Tesla decides to manufacture in California, nixing New Mexico plan

Tesla Motors announced its intention in February 2007 to build a manufacturing plant in New Mexico where it would produce its forthcoming Model S, an electric sedan with a targeted $60,000 price tag. The facility was to bring 400 high-paying jobs and a capital investment of $35 million to the state, which had wooed Tesla's business with better perks than the company's home state, California, had offered. Now the plant, which was to begin construction in April 2007, will be sited in California after all, according to an announcement Tesla made on June 30.

Governor Schwartzneger, sometimes accused of not doing enough to support cleantech with incentives, managed to pull $100 million out of the discretionary Alternative Energy and Advanced Transportation Financing Authority fund to buy equipment to lease to Tesla, which the company can buy from the government tax-free at the end of its lease term.

"To see this company build a plant in New Mexico drove me absolutely insane," Schwarzenegger told Reuters. "My administration ... does not like to lose."

For Tesla's part, in addition to the $9 million in savings the state's package delivers ($2 million more than it would have gained by siting the plant in New Mexico), the decision to stick closer to home could be a smart quality control move. Tesla Chairman Elon Musk wrote in an email to the San Francisco Business Times, "We will be doing this in the Bay Area to keep better control over production. One of the mistakes that Tesla made early on was being too spread out around the world."

The location of the new plant is as yet undisclosed, but the company's announcement placed it "somewhere in the Bay Area." The Model S is targeted to begin production in late 2010.