Automaker and renewable energy company Tesla is scouting locations in the United States for a new assembly plant. Multiple media outlets report Austin, Texas and Tulsa, Oklahoma are finalists. KGOU’s Richard Bassett discussed Tulsa’s chances and what it could mean for the city and state with Gali Russell, the founder of technology and investing YouTube channel HyperChange.
With Tesla factories already in California, Nevada, Shanghai and one under construction in Berlin, Bassett first asked Russell what will be different about the new one:
Extended Transcript:
Gali Russell: Well, every iteration of Tesla's factory, I think, is the latest and greatest — like new technologies, new version of their production lines, taking what they've learned at their last factory, making it better. Like we've seen the Model 3 ramp took them about two and a half years to get up to capacity. The Model Y came online about twice as fast, or three times as fast, and they were actually able to achieve a positive gross margin in the first quarter of production. So, they're ramping twice as fast and more profitably with each vehicle. And so, this new factory they're working on, I think is going to be basically their crown jewel. It's going to be the first factory they have in the U.S. where they have battery production on site and vehicle production over the long term. I believe this will be their new next generation battery cell that they acquired a company called Maxwell Technologies to bring to market. And yeah, this is going be a huge deal. Basically, Tesla's latest and greatest factory.
Richard Bassett: And they'll be doing what, the crossover model Y and the Cybertruck?
Russell: Yeah. And so, Tesla basically sells every single car they can produce. So, it's all about more capacity. So, they recently introduced the Model Y crossover utility vehicle, which is the largest segment of the automotive market. I think they have capacity for about 100,000 of those in California, but they just need more of those because they are projecting demand to be double or triple that potentially, even just domestically. And so, they want to build Model Ys for the East Coast to start. And then longer-term building the Cybertruck there, which I have one of those on order, I'm personally most excited about that.
Bassett: Tesla is reportedly looking then for a location in the middle of the country to more easily distribute its products. Oklahoma, Route 66, are about as central as you can get, but I am curious why Tesla executives specifically are interested in Tulsa and not other major cities in the area.
Russell: Yeah. I think, you know, it's important to understand where Tesla is coming from right now. They took over a GM and Toyota factory in Fremont, which is their main U.S. vehicle production facility. And so, they really didn't have a chance to like build it from scratch. They were sort of retrofitting. And so now this is Elon Musk and Tesla's chance, using everything they've learned to, like, go to the drawing board, build something from scratch, find a geography and jurisdiction where it's going be friendly to their business, where they can start negotiating them from day one, like, hey, we're going build this state of the art factory here. And I think he's just been caught up in the burden, some of the regulation in California and kind of fed up with that. And just geographically, they need to move farther east. And so the combination of that puts, I think Tulsa and Austin and Oklahoma and that region, like, in the sweet spot of exactly where this would work. And you have, you know, huge space, way lower cost of living, access to enough talent and that sort of combination sweet spot is what's making it work.
Bassett: So, Tulsa Mayor G.T. Bynum has been heavily tweeting at Tesla and their CEO, Elon Musk in recent days. In one, he suggested the city will buy Cybertrucks for police vehicles. If Tesla picks Tulsa.
Russell: Yeah, totally. I think they're very interested in that. And I think Oklahoma is taking the extremely right approach because, you know, Tesla had become the largest manufacturing employer in the state of California, over 10,000 people at their factory alone. Like this is a massive employment opportunity of extremely, you know, high paying, high skilled jobs in manufacturing and technology and software development. Like this is an extremely huge boom to any local economy. And I think Tulsa's realizing that and they realize how big of a potential asset this is so them and saying, "hey, like we're gonna give you enough subsidies, we want to buy this, we want to make this part of the community" is totally the right move. And I think that is going to, like, help and move them up. And that's why I personally have ... like I'm leaning a little bit more towards Austin and Texas because of what Space-X has done there and Tesla already has some operations there. But I think that and Tulsa, you know, those governments there have shown they want Tesla there. So I think that really does matter.
