Tesla's Planned "Gigafactory" Will Not Be In California

California loves Tesla, the Los Angeles Times informs us, but the electric car company is ambivalent about the Golden State. In a blow to efforts to stem manufacturing job loss in California, the car company, based in Palo Alto, said it would definitely not build a new $5 billion “gigafactory” employing up to 6,500 workers in its home state. The decision comes at a time when investment in manufacturing jobs measured on a per capita basis is cratering in the Golden State, according to the California Manufacturers & Technology Association.

In a recent survey, California received just one investment in a new or expanded manufacturing facility per 1 million people in 2013, compared to a national average of more than 8 such investments per 1 million people. Nebraska led the way with nearly 30 investments in manufacturing facilities per million people.


Much of that new investment is being driven by energy-related manufacturing, food production and agriculture, as this Manhattan Institute report from last year by Joel Kotkin on America’s new growth corridors explains. That growth is increasingly concentrated in the Mountain states and the so-called third coast of states in the Gulf of Mexico region. Not just jobs but wage growth has been robust, there.

California is rich in many of the resources driving job growth, especially oil and gas, but the state has refused to allow fracking to unlock supplies in the giant Monterey Shale, while California’s farmers struggle with a devastating drought in a state that hasn’t built a major dam or reservoir to control water flow since 1983. Meanwhile, the California senate has just proposed a new tax on oil as it is extracted in the Golden State, though Gov. Jerry Brown thinks more California taxes are not the answer.

Beyond taxes and regulations are growing business worries about high debt costs in states and localities. A number of businesses who have left California in recent years have mentioned municipal and state budget woes and pension debts. Ironically, as I wrote here, despite California’s reputation as a green economy, it’s now losing green jobs, too, to other states because of its high costs and regulatory burden. You can add Tesla, looking to build batteries for electric cars, to that list.

About the Author:  Steven Malanga is City Journal’s senior editor and a Manhattan Institute senior fellow. He is author of Shakedown: The Continuing Conspiracy Against the American Taxpayer, about the bankrupting of state and local governments by a new political powerhouse led by public-sector unions. He writes about the intersection of urban economies, business communities, and public policy. He has been cited as one of New Jersey Governor Chris Christie’s intellectual influences (BusinessWeek, August 2010).