Electric Vehicles

ClimateWire's Pyper talks politics, economics of Tesla battery 'gigafactory'

How will Tesla Motors Inc.'s Nevada battery "gigafactory" shape the future of the electric vehicle industry? On today's The Cutting Edge, ClimateWire reporter Julia Pyper discusses the politics of the decision and talks about how Wall Street is reacting to the $5 billion move by the automaker.

Transcript

Monica Trauzzi: Welcome to The Cutting Edge. Tesla making news this week as it announces Nevada as the site for its $5 billion battery factory. ClimateWire's Julia Pyper joins me to talk about the politics of the decision.

Julia, how political was this move by Tesla to pick Nevada over four other states that were also competing for the site? You've been talking to some lawmakers -- what's their reaction, what are we hearing on the politics?

Julia Pyper: Well, on the politics I guess you know Sen. Harry Reid came out really in huge support of this. Obviously he's from Nevada, huge clean energy supporter, so it sort of I guess could be a victory for sort of the Democrats in that sense. But then the governor of Nevada is Republican. Huge support from some free-market groups I talked to in the state who are excited to see the business opportunity there.

Tesla will receive about $1.25 billion worth of tax breaks, but it's not a direct government incentive; it's government subsidy rather, so that's something that those groups are -- those market groups are excited about.

So it's really had support across the board. And Tesla's decision I think was really about timing -- which state could get in there and allow them to start construction fast because they've got a tight timeline to get up to the scale that they want to achieve.

Monica Trauzzi: So let's talk money. Tesla stock is up this week but earlier this month we saw Lux Research release an analysis that projected that Tesla's factory could lead to a huge overcapacity. I know that you've been talking to some financial analysts following the announcement yesterday. What are they saying, and do the numbers make sense?

Julia Pyper: Yeah, well on the stock side that's projecting forward what they think Tesla can possibly achieve, and there's a lot of excitement: That brand has a lot of recognition and what it can do with the Model S looks pretty positive; it's got a lot of demand already for that.

Lux looked at literally where it's going to get some of these materials from to make batteries and it needs to source things like, you know, cathode materials and where's that all going to come from. So they had a little bit more conservative estimate on how big the gigafactory could be and that they might not achieve the revenues they want to in the time frame they'd like to.

Monica Trauzzi: How does this compare to what we see other automakers doing on alternative vehicles?

Julia Pyper: Tesla's obviously all-in on plug-in vehicles. Hydrogen-electric cars will be coming out soon. Hyundai just started leasing its vehicle and that will present a little bit of competition. Elon Musk himself has sort of written off that technology, calling fuel cells "fool cells." And we'll see. The hydrogen economy isn't very established; there's electricity everywhere that you can plug your vehicles into. The hydrogen infrastructure is not as developed. With those cars, uh, don't have the range limitations and refueling time issues that battery-electric vehicles can have.

Monica Trauzzi: Tesla has suffered some PR wounds lately. How does this news fit into sort of the broader narrative about Tesla's role in the U.S. auto industry and their share of the market?

Julia Pyper: Yeah, Tesla has had some bad reviews in the press lately. Actually and Edmonds.com gave it sort of a bit of a lackluster review over a longer-term period, but Tesla's come back in its typical style with a strong response. They extended -- they came up with an eight-year unlimited-mile warrantee, and they'll change the software in order to improve the design of the car; for instance lifting it a little bit higher off the road after there were some battery fire incidents.

So even -- and one of the analysts I talked to was saying that it doesn't seem like anything can stop them: They're sort of a freight train that's been on a roll. And even things like battery fires and bad consumer reviews haven't been able to stop people from wanting these cars.

Monica Trauzzi: And they're projecting more than 6,000 new jobs from this site. Their announcement came on the same day as the National Clean Energy Summit, which was also taking place in Nevada. So how big of a win is this for clean energy advocates?

Julia Pyper: I think it's pretty big. You know Tesla is certainly the cheerleader -- the leader out there. Their vehicles are obviously popular, but the batteries that they make can also be used in stationary applications, it can help them with their solar-powered electric vehicle charges. So it's going to be more than just what's in the vehicle, it's going to potentially affect the renewable energy industry also, which is a larger gain for clean energy overall.

Monica Trauzzi: All right, a lot to watch here. Thank you Julia.

Julia Pyper: Thanks.

Monica Trauzzi: More Cutting Edge coming next Friday. We'll see you then.

[End of Audio]

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