States Offer Premium Incentives To Lure Automotive Industry Players

To lure Mercedes-Benz USA from its long-time headquarters in New Jersey to a new location in Atlanta, the State of Georgia reportedly came up with an investment package of more than $23 million, or nearly $25,000 for each of the 900 jobs relocating to the center of the New South.

The deal was a relative bargain, however, compared to the $1.25 billion that Nevada gambled late last year to win the Gigafactory that Tesla Motors promises will become the world’s largest lithium-ion battery plant by the end of the decade. In a country struggling to cope with middle class stagnation despite a boom on Wall Street, the push for jobs has led more and more states to cough up cash incentives hoping to attract high-profile and often high-paying automotive jobs.

The payouts come in a variety of forms: tax incentives, free or subsidized land purchases, worker-training programs, even free utilities. Texas spent more to win over the North American headquarters of Toyota, which is in the process of relocating from Southern California. But the $40 million in handouts also covered 4,000 jobs, so the incentive package came to around $10,000 per worker. Nonetheless, it was still more than the Lone Star State reportedly spent on a per-job basis than the Texas Enterprise Fund came up with for Chevron and Apple to set up new Texas operations.

Things can get costly when a high-profile manufacturer puts itself up for bid, as happened when Tesla announced plans to build the world’s largest lithium-ion battery plant. At the time, the battery carmaker’s Founder and CEO Elon Musk estimated it would take a $500 million incentive package to win the Gigafactory project.

But facing competition from California, Texas, and several other finalists, Nevada went far beyond Musk’s wildest expectations, cobbling together a $1.25 billion package that includes free electricity and the likelihood that Tesla will operate virtually tax free for more than a decade.

Such lavish giveaways aren’t without their critics – and often, the price of attracting auto jobs is paid by other industries. Despite the unanimous vote by the Nevada legislature, there were some loud voices opposing the Tesla package. For one thing, it required taking away incentives that had been used to draw a number of insurance companies to the state, as well as subsidies for the movie industry.

Back to NAFA Connection