Tesla Wins Lawmakers' Favor in California, New Jersey - Analyst Blog

Two senators in California are trying to entice Tesla Motors, Inc. TSLA to construct its planned Gigafactory in the state by sponsoring the SB 1309 bill that offers incentives in terms of both financial benefits and faster regulatory approvals to the automaker. Tesla had initially excluded California from the list of states being considered for building the Gigafactory as the time required for the strict regulatory reviews in the state would delay the construction schedule. Therefore, the passing of the bill might tilt the decision in California's favor. Arizona, Nevada, New Mexico and Texas are the other states being considered for the Gigafactory.

Moreover, as Tesla is now planning to break ground for the Gigafactory at three sites instead of two, the probability of California being one of the chosen sites has increased. According to Bloomberg, the former Mather Air Force Base near Sacramento is one of the sites being evaluated by Tesla in California.

Building the Gigafactory in California will definitely be beneficial for Tesla as its main assembly plant is in Fremont, CA. Thus, the cost of transporting battery packs from the Gigafactory to the assembly plant will reduce drastically if it chooses California as the site. Moreover, the state will benefit as the factory will employ around 6,500 people.

While Tesla initially had plans to construct only one Gigafactory, the company has now decided to break ground in three sites to avoid any delay in construction. By the end of the year, the company will begin construction at any one of the three. Eventually the automaker might start construction on the other sites as well.

Meanwhile, in New Jersey, the Assembly's consumer affairs committee moved forward a bill that permits direct selling of electric cars by automakers provided they run maintenance facilities in the state. In March, new regulations approved by the state banned the direct sales of vehicles by any automaker and necessitated the use of middlemen. Tesla, which has two stores in the state, had filed an appeal against the regulation. If the new bill is approved, Tesla will not only be able to sell cars in the state, but might also increase the number of stores to four.

Tesla currently carries a Zacks Rank #4 (Sell). Some better-ranked automobile stocks worth considering are Fox Factory Holding Corp FOXF, Gentherm Incorporated THRM and Magna International Inc. MGA. Fox Factory and Gentherm carry a Zacks Rank #1 (Strong Buy), while Magna is a Zacks Rank #2 (Buy) stock.

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