the location for the electric carmaker’s $5 billion Gigafactory. It was the fourth consecutive trading day in which Tesla’s stock hit new all-time highs. However, on Friday, the stock fell as CEO Elon Musk said that he considered the share price to be high.
With regard to the company’s proposed Gigafactory, it emerges that apart from the 6,500 direct jobs as promised by Tesla, the deal will create 16,000 indirect jobs in Nevada. Further, the deal is expected lead to economic development benefits of up to $100 billion on the state over 20 years.
Tesla is said to be offered tax incentives of about $1.25 billion to be spread over the same period, in exchange for investing $3.5 billion in manufacturing equipment and real estate in the state. Further, Nevada provides the advantage of low tax rates to Tesla. Moreover, the site is close to a lithium deposit, which is essential as the electric carmaker plans to manufacture lithium-ion batteries on a large scale in the factory.
However, the deal needs to be approved by the Nevada Legislature. The chosen site for the diamond-shaped factory is the Reno Tahoe Industrial Center, which is about 15 miles east of Sparks, a Reno suburb in Nevada. Tesla has already prepared the site for construction.
While the automaker had revealed earlier that in June it held the ground-breaking ceremony at this site for the possible construction of the Gigafactory, it had stated that the final location was undecided as it was planning to break ground in three sites. Arizona, California, New Mexico and Texas were the other states being considered.
Tesla plans to finish the Gigafactory construction by 2017. By 2020, the company expects the annual lithium-ion battery production of the Gigafactory to exceed the global production in 2013.
The factory will produce enough battery packs to enable Tesla to build around 500,000 electric cars by 2020. Moreover, the company will use renewable energy sources, such as wind, solar and geothermal, to power the plant. It will also reduce the ‘per kWh’ cost of production of battery packs by over 30%. The automaker expects the factory to provide economies of scale and reduce production costs based on innovative manufacturing techniques, reduced logistic wastes, optimization of co-located processes and lower overhead costs.
Currently, Tesla sports a Zacks Rank #1 (Strong Buy). Other auto stocks worth considering in the same sector include Advance Auto Parts Inc. (AAP), O'Reilly Automotive Inc. (ORLY) and Fox Factory Holding Corp (FOXF). All these stocks have a Zacks Rank #2 (Buy).
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