Tesla Motors is getting ready to nearly double its production capacity. The company is buying new manufacturing equipment worth up to $415 million, for its factory in Fremont, that will bump capacity from 21,000 cars a year to 35,000 cars a year.
Tesla is expanding sales to Europe, China, Japan and elsewhere, and hopes to keep US sales volume in the 20,000 cars a year range at the same time. That means adding new production capacity for oversees sales.
In their last quarterly results conference call, Tesla’s management said they were looking into increasing production capacity.
The equipment is being bought in part with a $34 million sales tax waiver from California. Normally, California charges sales tax on manufacturing equipment purchases. But, under the California Alternative Energy and Advanced Transportation Financing Authority, chaired by State Treasurer Bill Lockyer, California routinely grants sales tax waivers to clean technology companies. That website includes a document listing the tax exemptions granted under the program.
It’s clear from the document that, when granting a sales tax waiver, California is looking to get several benefits: environmental improvements, earning sales tax revenue on the sale of stuff being manufactured, and jobs growth. According to the SF Gate article (link below), California expects $24 million in benefits, and over 100 permanent jobs added to Tesla’s factory.
Tesla will be building more cars, as well as drive train components for Daimler and Toyota, which generates environmental benefit. Having more manufacturing equipment means more jobs to operate the equipment. And sale of those cars and components means sales tax revenue for California.
The big takeaway is that this is going to increase Tesla Model S production to match sales growth internationally.
Tesla’s management has said that Model S sales is constrained by manufacturing capacity, not by the market. In a few months we’ll be able to judge the truth of that claim.
At the end of 2014, Tesla is also supposed to begin sales of the Tesla Model X. Tesla has told us to expect Model X sales will come on top of Model S sales. Which means that Tesla will have to increase manufacturing capacity again to handle Model X production.
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