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Tesla to Build Electric Sedan in California; State Introduces New Incentive for ZEV Manufacturers

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.

Comments

danm

It must have been a pretty juicy incentive pkg from Schwarzenegger because New Mexico had already given away the farm trying to woo them.
Who can blame the states. Everyone can see that's the future.

gr

So Cali gives home-based ZEV manufacturers apprx .08% discount on equipment purchases and loans for leased equipment. This might bring battery manufacturing into California where their primary consumer market is. Unfortunately the Sedan's $60k price tag is still too high for most families - even with State and Federal incentives.

Tesla is building a manufacturing base that should let them enter the far more competitive <$30k BEV market. Once they have manufacturing in place, sizing a lower cost drive train and power pack will be much easier.

Gerald Shields, Seattle, WA

Here's to hoping that WA state can get in on that action.

marc

gr-

tesla is aiming at the crowd that would buy BMW 7's or MB E-class. they are more than willing to shell out $60k for a sedan. based on what we've heard from them, the performance will be enough to entice those buyers (and it will give the "green chic" that is starting to wear off from the prius...)
additionally, as you noted production of ev drivetrains will allow them to acheive economies of scale so that their next vehicle can be more affordable to the average family.
incredible that a small startup can acheive this and GM/Ford/Toyota balk at even making a 30mile EV. no wonder gm stock traded at 54-year low today...
i would buy a pickup from them that got this kind of range, esp if they can perfect a quickcharge technology (~10 min). i am not EE but ME so i am not sure about the specs needed for this kind of charging. ee experts please chime in..

K

Tesla has a good chance of getting free land from a county or city eager to snare the factory.

And why shouldn't the local government then issue tax-free bonds and actually build the factory for you?

Then with the basic agreement about taxes, equipment, an almost free factory, various funds for the advanced technology, and tax credits for buyers, the situation for Tesla looks great.

Not knocking Tesla, they actually produced their first product as they predicted. Looks like good management to me. And this announcement shows a genius for finding public money.

litesong

I second Gerald Shields' motion. The Pac. NW's electric generation is excellent. The gov't & public are solidly behind renewable generation & has large wind projects full steam ahead. Probably will place top efficiency solar panels under the power lines. We're wound up for an electric society.

GreenPlease

I can only hope that Aptera gets such incentives.

Cervus

Right now the Pac Northwest has so much hydro power they're asking people to use it any way they can. They're sending as much energy south as the lines can hold, and it's still not enough.

John Taylor

California has another inversion and another week of smog.
It's the perfect time for California Governor Arnold Schwarzenegger, and Tesla CEO Ze’ev Drori to announce a Green Plan.

This is really a win For Tesla.
They get a fully financed state of the art factory, then get to buy it when it begins making money. Obviously it will make money, there is already a line up for the "White star sedan"

This is really a win for California,
They get a vibrant expanding business and very very secure manufacturing jobs. The taxes from this business and all the connected spin offs will boost the local economy and tax base.

Really, seeing Tesla making a successful car will change the way America looks at transportation, and will spearhead the American green revolution. Who knows, the USA may even catch up to those third world countries.

gr

marc:

not an EE either but so far it looks like only AltairNano has proven quick charge Li-on auto batteries. Henrik believes the key to EV expansion is to install quick charge stations along major thoroughfares. I am not convinced.

It seems that first gen PHEV/EVs under normal use patterns will do fine with overnight / business / parking lot trickle charging (220V 40amp). Later on, with a few years of experience in high current public access charge technology - we will see quick charge stations pop up like internet access at malls and coffee shops.

Reasons? A single failure in a 300amp charge circuit would be a disaster for the EV industry. It is simply too soon and unnecessary to expose the acceptance of electrification to this downside - in the beginning. Three or four iterations into PHEVs, the standards, safety certification process and remaining technical issues will have been addressed.

