Friday, December 11, 2015

Faraday Future to Break Ground on Billion Dollar Nevada Plant in 2016

Like its competitor, Tesla Motors, electric car start-up Faraday Future has decided to open up shop in Nevada. Faraday Future, a new, relatively small rival to the other electric car producers, was debating among California, Nevada, Louisiana, and Georgia for their billion dollar production facility, but eventually made their decision and will start construction in the beginning of 2016. a main factor influencing Faraday's decision was an offered package of over $300 million in tax incentives by Nevada legislators, According to company executives, this wasn't the only reason, though, and a more detailed analysis of the choice is made in Chris Kirkham's and Ivan Penn's L.A. Times article.

Faraday Future, which is branded as an electric car company, has not yet produced an electric car. One of the company's founders and primary backers is Chinese media mogul, Jia Yueting, who has a net worth of several billion dollars and is ranked as China's 17th-richest person. Many of Faraday Future's top executives previously worked for Tesla and luxury car companies like BMW and Porsche. As such, they have quite a bit of experience with electric vehicles and the selling points behind them. The market for electric vehicles, while it is still undetermined based on Tesla's sales over the past decade, has the potential to grow larger, especially as people become more environmentally conscious and try to find ways to be more energy efficient.

Nevada legislature offered similar perks to Tesla Motors a year ago. With the help of $1.3 billion in tax abatements, Tesla began work on a $5 billion factory outside of Reno. While Faraday only received a $335 million deal, that is still nothing to scoff at, and will go a long way toward creating more jobs in Nevada and producing vehicles that rely more on renewable energy sources rather than fossil fuels. These deals, which might look to some like a waste of money on the part of legislators, can actually be quite beneficial to the state as a whole due to the production of jobs and the increase in goods for export to other states and other countries. The money in tax incentives that Nevada is providing to these companies can be earned back many times over by increased productivity over the long-term future.

Faraday's business model must be pretty sound for the state to take a risk and invest in them and in the hope of domestic growth in the future. Faraday doesn't just get the $335 million immediately; they have to prove that their company is moving forward. According to legislators, Faraday will not receive all of the tax abatements and other promised perks until it has invested at least $1 billion toward construction of the plant. Even without help from the tax incentives, Faraday's investment could pay off very well in the long run. As gas prices stay low, more individuals are going back to larger SUVs, since they can better afford to fill up the tanks of such automobiles. However, if and when gas prices rise again, people will be more interested in the fuel efficiency of electric vehicles and hybrids. So, as companies like Faraday and Tesla start getting ready now, they may be able to have their production running smoothly by the time demand for electric vehicles increases again.

While the tax incentives helped Faraday to make their final decision of Nevada, there were aspects of the other potential states that could have made them better choices. California, Louisiana, and Georgia all have direct ocean access, which means that they have ports and, therefore, make shipping and receiving of products and parts much simpler. Between California and Nevada, the latter has more wide-open spaces in which to build large factories. All in all, Nevada, which lacked direct access to seaports, still provided close enough access to make shipping of parts not too much of a nightmare in transportation. Highway 15 provides Nevada an almost direct route to the West Coast's ports, which, when combined with the tax incentives, made Nevada a better choice for Faraday's base of production. While we don't know whether California's legislature offered similar tax incentives to convince Faraday to choose the Golden State, in the end, Faraday made its choice, taking the best deal for itself while also benefiting the state of Nevada.

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