California has gazumped New Mexico to land the new plant that electric car company Tesla Motors will build to manufacture its upcoming zero emissions sedan, the Model S.
While the company's much-acclaimed first car, the two-seater Roadster, is being built in the UK by Lotus – with the lithium batteries added in America, Tesla always intended to build entirely its follow-up five-seater vehicle in the US.
It looked like New Mexico would get the 400-employee plant when it came up with $7m (£3.51m) in incentives and Tesla last year announced with much fanfare it would relocate to that state.
But the California governor, Arnold Schwarzenegger, trumped that on Monday with some creative financing and millions in sales tax exemptions that had the Tesla management U-turning. Under the new deal, the San Francisco Chronicle reported, California would finance the purchase of an estimated $100m worth of manufacturing equipment.
The equipment would be leased to Tesla, whose payments to the state would be used to pay it off. The company could then buy the equipment from the state at the end of the lease term but would not have to pay sales tax on the purchase. That would save Tesla as much as $9m.
"I myself bought one of the first Tesla cars, so for me to see this company build a plant in New Mexico drove me absolutely insane. My administration, of course, does not like to lose," said Schwarzenegger, who is still awaiting delivery of his Roadster.
Lotus is building only about five a week in Norfolk but has plans to increase that number of 40 a week by the end of the year.
While that car costs more than $100,000 in the US, the Model S will retail initially at $60,000. The company said on Monday that it has plans on the drawing board for a $30,000 model.
New Mexico was understandably miffed at Tesla's change of heart and intimated that the company's much-publicised management problems were a factor. Tesla's co-founder Martin Eberhard was replaced acrimoniously as CEO last summer as manufacturing delays affected credibility.
"This decision by Tesla is not surprising given the recent instability of its management. Still, it is unfortunate that Tesla backed away from its commitment to the state," said New Mexico Economic development secretary, Fred Mondragon.
On the UK front, Tesla in late June appointed Automotive PR to handle the UK launch of the Roadster. The car will be on view at the Salon Prive in London on Wednesday and later this month at the British International Motor Show in London and at the Goodwood Festival of Speed in Chichester. The cars will be left-hand drives.
