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By John Goreham Apr 30 2014 - 11:41am

Elon Musk "bites the hand" eliminating California as a site for gigafactory

Elon Musk says that California’s environmental nonsense rules it out as a spot for the gigafactory.
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Update - As predicted in this story, California did not win the gigafactory 1st location. On September 5th, 2014 Elon Musk announced the location would be in Nevada, which he explained, saying “[Nevada is] a really get things done state,” said Musk. “That was a really important part of the decision.” For Full Coverage we suggest these stories:
- Tesla Demanded "Massive cash up-front: and spooked California - By John Goreham
- The surprising reason Nevada was chose (it wasn't just money) - By Luke Ottaway

Elon Musk has re-affirmed his opposition to California as a site for his Gigafactory. The reason may be a shock to many electric vehicle (EV) fans. Bloomberg reports that environmental studies, study reviews, study evaluations, study summaries, and the expiration of environmental study period time frames requiring a new environmental study, would be a serious concern to Elon Musk when choosing a site for a huge new factory. We made this exact point in a story last month regarding Panasonic's cold feet over such a huge factory. Elon Musk thinks these environmental hurdles can be overcome – but not in California.

Bloomberg and the Washington Post have reported that Musk has ruled out California as a site for the Gigafactory because of excessive environmental bureaucracy. Specifically, Musk said in an interview “California has a lot of regulatory agencies, and although this will be a very green factory, we can’t have a situation where an enormous amount of data has to be processed by a regulatory agency to find no significant impact and then give us approval to proceed.”

Given 2 minutes and a crayon a talented 6th grader could make a solid case that without the State of California’s environmental bureaucracy Tesla and the entire electric vehicle resurgence as we now know it would not exist. Yes, Tesla is making the best car in the world. It happens to be electrically powered and it uses the coolest batteries on the planet. Yes, Elon Musk is a man for the ages, a genius, and a hero to all EV advocates, many of which live in the Golden State. No, Elon can’t build a manufacturing plant there. In his mind it just doesn’t make sense given all the environmental rigmarole.

Environmental rigmarole is one of California’s main exports. The California Air Resources Board, and other similar, duplicative agencies in California, are the only reason that the RAV 4 EV, Fit EV, Fiat 500 EV, and many other electric cars exist. This is not an original thought on my part. EV advocates call these cars “compliance cars.” They only comply with one state’s mandates - California’s. It is hard to blame California for taking action. Los Angeles and the Central Valley of California suffer from the worst air pollution in the whole country.

Tesla benefits directly and enormously from California’s Zero Emissions Vehicle Credit sales. On the order of many tens of millions of dollars in revenue to Tesla last year came from the exchange invented by California’s environmental agencies. Tesla also benefits in so many ways immeasurable by the movement created by California’s environmental regulation of the auto industry. The expression “biting the hand that feeds you” could not be a better fit here.

Tesla isn’t alone in looking to move away from California as a place in which to do more business. Toyota, the world’s largest automaker, the US’ largest retail supplier of automobiles, and the company that makes the number one car sold in California (Prius), announced this very week it is bailing out of California and is moving its US headquarters, and much of its other operations, out of the state. To Texas, in case you are wondering. But Tesla? Yes, Tesla also lists Texas as a possible gigafactory site.

Elon Musk saying that he can’t build a massive factory in California because of the environmental hassles reminds me a lot of Don Draper’s missive explaining why he can’t promote the use of tobacco anymore. Hopefully Elon and Tesla won’t suffer the same consequences.

Related Stories:
Panasonic’s hesitation over Tesla Gigafactory not surprising
Tesla Gigafactory could be built in Texas

Image courtesy of Tesla's public site. X added for emphasis.

