Enticed partly by a new package of incentives, Tesla Motors has decided to build the assembly plant for its upcoming electric sedan in California at a still-to-be-determined site in the San Francisco Bay Area rather than in New Mexico as it had earlier announced. (Earlier post.)
California Governor Arnold Schwarzenegger, Treasurer Bill Lockyer and Tesla CEO Ze’ev Drori made the announcement at a press conference today at Tesla Motors headquarters in San Carlos, California.
Tesla’s upcoming Model S (earlier named “White Star”), will be a $60,000 car, said Tesla Chairman Elon Musk at the press conference. The Model S is being designed to seat five and have a single-charge range of 225 miles. Musk also said that the company had some projects in the works that could deliver a pure electric car for less than $30,000 “maybe a lot sooner than anyone thinks.”
In a statement posted on the Tesla blog, Drori said that after a thorough review of the operational and logistical elements for the sedan program, it was decided that the best strategy to ensure its success would be to locate manufacturing as close to headquarters as possible.
There are several key reasons why California is the right location for Tesla’s manufacturing facility: first, the operational advantages of locating our operation in the Bay Area close to our management and engineering teams. Second, the proximity to our most important markets. Last, but not least, Governor Schwarzenegger’s commitment to leading the nation and the world in addressing climate and energy concerns. Together, these reasons make the decision to move the sedan manufacturing program back to California clear.
Let me close by pointing out the decision that we announced today with the Governor represents a major milestone in the sedan program. Having set down a marker of where we will be establishing this critical operation, we can move forward on many fronts. This will allow us to bring the sedan program to fruition and to continue to drive toward Tesla Motors’ mission of making the electric vehicle the dominant mode of automotive transport for the 21st century and beyond.—Ze’ev Drori
A key component of the incentives is a newly adopted waiver on state sales tax on manufacturing equipment for zero-emission vehicles (ZEVs) built in state.
Existing law exempts the California Alternative Energy and Advanced Transportation Financing Authority’s (CAEATFA) from paying the sales tax on equipment used to manufacture advanced transportation products.
Under the new policy, CAEATFA will pass through that tax break to qualifying ZEV manufacturers under “sales-lease-back” agreements. Under such an agreement:
A ZEV or ZEV component manufacturer applies to CAEATFA to have a project approved pursuant to the policy. If approved, CAEATFA buys the equipment, and finances the purchase by taking out a loan or selling bonds. CAEATFA does not pay the sales tax on the transaction. The manufacturer makes lease payments to CAEATFA for use of the equipment, and CAEATFA uses these payments to repay the bonds or loan.
Under the lease arrangement with CAEATFA, the manufacturer has the option to purchase the equipment outright. If it purchases the equipment, the manufacturer obtains the benefit of the sales tax exemption, saving seven percent to nine percent on the purchase price.
Tesla will ask CAEATFA to approve such an arrangement to finance the purchase of equipment to build the Model S.
The tax incentive policy approved by CAEATFA covers several ZEV and near-ZEV technologies, including fuel cell electric vehicles, battery electric vehicles, plug-in hybrid electric vehicles, hydrogen internal combustion engines, advanced technology partial ZEVs and neighborhood electric vehicles. Any qualifying ZEV manufacturer can apply.
Today’s announcement is great news for California, our economy and our environment. We want these cutting-edge companies not to just start in California and do their research and development here—we want them to build in California. Tesla’s announcement today is just one of many we will celebrate as we implement AB 32 and reach our greenhouse gas emissions reduction goals.—Governor Schwarzenegger
ZEV makers can also apply for funding from the new alternative fuel and vehicle technology program outlined in AB118.