Texas is trying to lure Tesla with subsidies for its batteries.

The Last Supper meets the “Tesla Model 3.” Photo by Mark Wilson/Getty Images Texas voters have become increasingly interested in corporate subsidies for manufacturing firms, mainly because the state has strong incentives for production…

Texas is trying to lure Tesla with subsidies for its batteries.

The Last Supper meets the “Tesla Model 3.” Photo by Mark Wilson/Getty Images

Texas voters have become increasingly interested in corporate subsidies for manufacturing firms, mainly because the state has strong incentives for production (here’s a piece for more detail on Texas’ business incentives, from Forbes). The latest example of this trend is a state- and privately-funded effort to bring Tesla’s expensive lithium-ion car batteries to Texas. After a rough first try at forming a working partnership in California, Tesla and three of the state’s four Republicans—attorney general Ken Paxton, lieutenant governor Dan Patrick, and house speaker Joe Straus—have now officially signed on.

Because Tesla plans to produce its batteries at its Gigafactory, which is near Reno, Nevada, it should be easier to line up a supply line in Texas than if the company were building the lithium-ion pack directly from California. The Texas-New Mexico border is fairly well connected with capacity to export the battery.

As the Houston Chronicle points out, the winners of the deal are unclear; they include energy transmission firm Reliant Industries, Vestas Wind Systems, U.S. Energy & Leasing, and Perry Group International, which is tied to Lieutenant Governor Patrick. “Texas tried to sweeten the pot for Tesla, but couldn’t touch what Texas ended up getting,” the paper notes. Texas will also have a seat on the board of Tesla Energy, the company’s energy storage company.

The question of whether Tesla is a good corporate citizen will have to wait. Ultimately, the success of this project will depend on Tesla. Even though the car-maker’s reputation is on the rise, CEO Elon Musk continues to struggle with controversy about Tesla’s production system and Tesla’s finances. Musk and his company have invested $17 billion in the car-maker, and an additional $3 billion into SolarCity, which the company bought earlier this year.

California Senator Kamala Harris, who is widely speculated to be mulling a 2020 presidential run, delivered an open letter to Musk earlier this year criticizing the company’s truck and SUV production. If Musk doesn’t find a way to start closing the production gaps, some investors and regulators are likely to view his contributions to Tesla as uncertain or questionable.

Read more in Slate about Texas.

Leave a Comment