Tesla rolls into San Jose

Tesla chooses San Jose over New Mexico.

In a move local officials say will propel the creation of San Jose’s “cleantech cluster,” Tesla Motors Sept. 17, 2008, announced plans to manufacture its Model S electric sedan in the Silicon Valley city.

Construction of the $250 million production facility is slated to begin in mid-2009, with the first sedans rolling off the line in late 2010.

The company also says it plans to move its corporate headquarters and research and development facilities to the 89-acre site. Under the terms of a 40-year lease between San Jose and Tesla, the first 10 years will be rent-free, after which the automaker will pay $1.5 million per year, with annual 2 percent increases after 20 years.

When Tesla scratched a proposed New Mexico plant in favor of an undetermined California site in June 2007, San Jose wasn’t a contender for the new facility, Mayor Chuck Reed told Sustainable Industries [see “Tesla nixes New Mexico plan,” www.sustainableindustries.com, Sept. 2008].

Reed says he convinced Tesla executives to settle in San Jose by highlighting his city’s development team, which will work with the automaker to meet its tight timelines.

“It has to be a collaboration,” Reed says.

Tesla was attracted to San Jose because of the city’s support infrastructure and skilled work force, and because its proximity to the company’s current location would minimize inconvenience for its 250 employees, according to company spokesperson Rachel Konrad. The company is funding its new facility with a $150 million loan from the U.S. Department of Energy, a round of funding that could bring in $100 million, and revenue from sales of the Tesla Roadster, Konrad says.  

When fully operational, the new facility is expected to employ about 1,000 people. City officials say Tesla’s production schedule could have a spillover effect on the area, as vendors and suppliers locate nearby to provide components and services.

Snagging the high-profile Tesla plant moves San Jose closer to reaching the goals of its 2007 Green Vision initiative, which include the creation of 25,000 cleantech jobs by 2023. Reed says the city will continue to provide development support to other cleantech businesses considering locating in San Jose.      

Tesla’s five-passenger Model S, coming with an anticipated base price of about $60,000, runs off a lithium-ion battery pack and is expected to get about 240 miles per battery charge. Tesla has no plans to move production of its two-seater electric Roadster to California from its current British manufacturing site, according to Konrad.