We are conditioned to accept overnight charging for our cameras, MP-3 players, cell phones etc. First gen PHEVs will be no different.

Neil

While I certainly hope we don't have any major battery flame outs, I'm not convinced that the damage to the EV industry would be as great as some are predicted. We grow up with electricity and are somewhat used to the hazards. I don't see any slump in the sale of laptops even after the battery fires.

Henrik

So $60000 and 225 miles. The Tesla roadster uses a 53 kWh battery to get the same range. The Model S will be heavier and have more air drag so the battery will be about 60kWh. At $500 kWh it will be a $30000 battery. Assuming the tax bounty is about $5000 per car this leaves $35000 to produce the Model S without the battery. Launch year is missing but it will take two years to build the factory so sometime 2010 will be the earliest.

They talk about a $30.000 car. A small car could be made for that assuming again $5000 tax break plus $15000 to total $20000 for the car and $10000 for a 20 kWh battery that will give that car a 100 miles range.
To make such a $30.000 EV generally useful everywhere in California for any purpose California needs to build a fast charge network that is capable of charging this 20 kWh battery in about 10 minutes or less. How could that be done and how much will it cost?

A rough estimate is that there are about 40000 gas stations in California. Now let Tesla and perhaps Project Better Place and the relevant authorities of California make a fast charge standard that can do a 20kWh battery in 10 minutes. Once this is agreed pass legislation requiring all 40000 gas stations to get one fast charger up no later than ultimo 2012. Each fast charger could get a $10000 subsidy or so for the first charger and $5000 or so for the number 2 charger etc when set up at the same location. 40000 chargers, one at each gas station in California will cost only $400 million in subsidies. Spread it over 4 years and that is $100 million per year for the state of California from 2009-2012.

By 2012 any Californian that want to live a carbon neutral life and who has the money should be able to use exclusively EVs and to put up a solar roof or buy carbon neutral electricity from their utility. We need to at least make it possible for people to live carbon neutral if we what to and fast charge networks is more than a good start to make that possible. To live a carbon neutral life is comparable to giving charity or supporting education and research. It helps to ensure that fewer people die of air pollution and that there is a future for generations to come.

Joe

Tesla will be bought be another auto company the moment their production systems will start to get into gear.

Andy

Henrik, there is no need for a fast charge/exchange system. First off, the number of vehicles needing a range over 100 miles is tiny. Second, people needing greater range can purchase PHEVs, use their second car or rent. They wouldn't even have to rent a car. They could just rent a towable/mountable recharger. Fast charge or battery exchange programs aren't necessary and they certainly aren't limiting factors for EVs.

Heck, The trade off of limited range is more than made up for by much more convenient fueling. It is much less convenient to go to the gas station/"inconvenience" store once a week than to plug your car where you park it each evening. For this reason alone EVs are going to sell well even at a premium. When they reach price parity the market is going to swing very quickly. The plug is a selling point.

Andy

The plug is a selling point as the frequency of plugging in declines.

gr

And, it would be gratifying to see some percentage of gas stations go away. Corner lots across CA should be reclaimed for retail/commercial or !! a pocket park!!

HHN

Another Welfare Program for the Rich.

Sulleny

HHN is right-on brothers. All engineered of course by the axle of evil, GW Bush and Ahnold S.! Two old dweeb Republicans looking to feather their crew's nest. Next time please... Elect better actors.

Bob Bastard

Sulleny, I prefer 'Comrade' over 'brother.'

Charles S

Class warfare and politicos aside, if there is a $30k EV with 200 miles range out on the market today, do you think the middle class Americans would WANT to buy one?

Looking at the typical $30K segment in US, an EV is nothing close to the standard offering at such a price point. The Volvo C30 is a $30k luxury car that can barely move off the lots here in US. Any EV today will still be a niche vehicle, even if gas goes to $X/gal. The only reason that a typical car buyer will seek out an EV is if we start having fuel shortage at the pump.

