John Solari: Tesla’s economic multiplier looks good
http://www.rgj.com/story/news/2014/12/22/john-solari-teslas-economic-multiplier-looks-good/20750317/
Now that much of the dust has settled over the Tesla deal that will bring the world’s largest battery plant to Northern Nevada, one big questions remains — will the economic projections surrounding Tesla actually pan out?
The Governor’s Office of Economic Development has done a great job parsing the economic projections behind the Tesla jobs figures. But there are some interesting macroeconomic trends that are making the Tesla deal look better by the day.
Here is a brief recap of the economic multiplier that was used to project Tesla’s impact on Northern Nevada. Tesla is projected to create 6,500 direct jobs, all of them by 2018. Another 7,814 indirect jobs are projected from suppliers, distributors and other associated industries. Then, 8,402 induced jobs are estimated from the increased demand of this new workforce spending within the community. That totals 22,715 jobs.
There have been many questions about these calculations, and it should be reiterated that no projections are perfect in a fast-changing economy. But here are three reasons why Tesla’s economic multiplier projections are looking even more promising today than when the Tesla deal was approved:
Tesla may dominate solar storage
Much of the conversation around Tesla has understandably centered on electric cars, but Tesla’s ambitions are much greater than that. In partnership with SolarCity, the company has set its sights on a network of solar energy generation and storage that could mean sweeping changes to the energy industry. Tesla is developing battery technology that it hopes will become the centerpiece of both vehicle power and home energy across the nation.
As a Morgan Stanley analyst told Bloomberg recently, “We believe there is not sufficient appreciation of the magnitude of energy storage cost reduction that Tesla has already achieved, nor of the further cost-reduction magnitude that Tesla might be able to achieve once the company has constructed its ‘giga-factory.’”
If Tesla’s battery technology becomes a supplement or alternative to nation’s electricity grid, as well as the dominate power source for electric vehicles, Northern Nevada’s gigafactory projections may have underestimated the long-term economic impact to the region.
A rebound in construction
Many of the jobs calculations for Tesla did not take into account the temporary construction jobs that will be created to build Tesla’s factory. And the impact on construction will be significant, with an estimated 3,600 construction jobs and total construction payroll of $450 million. It is no secret that Northern Nevada’s construction industry cratered during the housing crash. Tesla’s $5 billion gigafactory will be a driver and a catalyst for a resurrection of Northern Nevada’s construction industry. And the Tesla project could have its own construction job halo effect, as more construction work pours in for road building and the construction of ancillary businesses and new homes.
The gigafactory’s eye-popping jobs figures may be conservative
When figures like 22,715 jobs became public, there was ample public criticism that the projections were overly optimistic. But there is a case to be made that those figures are conservative. The Governor’s Office of Economic Development used an economic multiplier of 3.49. But state figures show that the economic impact of projects such as the gigafactory can run even higher. Economic multiplier calculations for uses similar to Tesla’s factory run from as high as 4.8 because of the long supply and distribution chain that begins with raw material production and includes refining, manufacturing, assembling and distributing the end product.
Many questions remain about Tesla’s eventual impact on Northern Nevada’s economy. But as construction on the gigafactory ramps up, the future is looking bright for Tesla to be the economic engine that Nevada predicted.
John Solari is the managing partner of J.A. Solari & Partners. He has 25 years of accounting experience and is also a member of the American Institute of Certified Public Accountants and the Nevada Society of Certified Public Accountants.
http://www.rgj.com/story/news/2014/12/22/john-solari-teslas-economic-multiplier-looks-good/20750317/
Now that much of the dust has settled over the Tesla deal that will bring the world’s largest battery plant to Northern Nevada, one big questions remains — will the economic projections surrounding Tesla actually pan out?
The Governor’s Office of Economic Development has done a great job parsing the economic projections behind the Tesla jobs figures. But there are some interesting macroeconomic trends that are making the Tesla deal look better by the day.
Here is a brief recap of the economic multiplier that was used to project Tesla’s impact on Northern Nevada. Tesla is projected to create 6,500 direct jobs, all of them by 2018. Another 7,814 indirect jobs are projected from suppliers, distributors and other associated industries. Then, 8,402 induced jobs are estimated from the increased demand of this new workforce spending within the community. That totals 22,715 jobs.
There have been many questions about these calculations, and it should be reiterated that no projections are perfect in a fast-changing economy. But here are three reasons why Tesla’s economic multiplier projections are looking even more promising today than when the Tesla deal was approved:
Tesla may dominate solar storage
Much of the conversation around Tesla has understandably centered on electric cars, but Tesla’s ambitions are much greater than that. In partnership with SolarCity, the company has set its sights on a network of solar energy generation and storage that could mean sweeping changes to the energy industry. Tesla is developing battery technology that it hopes will become the centerpiece of both vehicle power and home energy across the nation.
As a Morgan Stanley analyst told Bloomberg recently, “We believe there is not sufficient appreciation of the magnitude of energy storage cost reduction that Tesla has already achieved, nor of the further cost-reduction magnitude that Tesla might be able to achieve once the company has constructed its ‘giga-factory.’”
If Tesla’s battery technology becomes a supplement or alternative to nation’s electricity grid, as well as the dominate power source for electric vehicles, Northern Nevada’s gigafactory projections may have underestimated the long-term economic impact to the region.
A rebound in construction
Many of the jobs calculations for Tesla did not take into account the temporary construction jobs that will be created to build Tesla’s factory. And the impact on construction will be significant, with an estimated 3,600 construction jobs and total construction payroll of $450 million. It is no secret that Northern Nevada’s construction industry cratered during the housing crash. Tesla’s $5 billion gigafactory will be a driver and a catalyst for a resurrection of Northern Nevada’s construction industry. And the Tesla project could have its own construction job halo effect, as more construction work pours in for road building and the construction of ancillary businesses and new homes.
The gigafactory’s eye-popping jobs figures may be conservative
When figures like 22,715 jobs became public, there was ample public criticism that the projections were overly optimistic. But there is a case to be made that those figures are conservative. The Governor’s Office of Economic Development used an economic multiplier of 3.49. But state figures show that the economic impact of projects such as the gigafactory can run even higher. Economic multiplier calculations for uses similar to Tesla’s factory run from as high as 4.8 because of the long supply and distribution chain that begins with raw material production and includes refining, manufacturing, assembling and distributing the end product.
Many questions remain about Tesla’s eventual impact on Northern Nevada’s economy. But as construction on the gigafactory ramps up, the future is looking bright for Tesla to be the economic engine that Nevada predicted.
John Solari is the managing partner of J.A. Solari & Partners. He has 25 years of accounting experience and is also a member of the American Institute of Certified Public Accountants and the Nevada Society of Certified Public Accountants.
