Tesla Motors has demonstrated that all-electric cars can be fast, sleek and highly desirable. The company has done its research and development in Silicon Valley. However, its first model is built overseas.
Its next model will be manufactured in the Bay Area.
"I wasn't about to let the company that makes the world's sexiest and best high-performance electric car go to another state," said Governor Arnold Schwarzenegger (R) California.
The governor is fond of Tesla, which makes an all-electric roadster that can go zero-to-60 in 3.9 seconds.
In fact, he has one of these $100,000 cars on order. However, Tesla is ready to move ahead with a lower cost model -- a sedan selling for $60,000.
And unlike the roadster, made in England, the sedan will be built in The U.S.
However, New Mexico was offering $7 million in tax incentives. That spurred the governor and State Treasurer Bill Lockyer to come up with a better deal.
"We both want these cutting edge companies not just to start here in California, do research and development, but actually to manufacture here in California," said Gov. Schwarzenegger.
The state will spend $100 million for manufacturing equipment, and then lease it to Tesla, the state will waive $9 million in sales tax if Tesla later decides to buy the equipment and the state will provide up to $1.5 million for job training for Tesla's new Bay Area plant.
"California has often been inaccurately portrayed as a place that is unfriendly to manufacturing, we've got a lot of it in this state. We're going to keep it, and hopefully grow it and particularly this green sector, new economy. We want to make sure we get our share or larger than our share if we can," said California State (D) Treasurer Bill Lockyer.
Two undisclosed locations in the Bay Area are being studied. Production of the all-electric sedan is two years off.
Tesla hopes to produce even lower-priced models as the price of components drop in a mass market.
"The actual packed cells are pretty expensive, and as we see these costs come down, we'll see the price of vehicles come down as well," said Tesla Sales and Marketing Vice President Darryl Siry.
Tesla says it has an even lower priced model in the works -- a sedan selling for under $30,000. That model will be out in less than four years.