Tesla applies for $106 million tax break on $1.26 billion expansion of the Fremont factory for Model 3’s Build Plan

Published By: on June 16, 2016 02:39 pm EST

Last month, Tesla raised $1.7 billion via stock offering to fund the expansion of its production capacity at its Fremont factory and produce half a million vehicles by 2018. The Build Plan was introduced after the company saw stronger-than-expected demand for its first mass-market product, the Model 3, which has already gained about 373,000 reservations.

Electrek reported (via Reuters) that the young electric vehicle (EV) company is applying for a tax break of $106 million, as it expects to invest $1.26 billion on the Fremont factory expansion for the Build Plan. The automaker is seeking the State of California’s support for purchasing equipment to construct the Model 3’s assembly line.

The state’s approval would be continuation of the existing deal which struck when the company first acquired the New United Motor Manufacturing, Inc. (NUMMI) factory after General Motors Company (NYSE:GM) and Toyota Motor Corp (NYSE:TM) closed the facility in 2010. The state approved tax break of over $90 million, the EV maker started rebuilding the factory.

The Fremont factory also employs thousands of employees and with the Model 3’s production should result in significantly more jobs. The deal is comparable with the Gigafactory’s tax break of $1.4 billion from the State of Nevada. Though, both the deals are subject to the automaker spending billions on training, hiring, and equipment to materialize.

Earlier this year, the California Alternative Energy and Advanced Transportation Financing Authority gave green signal to a similar incentive for Atieva to construct a $530 million EV factory, which would have annual production capacity of 130,000 vehicles. Meanwhile, Tesla’s recent expansion plan would boost production capacity from the existing 104,000 vehicles per year to 500,000 units by 2018.

Like the Gigafactory, the Fremont factory is one of the world’s largest building with production and office space of 5.3 million square feet. During 1QFY16 earnings call, CEO Elon Musk said that the plant can achieve annual production rate of a million cars.

Following the departure of its production leadership, Tesla hired former Audi Sr. Director of Production, Peter Hochholdinger, as the new VP of Production last month. The executive has worked on Q5, A5, and A4 programs at the German automaker.