Tesla's South Bay plans stalled by economy

January 29, 2009 6:37:25 PM PST
The recession is forcing electric car maker Tesla Motors to rethink its plans of building a new manufacturing plant in San Jose.

Tesla is known for its fast and pricey roadster, but its goal is to build a more affordable electric sedan.

In September, the company announced plans to make 89 acres in San Jose its new headquarters and manufacturing facility.

The problem: it couldn't raise the $100 million needed to break ground.

"There was the equivalent of economic Armageddon after September and so venture capital investors tightened up their lending," Tesla Motors spokesperson Rachel Konrad said.

Tesla has now moved on to plan B and is applying for low interest federal loans designed specifically to get fuel efficient cars to market.

The company has submitted two loan applications totaling $400 million. Congresswoman Anna Eshoo got 17 of her colleagues to sign a letter to the Department of Energy supporting Tesla's efforts.

"I think this is a win not only for the environment, it's a win for the people of California and for the workers of California," Eshoo said.

But that means the Zanker Road location is all but off the table because government loans favor the reuse of old existing facilities. One possibility is rehabbing former aeronautics locations in Southern California. Both Tesla and San Jose's mayor are hopeful the company can keep a Silicon Valley presence.

"The possibility of them having headquarters, research and development and drive train manufacturing in San Jose I think are very real," San Jose Mayor Chuck Reed said.

Tesla says it will pursue whatever locations make good business sense.

"Right now our challenge is to determine what exactly is the most efficient cost effective, and expedite solutions to get that car to market as soon as possible," Konrad said.

Tesla says it will unveil a working prototype of its electric sedan in March and intends to have it to market by 2011.