Tesla Sedan Production Will Be In San Jose

By Brendan Moore

09.17.2008

Tesla received final approval Tuesday of a deal with the city of San Jose in Northern California to lease almost 90 acres of city-owned land for a production facility to build their USD $60,000 Model S, an all-electric sedan.

Chuck Reed, the mayor of San Jose, stated that the lease is a long-term agreement, with a built-in waiver on the first 10 years of lease payments. Reed said the northern California town in the heart of Silicon Valley known worldwide for technology would be home to the factory and was moving quickly toward being the go-to place for so-called clean tech. “We want to be a world-class center of clean-tech innovation, and this fits into our strategy to do that,” Reed said. “We hope to be the home of the electric car like Detroit was for the internal-combustion car.”

The city of San Jose has an ambitious goal of creating 25,000 jobs in what it has identified as the “clean technology” sector in the next 15 years. City planners see the sector as high-growth and wish to establish themselves as one of the locations of same.

There were a lot of sunny smiles from the Tesla side as well. According to Tesla’s chief executive, Ze-ev Drori, the projected $250 million facility should be evidence to everyone that Tesla intends to be more than a specialty car maker that produces status symbols with green credentials for wealthy drivers.

“It is our intention to service the entire market,” Drori said in an interview with The Associated Press. “We are not a niche player.”

Since the Model S sedan will cost approximately $60,000, that’s not exactly mass market in terms of price, but from Tesla’s point of view, it’s a lot closer to the middle of the market than the Tesla Roadster at a starting price of $109,000. The 1500-unit first run of the expensive (and fast) roadsters has been sold out since the initial announcement of production, and some of those future “wealthy drivers” that wish to drive a status symbol with green credentials include celebrities like George Clooney, Kelsey Grammer, and of course, the governor of California, Arnold Schwarzenegger.

Drori stated yesterday that he expects manufacturing of the five-passenger, $60,000 Model S sedan to hit a rate of over 15,000 a year by the last quarter of 2011. Tesla is building the factory on its own, with funding from investors in the company. Tesla says the first sedans will be retailed in 2010.

Tesla also reiterated its intention to move down market further, and produce an EV that will be under $30,000, but says that vehicle in still in the development stage.

The original plan was to build the Model S factory, and therefore the Model S, in New Mexico, but some last-minute machinations by the State of California unexpectedly brought the factory to California, and left New Mexico state officials fuming. Gov. Arnold Schwarzenegger and state Treasurer Bill Lockyer worked out several advantageous tax breaks for Tesla, and the deal was done.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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