For now, EVs should either be more expensive for the halo effect or it should be very basic (low cost, no frills, low performance) for the early-adopters who wants to participate. A typical US family will more likely buy a used SUV before they will consider buying an EV. (BTW, I wish reports on poor new truck sales will include sales of used trucks and SUVs. I see far more dealer's tags on used SUVs than I see on new cars)

Henrik

@HHN
A fast charge network will reduce the total cost of car ownership per mile traveled so it is not a Welfare Program for the Rich. A rough estimate assuming $500 per kWh and $4 per gallon is that the different vehicle types can be ranked the following way when the >total cost of ownership< include the price of the vehicle, the cost of fuel and the cost of maintenance.

Most expensive transportation: Long-range EV Above 50kWh batteries.
Expensive transportation: Ordinary internal combustion engine vehicle.
Less expensive transportation: PHEV.
Cheapest transportation: Short range EVs using 10 to 20kWh batteries.


The problem is that the short range EVs need a dense fast charge network to be just as useful a vehicle like the long-range PHEVs or the ICEs. True enough the rich people that buy long-range EVs will also benefit from the fast charge grid but those who benefit the most are the more numerous who will buy affordable short-range EVs.

Thank you for bringing this issue up. It is kind of important.

Andy

Henrik, HHN was referring to the subsidies for the production plant.

I didn't want a phone with a music player. I never use it. I got a phone with a music player because it only came with that feature. Had I purchased one without a music player my utility would be the same. A feature that isn't used doesn't increase utility.

A vehicle range of 100 miles will cover the vast majority of trips in the U.S. Vehicles with a range over 100 miles wouldn't "need a dense fast charge network to be just as useful a vehicle like the long-range PHEVs or the ICEs." The utility of not taking weekly side trips to a filling station will easily outweigh the dis-utility of having to rent another vehicle for the once a year trip to Grandmas.

Henrik

@Andy
I perfectly well understand that a 100 miles range can do perhaps as much as 90% of the average vehicle users’ miles done during the year but that does not really help you with the remaining 10% of the miles done during the year where you need to do travel more than 100 miles per trip. The least rich people (students, blue color workers etc) can’t afford more than one vehicle and they need the most affordable means of transportation that is not a compromise with anything an ICE vehicle can do, and that is a short range EV in a society with a fast charge network.

Of cause, the utility of short-range (<100 miles) to mid-range (<250 miles) EVs increases when fast charge networks are available. This is why you use a cell phone and not a walkie-talkie because the cell phone is a network capable walkie-talkie with a global network.

K

HHN: loved 'axle of evil'.

reminded me of the 'axes of evil', the lumber companies who dare to cut down redwoods.

Buying an SUV makes sense if it matches your needs and the price is low enough. Price can offset gasoline costs.

The weasel words are 'if it matches your needs'. During hard times some people quickly realize which 'needs' are merely wishes or whims. They adjust.

But maybe governments should decide what matches each person's needs. A personal carbon ration sounds dandy.

John Taylor

@ Henrik ~> "pass legislation requiring all 40000 gas stations to get one fast charger up no later than ultimo 2012"

Not!
I agree on the necessity of a recharge infrastructure.
I totally disagree on your preferred locations.

Recharge stations should be in the parking lots of Malls, Restaurants, Theaters, Tourist destinations, and workplaces. They need to be at normal destinations, not off in hidden spots away from any useful ways to spend our free time.

The Electric recharge infrastructure will be more grid limited than battery limited. It is just cheaper to charge a bit slower.

In any long trip rest stop I tend to spend at least 1/2 hour just to relax from driving stress, pee, and get a coffee. We can quite clearly recharge any sort of battery within a reasonable time frame. To make it work, these need to be seamlessly integrated with our lifestyle, not hidden away in a time wasting nightmare.

Japan has already began the transition to the new infrastructure with a new shopping plaza sporting plug in recharge stations for the cars that are not yet for sale.

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