Manufacturing

Tesla Speeds Past Texas Red Tape to Park Its Battery Plant in Nevada


Tesla (TSLA) is going to build its giant battery factory in Nevada. State lawmakers are expected to officially announce the deal on Thursday evening.

The decision is not a huge surprise. Nevada isn’t far from Tesla’s California car factory and offers things the burgeoning company needs for its new battery plant: unemployed workers, lithium, and green energy. It also lacks something equally important: a corporate income tax.

By choosing Nevada, however, Tesla is missing a wonderful opportunity to mess with Texas. Local officials fiercely courted the battery plant, and Texas Governor Rick Perry even went to California to persuade Tesla Chief Executive Officer Elon Musk. Perry said he was fond of the Tesla he drove but would have preferred “if it had a ‘Made in Texas’ bumper sticker.”

Texans love “elephant hunting,” the economic development term of art for landing a big factory. But Texas hasn’t been equally welcoming to Tesla’s futuristic business model. Thanks to legal protections for incumbent auto dealers, the electric-car marker still can’t sell its sedans in Texas. Tesla has “galleries” in the state but can’t offer test drives or even refer drivers to a store somewhere else. Tesla repair centers in Austin and Houston can’t even advertise many of their services. Here’s the full breakdown of the Tesla roadblocks in Texas.

It’s a remarkably dense bit of bureaucracy for a place so fond of freedom and capitalism and firing pistols in the air. Of course, Texas played up the freedom stuff when it was wooing Tesla. State Representative Jason Villalba, a Republican, went so far as to promote “limited government interference” in a letter to Musk. His conclusion: “Texas believes in you and we want to help.”

Musk should have called Villalba on his bluff. The battery plant would have been perfect negotiating leverage for Tesla to get real dealerships in the Lone Star State. The kind where customers could do more than kick a tire and pick up a phone to call California. Sure, it would have required ramming some legislation through the statehouse, but that’s the kind of thing lawmakers do when the payoff is 6,500 jobs and a $500 million capital investment.

Would a few dealerships trump what likely is a hefty pile of incentives from Nevada? Maybe, maybe not. But the value of car dealerships in Texas—home to almost 1 in every 10 U.S. car purchases, according to Hedges & Co.—is hard to overstate.

Kyle-stock-190
Stock is an associate editor for Businessweek.com. Twitter: @kylestock

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