A view of a fully electric Tesla car on an assembly line at the new Tesla Motors car factory in the Netherlands during the opening and launch of the new factory, on August 22, 2013.
Nevada, New Mexico, Texas, or Arizona? There can be only one home for the Gigafactory.
Or possibly two... if two are built.
The Gigafactory is a massive battery plant, built by the electric car maker Tesla, that will take up to 1,000 acres and will include its own on-site wind and solar energy plants. Tesla has narrowed down its choice of location to four states, but rather than pick one now, it will prepare to build in two or three (or potentially all four), CEO Elon Musk announced on Wednesday.
Replicating engineering work, design work, site selection, connection to power and utilities, and permitting is a costly strategy, says Ben Kallo, senior equity analyst with Robert W. Baird.
"You can talk about millions and even tens of millions [of dollars] to do this" for just one extra site, according to Kallo.
But the cost of not doing it could be much greater. Tesla plans to have 500,000 electric cars on the road by 2020. This would include more of its Model S sedans, a new SUV, and a more affordable car (at $35,000, it might be described as 'less unaffordable'). Tesla also plans to expand into electricity storage to the wind and solar industries, says Kallo. And the gigafactory is the foundation of that plan. A delay could damage Tesla's competitive advantage as a first mover, and could damage investor confidence. Aside from its own share holders, Tesla needs investors to finance the $5 billion behemoth project.
Jakki Mohr teaches marketing at the University of Montana and has followed Tesla closely. She says having multiple possibilities to site the gigafactory is a savvy negotiating move.
"States give huge incentives to get this kind of business in their regions," says Mohr, and this is a way of "playing one state against another to receive better incentives to locate there."
There's also one critical but underappreciated concession Tesla wants, according to Charles Hill, professor of management at the University of Washington's Foster School of Business. Tesla wants to sell cars itself, not through dealerships.
"It may be that Tesla picks a state that's initially hostile to that – Texas would be an example – as a way of getting leverage for them to change that policy as well," says Hill.
"The political issue around whether Tesla should have a direct sales model as opposed to selling through dealers is almost as big of an issue as the battery plant, and I don't think the two are totally separable."
The more back up plans you have, the more arms you can twist.Marketplace Morning Report for Friday May 2, 2014Marketplace Tech for Friday, May 2, 2014by Sabri Ben-AchourPodcast Title Elon Musk, Tesla plan 'Gigafactory' siteStory Type News StorySyndication SlackerSoundcloudStitcherSwellPMPApp Respond No
In an unprecedented move, the Department of Education has released a list that includes some Ivy League schools, state and private institutions.
Over the years on Marketplace we've tried to cajole artists to talk business. It's not easy -- many are more comfortable talking about inspiration and passion than getting their hands dirty with money.
But if you want to bring a creative project to fruition, there are money choices to be made. For instance, jazz musician Lauren Kinhan decided to go online to crowdsource the money for her newly released solo album called "Circle in a Square."
Some people might use a spreadsheet to set their fundraising goal when crowdsourcing cash. Lauren Kinhan tells Marketplace Morning Report host David Brancaccio that she did it in a more jazz-improv kind of a way.
Western Union, by far the biggest player in the money transfer business, has new competition from Walmart, which recently added a store-to-store money transfer service in the U.S. Both companies know that to grow in this industry, you have to keep adding new customers – which means the face of the money transfer business is changing a bit.
To understand how the sector is trying to attract customers one by one, meet two guys who recently sent money through Western Union. Customer No. 1 is Carlos Galvez.
“Well, I just sent $370 right now,” says Galvez, coming out of a small Western Union retail location in Washington.
You could call Galvez a traditional Western Union customer. He’s an immigrant who makes enough selling tamales to send money to cousins in El Salvador.
“We can’t send money every time,” says his son, Armando Menjivar, “but at least once a month, or when it comes to a big emergency.”
Now, meet Customer No. 2, who is not traditional.
Will Tjernlund, a self-described “third-generation Minnesotan. The 23-year-old buys and sells things on Amazon and eBay, and he used Western Union to send money to China.
But what’s actually different about Tjernlund’s story is where he sent the money from.
“I googled Western Union to find the nearest location to me,” he says. “And the nearest location was inside a U.S. Bank.”
Over the last five years, the number of bank branches offering Western Union services has almost quadrupled, to more than 10,000 in the U.S. and Canada, according to the company. U.S. Bancorp, SunTrust Banks Inc., and Regions Financial Corp. are among its biggest partners.
Analysts say banks used to resist this kind of partnership. Some didn’t want to advertise a branded service that wasn’t their own.
Plus: “Western Union traditionally served the underbanked and the underserved,” says analyst Wayne Johnson with Raymond James, which has investments in this sector.
But the majority of Western Union senders today are banked, according to Frank Lockridge, the vice president of strategic accounts for Western Union in the U.S. That means those customers have bank accounts, even if their relatives back home don’t.
“Some of our bank partners have realized that they’ve seen their customers getting the money out of the bank ATMs, getting the cash out of the branch, and walking next door to conduct that money transfer,” says Lockridge.
So now banks are trying both to retain their customers’ business, and draw new underserved clients into mainstream financial services.
Western Union won’t say how well the strategy of partnering with banks is paying off. But it does say people who transfer money from banks tend to send more than people in retail locations.
The bulk of the money Western Union sends is to and from foreign countries. But it does have a new domestic competitor: a service called Walmart-2-Walmart.
“It’s available at all 4,200 of Walmart branded locations,” says Daniel Eckert, Walmart U.S.’s senior vice president of services.
Eckert says simplified, inexpensive money transfer services are especially useful to people displaced from their families, like military personnel and shale oil workers.
“Even just in the first few days of Walmart-2-Walmart being up and running, our primary transaction stores were Williston, North Dakota, which is right out by the oil fields, and Killeen, Texas, which is just outside of an active duty army base,” he says.
And that’s how it goes in the money transfer business – adding customers bit by bit.