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Tesla Applies For $106 Million Tax Break

June 17, 2016 0 Comments



Tesla recently closed a $1.7 billion stock offering to fund production capacity expansion at its Fremont factory to reach its goal of producing 500,000 vehicles by 2018. The plan was introduced after the company experienced a higher-than-expected demand for its upcoming Model 3, which has already received over 373,000 reservations.

The automaker has received millions of dollars in state incentives, including a recent $39 million break on sales tax related to its $463 million expansion of the Fremont plant. Now, Reuters reports that state records indicate Tesla has also applied for a $106 million tax break on a planned $1.26 billion expansion of the Fremont factory to build the new Model 3.

The company is seeking support from the State of California to purchase equipment to construct the Model 3’s assembly line. This would represent the continuation of a deal the state already made with Tesla when the company first acquired the New United Motor Manufacturing, Inc. (NUMMI) factory after GM and Toyota closed the facility in 2010. The state approved a tax break of over $90 million, and the automaker started rebuilding the factory.

Thousands of employees are already working at the Fremont factory, and the Model 3’s production should result in the creation of many more jobs. The deal is comparable to the company’s Gigafactory tax break of $1.4 billion from the State of Nevada, though both deals are subject to the company spending billions on training, hiring and equipment in order to materialize.

Tesla’s Fremont factory is one of the largest buildings in the world, with 5.3 million square feet of manufacturing and office space. The company plans to bring its production rate up to 500,000 with the Model 3, S and X combined, while CEO Elon Musk recently said the Fremont facility has the potential to manufacture up to 1 million vehicles per year.

Reuters also reports that earlier this year, the California Alternative Energy and Advanced Transportation Financing Authority approved a similar tax relief for Atieva to build a $530 million EV plant in the state. Atieva’s factory, which will produce the company’s upcoming all-electric sedan, aims to manufacture up to 130,000 cars per year at full capacity.

Tesla has set a deadline for Model 3 internal parts and supplier parts for July 1, 2017, with plans to finalize the tooling designs by the end of the month. Deliveries are expected to begin in late 2017.

Last month, the automaker also confirmed the hiring of Peter Hochholdinger, Audi’s Senior Director of Production behind the manufacturing programs of the A4, A5 and Q5 vehicles, to lead Tesla’s production at the Fremont factory.

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