Tesla = $5.1 Billion Economic Boost For California, $5.5 Billion More Sales Activity

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In 2010, Tesla became the first US automobile manufacturer to go public since Ford Motor Company in 1956. As of December 31, 2017, Tesla had a market capitalization exceeding $52 billion and a workforce of more than 37,000 employees worldwide. California is the core from which all Tesla innovation, design, and manufacturing radiates. So it makes sense that the company with a vision to accelerate the world’s transition to sustainable energy commissioned IHS Markit to conduct a study that assessed the economic contribution the company’s California operations made to the local economy during 2017.

Tesla’s economic footprint — when divided into three categories of employment and wages, sales activity and value added, and government revenues — stimulated a total of $5.5 billion of sales activity, contributed $5.1 billion to California’s gross state product, and supported 51,000 direct and indirect jobs in 2017.

Tesla's economic footprint
Graphic courtesy IHS Markit

Employment & Wages

Tesla’s impact on the California workforce is significant, both through direct employment of 20,189 workers as well as the 31,424 additional workers who were supported by Tesla’s local supply chain purchases and its employees’ consumer activity. Tesla paid its employees a total of $2.1 billion in wages and equity in FY 2017. It is interesting to note that every employee is given equity upon hire.

Sales Activity & Value Added

With $2.0 billion in transactions with over 2,650 California Tier 1 suppliers and $2.1 billion in wages and equity to its California-based employees, Tesla contributed approximately $4.1 billion to the California’s gross state product (GSP) in 2017. Another way to look at this is that the GSP contribution grew to $5.1 billion when the Tier 1, Extended Supply Chain, and Induced effects are included.

Approximately 1/3 of the sales activity was stimulated by the spending of Tesla’s employees, who spent about 77% of their wages and equity on consumer purchases. Much of that spending remained in the local economies, stimulating $1.9 million of sales activity.

Every dollar Tesla spent with suppliers generated $0.8 dollars in additional spending, and every dollar that Tesla paid to its California employees led to $0.9 dollars in consumer spending across the state.

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Government Revenues

Tesla’s direct payments to state and local tax authorities in California totaled $328 million. The Tier 1, Extended Supply Chain, and Induced consumer actives stimulated by Tesla generated close to $345 million in California state and local taxes, plus over $452 million in federal taxes.

Methodology

IHS Markit traced three levels of Tesla’s California economic contributions. (You can read the full report here.)

The first level, designated as direct contributions, resulted from the company’s operations and its direct spending with Tier-1 Suppliers that were engaged either through the supply chain or as part of capex/opex projects.

The second level, indirect contributions, captured the secondary and higher-order effects that rippled through the Extended Supply Chain (i.e., suppliers’ suppliers, etc.).

The third level, induced contributions, includes the economic contributions that accrue from consumer activity of the employees at Tesla, the Tier-1 Suppliers, and the Extended Supply Chain.

Final Thoughts about Tesla’s Economic Footprint in California

All too often, the fiscal news about Tesla surrounds the company’s car-making troubles, Model 3 bottlenecks, SolarCity headaches, need for a capital raise, or its cumulative financial obligations. Conversely, increasing production numbers at Tesla’s factories with the addition of Model 3 to the lineup, the expected ramp to full speed production, and the future Model Y crossover provide a clear indication of how Tesla’s journey to mainstream is quickly reaching a tipping point.

With the unpacking of Tesla’s contributions to the California economy, it is clear that Elon Musk is not only pushing his rivals to embrace electrification, his company is an essential contributor to the 6th largest economy on planet Earth. The confluence of Tesla’s vision of a sustainable future and its economic stimulation — as evidenced by a 2017 total of $5.5 billion of sales activity, an extra $5.1 billion to California’s gross state product, and support of 51,000 direct and indirect jobs — is strong evidence to refute Tesla naysayers.


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Carolyn Fortuna

Carolyn Fortuna, PhD, is a writer, researcher, and educator with a lifelong dedication to ecojustice. Carolyn has won awards from the Anti-Defamation League, The International Literacy Association, and The Leavey Foundation. Carolyn is a small-time investor in Tesla and an owner of a 2022 Tesla Model Y as well as a 2017 Chevy Bolt. Please follow Carolyn on Substack: https://carolynfortuna.substack.com/.

Carolyn Fortuna has 1310 posts and counting. See all posts by Carolyn Fortuna