Tesla's Nevada Gigafactory Site Points to Problems in California

NEW YORK (TheStreet) –– Tesla Motors (TSLA) announcement that it will be building its Gigafactory in Nevada highlights that economic reform is needed around the country, especially in California, where noted venture capitalist Tim Draper has proposed breaking up the state of California into six states.

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"Losing Tesla to Nevada is just another reminder that our state needs change," Draper, founder and Managing Director of Draper Fisher Jurvetson, said in a press release. "California has high unemployment and the percentage of people living below the poverty line is steadily increasing. Our state needs a massive investment in infrastructure and a streamlined process to help grow and keep businesses."

Initially, Tesla announced it was choosing between four states (Arizona, Texas, Nevada and New Mexico) for the Gigafactory, when it unveiled plans for what the Gigafactory would look like, as well as its expected production levels and costs. California was not amongst them, a fact that CEO Elon Musk highlighted on the May 8 earnings call, due to "a complex and lengthy process for approval of Greenfield sights."

Musk noted Tesla could not afford to wait "like a year or more" for the decision on the Gigafactory to proceed due to regulatory rules in California, as opposed to other states, where "it's much more streamlined approach." Musk did note on the May 8 earnings call that California was back in the running to be considered because the state government tried to acquiesce to Tesla's demands for building the plant, which will house 6,500 permanent employees and thousands of temporary jobs and is expected to produce 500,000 electric vehicles by 2020.

Requests for comment from the Governor of California's office were not immediately returned.

On Thursday, Musk, alongside Nevada Governor Brian Sandoval, announced Nevada was the official site of Tesla's Gigafactory, which will help cut battery costs by more than 30% by 2017, when the mass market, Gen III vehicle, named the Model E, is slated to appear. The Gigafactory will mean "nearly $100 billion in economic impact" to Nevada over the next 20 years, according to Sandoval, but it comes at a cost to taxpayers. Nevada offered $1.25 billion in tax breaks to Tesla over the next 20 years according to USA Today, but Musk noted in a press conference Nevada's offer was not the largest in terms of tax breaks.

Losing the Gigafactory to Nevada highlights the issues with California, which still has "high unemployment" according to Draper (7.4% in June according to the U.S. Bureau of Labor Statistics), and a state that is "ranked worst in the nation for business," according to the venture capitalist.

As such, Draper has been a big proponent of splitting the state into six separate states with an initiative known as "Six Californias," which he believes "gives us [California residents] an opportunity to create a better future for all 38 million of us."

The Six Californias initiative would see the creation of six states with more responsive and local governments, as opposed to one governing body for all of California, which has been ranked as the world's eighth largest economy by the World Bank, with an estimated GDP of $2.2 trillion in 2013.

Read More: Here's the Biggest Risk With Tesla's Gigafactory

--Written by Chris Ciaccia in New York

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