Yesterday, Tesla (NASDAQ:TSLA) announced that the company would be placing its new Gigafactory in Nevada, where it had already broken ground and many believed it would ultimately place the Gigafactory. And during the Gubernatorial debate in California, between sitting Governor Jerry Brown and challenger Neel Kashkari the topic of Tesla’s Gigafactory was brought up as a lost business opportunity for California by Kashkari.

Kashkari stated, “We need to bring good jobs to California. Tesla is one of many examples of this failure of this Administration.” Then, Governor Brown followed by saying, “It’s pretty clear what happened. We fought hard for Tesla, but Tesla wanted a massive upfront cash payment that I don’t think would be fair to the taxpayers of California.” He then goes on to talk about how when Tesla wanted to build their car they picked a factory in California and that they continue to maintain their presence in California. In fact, Jerry Brown neglected to mention that Tesla has been slowly increasing hiring for their NUMMI factory in Fremont, California as they continue to ramp their production of the Tesla Model S and upcoming Model X.

Now, getting to Nevada itself, the Nevada state legislature had already approved the Tesla tax deal ahead of the announcement and it appears as though Tesla had pretty much already made their decision when they announced that they had broken ground in Nevada but were still confirming locations. So, if anything, there’s a very good chance that the cash payment they were looking for would have been to sweeten the deal over what Nevada had already approved.

Tesla Nevada Tax Deal Breakdown

As you can see from the breakdown above, Tesla would be allowed to operate in Nevada essentially tax free for a decade, something that makes the long term profitability of this Gigafactory incredibly easy and encourages Tesla to try to generate as much profit as possible.

So, Governor Brown of California would have been forced to convince the state legislature to not only approve something similar to nevada but also to sweeten the deal with some sort of upfront cash deal as he had indicated in during the debate. He did not harbor any ill will towards Tesla, encouraging them to do well in Nevada because the rest of the company’s operations are still located in California and the better they do, the better the State of California does and they will inevitably hire more people and contribute more to the tax base of the state. The Gigafactory and the accompanying 6000 jobs would without a doubt be beneficial to the state economy, but at a very high cost to tax payers.

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Tesla Motors [NASDAQ:TSLA] today reported their earnings for the second quarter of 2014, beating many analysts expectations by delivering a record 7,579 Model S vehicles in the quarter as well as producing a record 8,763 Model S vehicles in the quarter. Non-GAAP earnings were $16 million dollars (broken down to $0.11 EPS), while GAAP earnings (loss) was a loss of $62 million or a loss of $0.50 cents per share. Tesla Motors also cautioned that they expect the third quarter revenue and overall production to be lower than initially expected due to the retooling of the Fremont NUMMI plant for higher volume Model S and new Model X production. They also said that this new Model S/ Model X assembly line is planned to begin operation next week. However, they did not change their guidance for the year, as they expect that the fourth quarter, Q4 2014, should make up for any lost production in Q3. As such, they are still on track for their expected figure of 35,000 deliveries in 2014.

They also talked about the groundbreaking at the Reno, Nevada site for the Tesla Gigafactory, however they still have made it clear that the site has not been finalized yet, even though they’ve broken ground in Nevada. On the topic of reduced production, they still expect to product 9,000 vehicles in Q3, and without the retooling they expect that they would be producing 11,000. They expect to deliver 7,800 vehicles in Q3, and without the retooling and production stoppage they expect that they would have delivered nearly 9,500 vehicles, which may explain investors’ current unhappiness with the stock. Tesla’s stock is currently down 2 1/2 percent, on top of being down 2 1/2 percent in normal trading. Obviously, most of this is not really news, but Tesla is now quantifying exactly how bad their expected retooling slowdown is. Elon Musk will very likely calm investors down with some news about the Model X deliveries or increased average sale price as a result of shipping the Model X in Q3 and Q4 of this year.

The news that Panasonic is also investing in the Gigafactory is also big news for Tesla Motors, but that officially came out yesterday which may partially have been to try to stem the blow from reduced Q3 product numbers. But even so, Tesla clearly expects to deliver as many vehicles as they had promised, which makes the long term outlook better than the quarterly one. Not to mention, Tesla Motors has already beaten earnings expectations for Q2 2014, even though they’re still technically operating on a GAAP net loss (which will likely change by the end of this year).

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In case you haven’t heard, Tesla just confirmed a story originally posted by AutoExpress in the UK that they will be indeed naming the vehicle that follows the Model X by the name Model 3. This is unfortunately a result of the fact that Ford blocked Tesla from naming their next car after the Model X by the name Model E. If that had happened, Tesla would have been able to sell a Line of Model S, Model E and Model X vehicles, also known as the SEX Models of cars when you combine all three letters of the different Tesla models.

The Model 3 still technically allows for that if you use ‘leet speak’ and type SEX out as S3X instead. The guys at AutoExpress had an extensive interview with Tesla’s founder, Elon Musk who gave a lot of details about the new Tesla model as well as the motivations behind the naming and who they were looking to compete against. After all, the new Model 3 will be targeted towards the $35,000 price range of vehicles which puts it squarely in the BMW 3 Series’ court, much like the Model S did with the 5 and 7 series.

In their interview with Elon Musk he said, “The new model is going to be called Model III, we’ll have three bars to represent it and it’ll be S III X!” However S3X looks a lot more like SEX than SIIIX and I think we can all agree that Elon Musk is smart enough to know this. The new Model III or Model 3 will be unveiled in 2016 and should be on sale by 2017 and will likely have an entirely new platform rather than a scaled-down version of what’s currently in the Model S and planned for the Model X. The new technology, according to AutoExpress, will be the brainchild of Tesla’s British engineering chief Chris Porritt, formerly of Aston Martin.

Musk also announced that Tesla was planning to setup an R&D facility in the UK and that it could be operational in time for involvement in the Model 3’s development. The Model 3 is also rumored to be 20% smaller than a Model S and will likely use batteries from Tesla’s planned Gigafactory which has yet to be built. The Gigafab still hasn’t been placed yet in terms of location but there’s a very short list. The new Tesla will also have a range of about 200 miles and still have good performance, like the Model S.

Tesla also announced plans to update the Tesla Roadster, the company’s first car, with a new battery pack that would extend its range from 245 miles to about 400 miles per charge, enabling a Los Angeles to San Francisco trip, non-stop. Personally, I fell in love with Tesla with the Roadster, so if that car can be had with a new battery pack and improved range, it may still be more attractive to many than the Model S, Model X or Model E. Also, they didn’t give many specifics but it appears that they will be offering this upgrade to existing owners of the roadster since they went out of production a few years ago.

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