Bassett: How many jobs do you think this new factory will provide?
Russell: Excellent ... I'm glad you asked that question. I haven't really thought about this too much. But I mean, off the top of my head, I think this is going be a bigger facility than Fremont, where they pump out half million cars per year. They don't do battery production. They do have some corporate there. And they have 10,000 employees in Fremont, I believe—20,000 in California. My guess is you're looking at maturity a minimum of 5,000 employees, probably more like ten, fifteen or twenty thousand employees over the next five to ten years whenever this gets built. And I want to reiterate that a lot of these are, like, really well-paying, you know, high value jobs. I think this is going to have a huge impact in the real estate and just local economy of wherever this gets announced.
Bassett: So, one of Tesla's missions is to lead the world's change to renewable clean energy. And Oklahoma is traditionally dependent, you know, on the opposite of that. Do you think that challenge of changing the culture here is at all on Elon Musk's mind?
Russell: I think that's definitely a big challenge, but I would also say it's an opportunity. My motto is the bigger the problem, the bigger the opportunity. And, you know, I think it's becoming clearer and clearer that green energy and green technology and electric vehicles are the future of propulsion in society. The internal combustion engine is not. That's why we're seeing governments, you know, ban the sale of internal combustion engines in decades. And that's why we're seeing every other automaker desperately invest and say electric vehicles are the future, including companies like Ford and GM, which was not the case, you know, 5 or 10 years ago. But Tesla's really shown that's the future. And so I think, you know, as difficult as that transition is, at the same time, this is a massive opportunity for somewhere like Tulsa and Oklahoma to stay ahead and adopt that next generation of technology and make that leap and stay,like, become a leader in this ... what's going to be, you know, a decades long thing to play out where electric vehicles takeover society, renewable energy takes over the grid. You know, this is a massive multi-billion-dollar opportunity. And I think that will outweigh the negatives of the oil and fossil fuel industry going away.
Bassett: So the website Electrek suggested last week that Austin had already been chosen. But then soon after, other news organizations reported Austin and Tulsa were both finalists. You know what's going on there?
Russell: Yeah, you're not going to like me for this, but I think Tesla and Elon Musk, like I said, this is such a big asset for whoever they choose to go into and they know that and they know that they can leverage different incentives from different governments by making it seem like they're deciding where they want. But I think it's a done deal and they want Austin, as much as that's kind of a bummer for Tulsa, and they're just playing the game of saying we could go to Tulsa if Austin doesn't, you know, make this perfect for us. And that's kind of their take is sort of this geopolitical, you know, balancing act and hedging game, which I think every, you know, large technology company is going to do before they do a factory. But in general, I would say that, you know, Texas missed out on the Nevada Gigafactory five years ago and look at what's happening now. So, I think this is much bigger than just like, oh, if Tulsa doesn't get the factory like it's over, like Tesla is going to be a company that has massive growth for decades that's eventually going to have hundreds over a hundred thousand employees, is my take, you know, in the U.S.. You know, with massive manufacturing hubs all over the country doing all sorts of crazy stuff. I think getting it into home ventilations, you know, solar roofs, they're going to build, like, the ... essentially the smart home of the future and cars. Like there's just so much potential for this company to become a major manufacturing conglomerate that I think Tulsa showing that they want Tesla, showing their business friendly right now — even if it doesn't win for this factory — could put them in the leading position for the next factory or another big facility in a couple of years that will also be a huge win for the city.
Bassett: When will the final decision be made?
Russell: Well, Tesla has their battery Investor Day, where they want to unveil this new battery technology that they're going to build at this factory. But they want to do it in person and obviously, the whole, you know, COVID-19 situation has made it so we can't really have an in-person event. And so, it's just up in the air based on that. But my guess is, you know, I wouldn't be surprised if Elon Musk tweets it tomorrow and says, we're going to Tulsa. I would not be surprised. And I wouldn't be surprised if we wait six months and still don't know either.
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