Boots & Sabers

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2123, 04 Sep 14

Tesla To Build New Factory in Nevada

This is interesting on a number of levels.

The deal was announced Thursday after months of wrangling between California, Texas, Arizona and New Mexico. It will cost the state $1.25 billion in tax breaks and other incentives, Sandoval said. It is expected to generate $100 billion in “economic impact” over the next 20 years.

The Governor also said about 6,500 jobs will be created directly at the plant, but as many as 22,500 jobs will be created in the state because of the project. The state’s economic development office estimates that the factory will add $1.9 billion to state and local coffers over the next two decades, with a quarter of it going to K-12 education.

Why Arizona? The fact that Arizona is a low-tax state without an income tax. The massive incentive package that Arizona was willing to pay. The willingness of Arizona to have a very toxic factory in its borders. The fact that Arizona is a Right to Work state. The fact that Arizona has a lot of low-cost labor (a lot of it illegal). The irony that super liberal Tesla is going to take advantage of all of this to sell expensive cars to rich eco-liberals. Whatever. This is the part that caught my fancy.

Tesla will be allowed to sell its cars directly in Nevada without a franchise agreement, which has been a sticking point in other states.

The dealer model for vehicles really seems to be more and more a relic of the past. With consumers’ ability to research and price cars with the internet has really reduced the ability of dealers to offer the consultative service for buying a car. And while dealers do offer a lot of post-purchase vehicle services, there really isn’t any reason that they can’t provide those services while allowing consumers to purchase cars directly from the manufacturers. The only real piece that dealers provide that the manufacturers can’t is the ability to test drive a car.

Tesla is eroding the dealer model around the country. With the price of cars continuing to rise and the powerful car-buying tools available on the internet, perhaps it is time for other manufacturers to try a direct model too.


2123, 04 September 2014


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