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Comments

Stephen Pace wrote on April 30, 2014 - 12:52pm
Let's be clear. Elon says they are under massive timeline pressure to get the factories planned, approved, and built by 2017 in time to make a difference for Model E which is a make or break product for them. Elon was apparently told that there was no way California was going to be able to signoff in the timeframe they needed, so he had to look elsewhere because he wants to be in control of his own destiny. If Model E doesn't deliver, then Tesla hasn't completely delivered on their corporate goal for bringing sustainable transport to the masses. That release also makes clear that these plants WOULD eventually be approved given they are very green plants, but just not in the timeframe that is required. It isn't like they are making dirty plants and having to build them in states that would tolerate dirty plants. Far from it. It is merely a timing thing.
John Goreham wrote on April 30, 2014 - 2:08pm
Yes, you are right it is more about timing than it is about any other issue. I will say that having been in business in a variety of forms, time is always a serious concern. I love that Elon Musk spoke the truth. So few CEOs, or people in power in any form do it. If I were a Californian, I would cheer this. It could be one of the small things that over time brings big change.
Weapon wrote on April 30, 2014 - 1:16pm
It makes sense overall. Look at it this way, Tesla plans to pick 2 locations for the battery factory. It is all a matter of timing and he can't afford to waste any extra time as he wants the factory up ASAP. Aka the factory is probably necessary to get the Model E out the door so unless it is out on time he would have to delay Model E release. But I would not count it as biting the hand that feed him, he is opening a new factory in Lathrop and Tesla has purchased over 600,000sq ft of land all around California. On top of that they are still scaling the factory in Fermont. He is going to have to diversify to other states one way or the other, or is he suppose to build everything only in California? Also, to point out, most of the subsidy California gives is for it's own sake of making their air cleaner.
John Goreham wrote on April 30, 2014 - 2:05pm
Personally, I agree with you. One interesting thing I always wondered about was why Toyota gave up the Freemont factory at such a discount. It is becoming more and more clear over time.
Weapon wrote on April 30, 2014 - 3:08pm
Well the Fremont factory was originally co-owned by GM and Toyota. To both companies the factory was not very good though because it was too far away from their supply lines. Toyota mostly remained in there due to commitment to GM. When GM went bankrupt they ended the venture and Toyota pulled out afterwards. Though California would not let them do so. When Tesla came along it kind of made it easier on both parties.But I'd disagree it was cheap. Toyota got 50 million in Tesla stock at the time, today that is what 10x that?
John Goreham wrote on April 30, 2014 - 4:26pm
You just made a great point. "Too far from their supply lines." Someday, some enterprising writer is going to notice that a lot of green cars that run on electrons are built piecemeal all over the place (BMW i3) and fossil fuel burning planes, ships trains and automobiles move all the parts around - A LOT. Look away, nothing to see here, move along.
Carl wrote on April 30, 2014 - 1:33pm
Last time I looked, Tesla was a privately owned business with the intent to not just go broke spectacularly, but to make a profit. Repeat after me - profit is NOT a dirty word. This is not a case of biting the hand that feeds you - this is simply applying simple, sound business principles. Yes, it's the California environmental regulations that created the need for Tesla. But it's also a case of the state creating an unhealthy climate for businesses to actually operate there (if not, why would Toyota move to Texas?). So how about the mouth chewing up what's trying to feed it and then spitting it out - which is also appropriate.
John Goreham wrote on April 30, 2014 - 2:03pm
Tesla is not a privately owned business. It is now a publically traded corporation. Not that it makes any difference to your argument, which I agree with completely. Well said.
Carl wrote on April 30, 2014 - 3:46pm
Privately owned as opposed to owned by the state was what I meant, John. Neither the state of the California nor the Federal government own Tesla. If California owned Tesla, and they moved out of state, then the biting would apply. But Tesla is free to choose where they wish to set up their business, and they're going to do it where the climate is friendly to business. Same reason why Toyota closed NUMMI while opening plants in Indiana, Texas, and Mississippi or Subaru (to keep Denis happy) is in Indiana, Honda is in Ohio and Indiana, and the list continues on auto assembly plants NOT being built where the 'traditional' labor force is/was located.
John Goreham wrote on April 30, 2014 - 4:22pm
No offense intended. Your term "owned by the state" applied to an automaker would have been laughable at one time in America. Except then came 2008. This move took balls by Elon Musk given the fact that CARB is considering cutting off the state CVRP rebate for his cars. And pretty much just his cars. Should have put that in my story....
Johnny wrote on April 30, 2014 - 4:40pm
For the two sites he's going to announce, I have the feelings one of them is going to be in California. If he can break ground there on a timely manner, then it's going to stay in California, but if it happens just like he predicted, then he will procced with the second site. Regardless I don't think he bites the hand. Excessive environmental bureaucracy is for companies who don't care about the environment. Since his company is all about green, the excessive environmental bureaucracy is unnecessarily.
John Goreham wrote on April 30, 2014 - 4:46pm
So what do you make of the quote where he talks about that? "California has a lot of regulatory agencies, and although this will be a very green factory, we can’t have a situation where an enormous amount of data has to be processed by a regulatory agency to find no significant impact and then give us approval to proceed." Maybe just thinking out loud and not a serious answer in a serious interview? I am not being sarcastic.
Johnny wrote on April 30, 2014 - 5:00pm
I believe it's a preemptive strategy. Since he voiced it publicly, California has to get its act together to approve his factory fast, and if it won't, he will proceed with the second site. His factory won't be delayed and no one can blame him for dropping it. Either way he'll come out on top since he bypasses a lot of red tapes that would normally take years to go through.
John Goreham wrote on April 30, 2014 - 5:46pm
I think you're right. Where is everyone getting the news that California is one of the two sites Musk says the company has narrowed the search to? I have not seen any news saying that. Maybe I am missing something.
Johnny wrote on April 30, 2014 - 6:40pm
Is the site blocking URLs? I'm trying to give you a couple of references but the comment didn't get posted.
Armen Hareyan wrote on April 30, 2014 - 10:44pm
Hi Johnny, Thank you for all your comments. Yes we are blocking URLs to prevent spam. Once we allow them, too many spammy messages are posted and it's almost impossible to manage them. In this way, our comments are very clean and useful for TorqueNews readers. Thank you.
John Goreham wrote on May 1, 2014 - 9:19am
The comments section cannot support direct links, but you can copy the address from the browser bar and paste it. We can then copy and paste it into the browser. Sorry for the inconvenience. Or you can post it on the Torque News FB page. Thanks
Johnny wrote on April 30, 2014 - 6:41pm
I read the article below and a couple of others. Then a day later Elon said he will announce two sites. So I just put two and two together thinking that might be his plan, but I definitely don't know for sure. newsmax.com/us/tesla-battery-factory-race/2014/04/28/id/568214/ gas2.org/2014/03/10/tesla-gigafactory-wont-california-will/ Elon is a business man. He will do what's best for his company, not for the state. So whether that's biting the hand, I don't know, but I don't think I care if he does. If he succeeds, it's good for everyone everywhere, not just California or wherever the gigafactory factory will be in. So I'd rather prefer he bites the hand and succeeds than doesn't bite the hand and fails.
John Goreham wrote on April 30, 2014 - 6:44pm
Well said.