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Summary:

Tesla plans to boost Model S production by 35,000 cars, and it’ll be using tax breaks from California to do it.

Tesla Model S

Electric car maker Tesla Motors plans to use a $34.7 million tax break from the state of California to help more than double annual production of its Model S electric sedans at its Fremont factory, SFGate reported Tuesday. Tesla currently is producing around 21,000 Model S cars per year at the plant, and plans to boost that by 35,000 cars — one of its biggest manufacturing ramp-ups since it first began making cars.

Tesla's line of Model S cars

The state of California taxes most companies when they buy manufacturing equipment, but exempts a company like Tesla because of its greater environmental contribution and carbon emissions reductions. The $34.7 million in tax breaks is from sales and use taxes on $415 million worth of new manufacturing equipment, and the new production could create 112 new jobs. The company used the same tax breaks on $612 million worth of manufacturing when it first retooled the former NUMMI factory into its current state.

Tesla CEO Elon Musk

The tax breaks show how government support — this time at the state level — continue to help cleantech companies grow and produce jobs, despite the controversies involved. The Department of Energy gave Tesla a $465 million loan to help it move into production of its Model S and Tesla was able to pay back those funds many years early. But other less successful companies like Solyndra and Fisker — which both went bankrupt — have made government support of green companies controversial.

  1. So let’s say 20% of the additional new cars being produced (about 7,000) are sold in CA, at an average price of $75,000. That’s more than $500M in revenue that California will collect sales tax on. Each year. Or about $35M a year increase in sales tax revenue, which means CA will get back its tax rebate to Tesla in less than a year of production.

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    1. Add to that the increase in (paid) work force who ante up state income tax (and sales tax at 9% – ouch!). That number will be much larger than the sales tax on 7,000 vehicles. I suspect that Tesla’s current work force in CA pay anywhere from $10^7 to $10^8/yr in income tax and sales tax. Now that amount will double. And that does not account for ROI on the indirect economic multiplier. Good move Jerry Brown. Good move. Now if I could just afford to buy one!

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  2. Not very surprising, Michigan gave these kinds of breaks to GM for decades.

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    1. They give them because they work – the state will recoup their investment in short order (esp. with a popular product like the Model S).

      Where it fails is when the state/fed back hokey ventures. But if the portfolio is large, and the aggregate return is good, then this kind of investment has very good ROI.

      And that’s not even counting the increase in tax base from workers and nearby stores that benefit from the increased commerce.

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  3. Brian W. Crumley Wednesday, December 18, 2013

    How is 21,000 to 35,000 more than double?

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    1. They’re increasing production capacity BY 35,000 cars per year – from 21,000 to 56,000.

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  4. They help lower the $1 Billion a day in imported OIL and reduce pollution. Not to mention help the USA export goods instead of importing them. Tesla is a story of everyone winning in the USA.

    Since China is the biggest and fastest growing market for cars Tesla will continue to sell everything they make. They even make the Toyota RAV4 and Mercedes B electric. What a great story.

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