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California lawmakers propose incentives for Tesla battery factory

By Jennifer Chaussee

SACRAMENTO Calif. (Reuters) - California lawmakers proposed financial incentives for electric car maker Tesla Motors Inc on Thursday in a bid to entice the company to build a large battery factory in the most populous U.S. state.

Palo Alto, California-based Tesla is preparing to choose a location for a proposed $5 billion lithium-ion battery plant dubbed the "gigafactory." The project is expected to employ 6,500 workers.

"California has set the example for the world in battling climate change and promoting innovative technology to lower carbon emissions," said California Democratic state Senate leader Darrell Steinberg, who introduced the bill to create the incentives along with Republican state Senator Ted Gaines.

"This factory would help us achieve the dual goals of strengthening our economy and fostering more clean technology and renewable energy," Steinberg added.

The bill, which needs a two-thirds majority vote from both houses of the legislature, aims to expedite approval processes for breaking ground on the factory and offer Tesla a series of tax cuts. The bill does not yet have language detailing the specific incentives.

It was introduced after Tesla CEO Elon Musk criticized California's business regulations in a call with investors on Tuesday, describing the state's approval process for building green technology sites as complex and lengthy, and saying other states have a "more streamlined approach."

"Everything is on the table – tax credits, investment credits, hiring credits," Gaines said. "We need to show Tesla that we'll cut through the knot of red tape that frustrates companies in this state and prove that California is open for business." 

Fears that Tesla might take its business outside California to avoid state regulations spurred a bipartisan partnership between Steinberg and Gaines. Both of their districts are in and around Sacramento County. They are aiming to lure Tesla into building its factory on a former military base in the county.

"California will have to meet the same criteria as other locations in terms of speed to implementation. Speed is of the essence," said Shanna Hendriks, a spokeswoman for Tesla.

(Additional reporting by Rory Carroll in San Francisco; Editing by Cynthia Johnston)

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