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Hmm, I Think the Elephant in the Room on this Business Relocation is Being Ignored

January 30, 2018, 12:04 pm

Apparently some hot new auto company called Nikola Motors (in the class of companies to my mind like Tesla and Fiskar that have a sexy idea and a lot of cash burn) is relocating to the Phoenix area.  Ugh.  You know what that probably means:

Arizona Governor Doug Ducey and Nikola Motor Company today announced the company has selected Buckeye, Arizona for its Nikola Motor Company hydrogen-electric semi-truck manufacturing headquarters facility. The new 500 acre, one million square foot facility will be located on the west side of Phoenix and will bring more than $1 billion in capital investment to the region by 2024.

"After 12 months, nine states and 30 site locations, Arizona, Governor Ducey, Sandra Watson and Chris Camacho were the clear front runners. Arizona has the workforce to support our growth and a governor that was an entrepreneur himself. They understood what 2,000 jobs would mean to their cities and state," said Trevor Milton, CEO and founder, Nikola Motor Company. "We will begin transferring our R&D and headquarters to Arizona immediately and hope to have the transition completed by October 2018. We have already begun planning the construction for our new zero emission manufacturing facility in Buckeye, which we expect to have underway by the end of 2019."

Nikola Motor Company designs and manufactures hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems and hydrogen stations. The company is bringing the nation's most advanced semi-trucks to market with over 8,000 trucks on preorder.

Nikola Motor Company selected Buckeye, Arizona due to numerous factors including the state's pro-business environment, engineering schools, educated workforce and geographic location that provides direct access to major markets.

How much do you want to bet that the number 1 reason for moving to Phoenix was left off the list: taxpayer subsidies.  Yep, I have not seen the deal, but my guess is that yet another company is going to get a piece of my profits transferred over to them because they make a better photo op and press release for politicians.  I am pretty sure that the statement "[arizona] understood what 2,000 jobs would mean to their cities and state" is code for "they offered us a pile of cash".

Postscript: By the way, I do like their idea of a hydrogen truck better than Musk's all-electric truck -- that is, if they can figure out how to scale up a hydrogen distribution system.

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Category: The Corporate State

15 Comments

  1. Petri:

    Reuters; "The company declined to provide details of an incentive package it received from Arizona, but said the costs for developing the $1 billion facility would be shared between Nikola and the state. (Reporting by Eric M. Johnson in Seattle; Editing by Tom Brown)"

    January 30, 2018, 12:17 pm

  2. jon49:

    I thought it was illegal for Arizona to offer money to companies. Or is that only for cities? Oh well, not like AZ judges enforce the rule of law anyways.

    January 30, 2018, 12:24 pm

  3. Steve Burrows:

    Just like electricity, hydrogen is largely produced from coal and/or natural gas. Hydrogen is also extremely difficult to store, particularly as a transportation fuel. I suspect a scam to fleece investors, private and public.

    January 30, 2018, 1:41 pm

  4. Mercury:

    Isn't it difficult to contain hydrogen for any length of time?

    I mean, being the smallest molecule in the universe and all sort of implies that whatever you make the tank out of is going to seem more like a sieve to H2.

    Also, sounds sort of dangerous...

    January 30, 2018, 1:42 pm

  5. craftman:

    "that is, if they can figure out how to scale up a hydrogen distribution system"

    I did an analysis on this in grad school (10 years ago, so maybe the economics have changed) but a "hydrogen economy" was nowhere close to ready for transportation. Large scale, industrial uses? Maybe. Electrolysis of water is still the best source of hydrogen, which requires electricity, which makes the per unit cost of fuel on the order of 2-3x gasoline. So when the environmentalists are lining up to pay $10+/gallon for gas, you'll know we're ready.

    I think a hydrogen economy has a market in rural areas with solar or hydroelectric energy production providing the energy to separate and store hydrogen as a fuel for use in farm equipment/processes, rather than trucking gasoline to remote areas.

    January 30, 2018, 1:46 pm

  6. Doug H Nuts:

    I first heard of Nikola Motors a while back, when they were still talking about a turbine-electric powertrain (which I still think could be a awesome drivetrain for heavy applications). But, they quickly decided that wasn't sexy enough to lure in the big $$....so they got on the hydrogen bandwagon. They're still promising "One million miles of FREE* HYDROGEN FUEL"! And now they've expanded to powersports too! Because getting a manufacturer of a single focused product line successfully off the ground would have been too easy.....

    Lots of marketing fluff.....no substance. Good luck with your "investment" Arizona.

    January 30, 2018, 5:10 pm

  7. sean2829:

    I believe that most commercial production of hydrogen is natural gas reformation not electrolysis. Apparently is also possible to do the reformation process with ethanol https://energy.gov/eere/fuelcells/hydrogen-production-natural-gas-reforming so maybe there's a fuel source in remote areas. In reality however, it might make the most sense to use this technology in places where smog is an issue which means dense urban areas and in that case there could be much more concentrated network of supply. Most refineries process a lot of hydrogen.

    January 30, 2018, 5:37 pm

  8. John Moore:

    I think the struggle against this is hopeless. The free market in incentives means that those who don't offer them lose out. A lot of these incentive driven choices do indeed benefit the communities, sometimes a whole lot. That doesn't justify the practice, but it does justify cities competing with others will certainly do it, if the subsidies aren't so large that the city net loses.

    I have no idea how to stop it. Arguing against it is like arguing against capitalism... all the arguments in the world can't stop it. Maybe the government could use its interstate commerce clause to prevent this if it crosses state lines. Whether it should, well, the cure might be worse than the disease.

    January 30, 2018, 8:06 pm

  9. John Moore:

    It does love to work its way into metals, weakening the bond structures and essentially corroding it (except not by direct action). How significant that is to storage, I don't know, but many metals, including iron, soak up amazing amounts of hydrogen.

    January 30, 2018, 8:08 pm

  10. cc:

    The problems with hydrogen are numerous. You can pump natural gas down a pipe to distribute it but hydrogen molecules are so small they leak everywhere. Hydrogen make steel brittle. If you think a gas explosion is big, try a hydrogen explosion. By comparison, gasoline in a car is totally safe.

    January 31, 2018, 8:37 am

  11. rst1317:

    "
    ... and will bring more than $1 billion in capital investment to the region by 2024.
    "

    If it doesn't, will the politicians giving them taxpayer money personally and directly refund the taxpayers out of their own pockets? It's easy to make such proclamations when there's no meaningful downside to being wrong. They should have skin in the game.

    January 31, 2018, 10:22 am

  12. rst1317:

    General Motors at the turn of the century was churning out PR left and right about hydrogen being the future and how it was the future of GM. They went belly-up soon after that.

    January 31, 2018, 10:28 am

  13. craftman:

    Ah you're right, one of the constraints on our analysis was assuming non-carbon based inputs which led us to electrolysis of water and hydro/solar energy

    January 31, 2018, 12:08 pm

  15. TMallory:

    The problem with hydrogen is that it is not a fuel source. It is a storage medium. You can't drill for hydrogen, or grow hydrogen. You use energy to make it. Then you use it to get the energy back. The funniest part is that virtually all of the industrial hydrogen for fuel comes from oil refineries.

    January 31, 2018, 8:20 pm