A new IHS Markit study about Tesla’s economic contribution in California shows that the automaker contributed more than $5 billion to the state’s economy and supported over 51,000 jobs last year.
The new report, which was commissioned by the California-based automaker, comes at an interesting time.
Tesla has often been blamed for taking government subsidies, which is often a misguided complaint since it received only a fraction of the subsidies that the Big Three automakers and the oil industry have received without even accounting for the constant subsidy that the fossil fuel industry benefit from due to the lack of a proper price on carbon.
In this report, Tesla is trying to highlight what they are actually contributing to the economy and directly to the government – more specifically in California, where it has most of its operations through its headquarters and the Fremont factory.
IHS Markit found that the company also employs many suppliers in the state. It accounted for $2.0 billion in transactions with over 2,650 California suppliers in 2017 alone.
A Tesla spokesperson said about the report:
“As one of the largest manufacturers in the California, and the only remaining car manufacturer, 2017 saw Tesla generate more than $5 billion in economic activity within the state. We remain focused on trying to make a positive difference in California as we work to accelerate the adoption of sustainable energy.”
According to the report, the bulk of Tesla’s impact in California has been in Alameda County, Santa Clara County, Los Angeles County, the City of Fremont, and San Mateo County.
The company has 150 manufacturing facilities, warehouses and administrative buildings across California and it operates 172 Supercharger stations, and 38 Tesla sales and service centers – with a total staff of 20,189 people.
Here are additional key findings for 2017 from the report:
Employment and Wages
- Tesla’s operations supported over 51,000 jobs in California. Tesla directly employed 20,189 workers while another 31,424 were ultimately supported by Tesla’s local supply chain purchases and its employees’ consumer activity. Thus, for every Tesla employee, another 1.5 jobs were supported in California.
- Tesla paid its employees a total of $2.1 billion in wages and equity in FY2017. Every employee is given equity upon hire.
Sales Activity and Value Added
- Tesla infused approximately $4.1 billion into the California economy: $2.0 billion in transactions with over 2,650 California Tier 1 suppliers (average spending of just over $750K per supplier); plus, Tesla paid $2.1 billion in wages and equity to its California-based employees.
- Tesla’s operations directly contributed an estimated $2.0 billion to California’s gross state product (GSP) in 2017. The GSP contribution grew to $5.1 billion when the Tier 1, Extended Supply Chain and Induced effects are included.
- Tesla ultimately drove a total of $5.5 billion in sales activity across California. Approximately 1/3 of the sales activity was stimulated by the spending of Tesla’s employees. We estimate that Tesla employees spent about 77% of their wages and equity on consumer purchases. Much of the spending remained in the local economies, ultimately stimulating $1.9 million of sales activity.
- Every dollar Tesla spent with suppliers generated $0.8 dollars in additional spending throughout the California economy.
- Every dollar that Tesla paid to its California employees led to $0.9 dollars in consumer spending across the state.
- Tesla’s direct payments to state and local tax authorities in California totaled $328 million.
- The Tier 1, Extended Supply Chain and Induced consumer actives stimulated by Tesla generated close to $345 million in California state and local taxes plus over $452 in federal taxes.
The report itself is interesting, but I never had any doubt that Tesla had a major economic impact in California.
What I am most interested in is why Tesla ordered that report and why it did it now.
If I had to make an educated guess, I would say that this report would have a lot of value when negotiating a state incentive deal for a new manufacturing facility, which Tesla has apparently been looking for in order to bring the Model Y to market.
There’s nothing that was indicating that Tesla would try to get another factory in California since it would make sense for them to spread out more geographically at some point, but the company has reportedly been interested in a huge parcel of land in Oakland earlier this year.
When Tesla bought the Fremont factory, it did get a good deal for the actual plant, but the company didn’t have a lot of leverage with the government.
It did when it was time to build the Gigafactory 1 and the company did get a somewhat good deal that could end up being worth about $1 billion over 20 years mostly in tax breaks from the state of Nevada.
But like the economic impact explained in this report, Tesla will have to contribute tens of billions to Nevada’s economy during those 20 years in order to take advantages of those tax breaks.
It’s why I can see this report as being useful for another similar deal.
Note: The full report “The Economic Contribution of Tesla in Califórnia is available at https://electrek.co/2018/05/15/tesla-california-economic-contribution-report