TSLA Tesla Inc

By Tim Higgins 

Tesla Inc.'s decision on where to build a new U.S. automobile assembly factory will be influenced by state incentives as well as access to a large workforce and low logistics costs, Chief Executive Elon Musk said.

Mr. Musk on Tuesday said on Twitter that the Silicon Valley electric-car maker is scouting locations for a new factory in the U.S. to build the company's coming pickup truck and Model Y compact sport-utility vehicle.

"Incentives play a role, but so do logistics costs, access to a large workforce with a wide range of talents, and quality of life," he later told The Wall Street Journal in an email.

President Trump in January had suggested Tesla was planning to erect a new factory in the U.S. Mr. Trump, in an interview with CNBC, said he had talked with Mr. Musk and that the auto maker planned to build a "very big plant" in the U.S.

Mr. Musk, via Twitter on Tuesday, said the facility would be placed in the central part of the U.S., a region of the country that fuels many pickup sales for competitors Ford Motor Co. and General Motors Co. He also said, in a second social-media post, that production for the Model Y would serve East Coast customers.

Excitement over Tesla's growth ambitions and success in opening an assembly factory in China in recent months has helped fuel a sharp rise in company shares. Even after a recent selloff in stock over broader concerns about the spreading novel coronavirus, Tesla shares closed Tuesday 54% higher this year.

Tesla is targeting at least a 36% increase in deliveries this year, in part from the additional production capacity coming from its new China factory. The arrival of the Model Y, which the company has said should begin delivering by month's end, has the potential to further stoke the company's deliveries. Consumers in the U.S., and China have been gravitating toward smaller SUVs and away from sedans.

The arrival of the Model 3 compact car in 2017, the company's highest production vehicle, and Model Y this year are part of a broader strategy by Mr. Musk to pivot Tesla from being a niche luxury brand into a car company that sells millions of electric vehicles around the world.

Tesla also has begun site work to build a factory outside of Berlin to add to its assembly capacity in China and California. It plans an initial output, starting in 2021, of 150,000 cars in Germany, growing to 500,000 at a later date.

The new U.S. factory announced Tuesday would be Tesla's fourth assembly facility. The company also has a large battery factory in Nevada.

Investor sentiment around Tesla improved significantly in the fall. The company reported a surprise third-quarter profit. Then, at an event in November, Mr. Musk revealed a pickup dubbed the Cybertruck, with a stark design that drew significant social media attention. He has said that 250,000 people have put down money to preorder the vehicle. Tesla has suggested production of the truck would begin around late 2021.

The company took advantage of the enthusiasm around its prospects to raise more than $2 billion in February by issuing new shares. The money helps bolster the company's access to cash. It was raised before the spread of the novel coronavirus in the U.S. spurred uncertainty over economic growth.

The company has warned that efforts to contain the coronavirus in China could hinder its first quarter. Other auto makers have seen dramatic declines in sales as the country essentially came to a grinding halt. Tesla will release first-quarter delivery results in early April.

Write to Tim Higgins at Tim.Higgins@WSJ.com

(END) Dow Jones Newswires

March 10, 2020 22:34 ET (02:34 GMT)

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