The Golden State used to have many car factories, though these days there are few companies actually building cars in California. Tesla Motors, however, calls Cali home, and they’ve brought a surge of money and jobs into the Bay Area with the successful launch of the Model S. To help boost production, California is giving Tesla a substantial tax break.
California is allowing Tesla to forgo $34.7 million in sales and use taxes on $415 million worth of new manufacturing equipment. The equipment will help Tesla increase production of the in-demand Model S, and Tesla expects to build over 21,000 units this year. However, the old NUMMI factory Tesla shares with Toyota has the capability of building many, many more cars than that. The new equipment will allow Tesla to put another 35,000 units per year into production.
Unlike many states, California heavily taxes the purchase of manufacturing equipment, keeping many big companies from having production facilities there. However, California uses the tax as a way to encourage cleantech startups, like Tesla, buy forgiving these hefty taxes, as well as giving grants encouraging production of vehicles like the Tesla Model X. This is at least the second time Tesla has used such tax breaks to save money, and while they could arguably save even more by going to a lower-cost state, Silicon Valley seems like the place Tesla belongs.
Whether or not Tesla can actually totally fill out production volume at the NUMMI plant remains up in the air, as the facility is theoretically capable of producing hundreds of thousands of vehicles per year. At the rate Tesla is going though, it won’t be long before they look to expanding to an all-new facility.
Source: The San Francisco Gate