California anchors Tesla with $28.8M tax break

Tesla Motors, the hyped electric car company, just nabbed another win (in a long line of them since the spring), earning approval for a $28.8 million tax break from California’s Alternative Energy and Advanced Transportation Financing Authority (a branch of the Treasurer’s office). The change will save them taxes on $320 million worth of equipment.
It’s hard not to view the break as a big thank you note from the state. Tesla CEO Elon Musk has always been adamant about Tesla remaining a firmly Californian enterprise. While its competitors like Fisker Automotive turn to China and cheaper industrial states for manufacturing operations (it just announced the takeover of an old GM plant in Delaware), Tesla has been very vocal about setting down roots with a major assembly plant in southern California while locating its headquarters and some manufacturing at the Stanford Research Park in Palo Alto, Calif. It may not have created that many jobs for Californians yet — but it could, and it is bringing solid investment and the glow of transportation innovation to the region.
If there was any doubt that Tesla would be locating its $365 million Model S plant anywhere else, it’s been dispelled. The car, slated for a 2012 release, is supposed to be the more practical, middle-class answer to the company’s $109,000 luxury roadster. It hasn’t said exactly where the facility will be located (an eagerly-awaited announcement) — though Downey and Long Beach have both been lobbying hard.
Tesla plans to spend roughly $320 million on equipment to outfit this plant once a site is selected, and will save about 9 percent in taxes. The state’s Alternative Energy and Advanced Transportation Financing Authority will hold the title to this equipment in order to make this happen.
This sounds all well and good for Tesla, but the state could take some flak for giving the company even more government allowances. The EV-maker has already drawn fire from major media outlets, including Fox News, for taking millions in federal funds (it snagged $465 million in low-interest loans earlier this year) in order to produce cars the majority of the American public can’t afford. This issue is even more contentious in California where the state budget has grown into a hornet’s nest of a problem. It won’t be surprising if critics of the company and the tax break point to deep cuts in school budgets and question whether $47,000 electric cars — which have yet to be built much less road tested — are worth the money.
Tesla could open doors to revolutionary transportation solutions in the future — solutions that could make a major difference in greenhouse gas emissions and climate change. But in the short-term, when every little bit counts, it’s becoming increasingly hard to justify its government favor.
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