Print 31 comment(s) - last by Ringold.. on Feb 1 at 3:39 AM

Elon Musk at proposed San Jose Facility Site  (Source:
Tesla was unable to secure the needed venture capital needed for San Jose facility

Southern California is home to many of America's high-tech companies from chipmakers to internet companies like Google and many more. Silicon Valley is the home to many of the largest and most influential technology companies on the planet.

The rapidly declining economy has meant that layoffs in Silicon Valley have been significant and are expected to continue. Despite the decline in many firms calling Silicon Valley home, the clean tech segment of these tech firms are expected to continue growing.

One of the most famous clean tech firms is Tesla Motors, which is famous for its all-electric Roadster that offers impressive performance without burning fossil fuels. Tesla had its eye on a strip of land located in San Jose between Highway 237 and Zanker Road. The 89-acre strip of land was to be the location of the automakers headquarters and the assembly line for its new Model S.

Silicon Valley/San Jose Business Journal reports that Tesla's plans for the property have now stalled. Tesla says that it was unable to secure the $100 million USD in venture capital it needed to finance the property and proposed facilities. The location was also going to house the assembly line for the Model S.

Tesla spokesperson Rachel Konrad said, "We abandoned (the VC route) because the VC financing environment became so tight and difficult."

With the difficult venture capital market, right now Tesla has opted to apply for low-interest federal loans through the Advanced Vehicle Manufacturing Program. Tesla says it is seeking $250 million USD to build its Model S facility and $150 million USD for an advanced powertrain facility.

The reason the San Jose property that Tesla wanted won’t work is that it is considered to be a greefield site, or a site that would require all new construction. Loans through the government program Tesla applied for prefer brownfield sites be used. A brownfield site is a site that has been abandoned by another company and is sitting vacant.

Konrad said referring to the greefield site near Zanker road, "We can’t afford to do anything that would jeopardize our ability to get the federal loan."

Tesla is in a competition for the government loans with over 75 other companies that include major automakers and smaller suppliers to the automotive industry. The government has $25 billion in funds available through the loan program. Tesla may be at a disadvantage to some of the Detroit based automakers who have easy access to large brownfield facilities that work for the loan program.

Konrad continued, "Our thinking is now we want to keep the headquarters in Silicon Valley and the Model S assembly plant wherever it is most cost-effective and most expedient to get the car to market as fast as possible for the lowest cost."

Should Tesla win the loans it is requesting, it would take about two years before production of the Model S could start. Tesla says that if it fails to win the federal loans it has requested it will return to the venture capital market to seek funding. However, if forced to do that further delays would be encountered bringing its Model S to market.

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CA.. No Way..
By snownpaint on 1/30/2009 10:51:20 AM , Rating: 5
Cali may be the place of "green". But it is also the place of high payrolls, taxes, restrictions, and bureaucracy. Look at some of the other places. With the limited amount of cars they will sell, shipping is a small concern to the buyers.

RE: CA.. No Way..
By Desslok on 1/30/2009 11:00:36 AM , Rating: 2
I REALLY do not understand the logic here. They were planning a plant in New Mexico which would have been a hell of alot cheaper to run plus there are a bunch of ex Intel and Phillips people here so they would have a great pool of talent to pull from. Yet they scrap the plant in NM for one in San Jose????

RE: CA.. No Way..
By MrBlastman on 1/30/2009 11:07:55 AM , Rating: 2

Konrad said referring to the greefield site near Zanker road, "We can’t afford to do anything that would jeopardize our ability to get the federal loan."

They want a federal loan still. Perhaps, and I know this is a difficult concept for Tesla to grasp, they should consider dropping plans to manufacture a flashy, expensive, electric car which few people can afford - that also requires government aid to take the gamble that people will want to buy it, and instead focus on an inexpensive, affordable, mass-market electric auto that everyone wants and can use.

That sounds logical to me. With all their talent, they could finance their luxury performance division with the proceeds from a cost efficient, "boring" line of autos that have innovations the big auto companies are not aspiring to. At least, this is how Ford might have done it in the days of long gone and old (circa 1908).

RE: CA.. No Way..
By Jansen on 1/30/2009 11:48:45 AM , Rating: 2
Tesla's goal has always been to build an affordable family car.

August 2, 2006:

I can say that the second model will be a sporty four door family car at roughly half the $89k price point of the Tesla Roadster and the third model will be even more affordable. In keeping with a fast growing technology company, all free cash flow is plowed back into R&D to drive down the costs and bring the follow on products to market as fast as possible. When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car.

RE: CA.. No Way..
By MrBlastman on 1/30/2009 11:56:30 AM , Rating: 4
Since when is 44.5k affordable for the average American family? If you look at the aggregate household income in the United States...

The real median household income was $50,233 between 2006 and 2007. Any financially prudent person would tell you spending a years income on an automobile, a depreciating asset, is a rediculous financial blunder.

Reality man - something Tesla still doesn't understand. The only thing we don't know is how much "more affordable" the third model might be. I don't know if we'll ever find out if they continue to be this mad.

RE: CA.. No Way..
By Jedi2155 on 1/30/2009 4:19:58 PM , Rating: 4
I'm not sure they can build a comparable performance (primarily range) electric vehicle at the same prices one would expect from a standard combustion engine. R&D still has many YEARS of research to do on the battery research in order to have comparable prices.

You keep blasting Tesla for not making an affordable vehicle, however the limits of technology at this point does not allow that and they are doing what they can fix the stereotype of electric cars being weak and low range. That was their first goal in producing the roadster. The second being able to drop the price down which they're now working on. Lithium ion batteries are still extraordinarily expensive and until we can produce a better method of cheaply storing electrical energy (which requires $$$ in R&D) they will continue to be at the price range. Therein lies the connudrum of the chicken and egg scenario, they need to prove there is a bigger market for electric vehicles in order to get more money for R&D.

I could go on and on but I hope you understand my point.

RE: CA.. No Way..
By Jedi2155 on 1/31/2009 2:51:35 AM , Rating: 2
On a related note, GM is trying to do exactly that with the 2nd Generation Volt.

RE: CA.. No Way..
By Samus on 1/30/2009 6:47:37 PM , Rating: 2
They should have never closed the Michigan facility and just retrofited from engineering to production. Lots of cheap labor, and a collapsing economy up there will make for some great tax incentives from the state.

RE: CA.. No Way..
By The0ne on 1/30/2009 2:15:28 PM , Rating: 2
Maybe because they want the reputation? -> "Silicon Valley is the home to many of the largest and most influential technology companies on the planet."

It doesn't make any business sense at all, not when you're losing cash and laying most of your employees. Having the plant in Mexico would have been a sound decision until things improve, but to stick with San Jose is a joke. The above reasons stated previously are enough to warrant a move. CA isn't cheap.

RE: CA.. No Way..
By Suntan on 1/30/2009 4:12:58 PM , Rating: 2
not when you're losing cash

That will get you in trouble with your investors.

and laying most of your employees.

That's going to get you in trouble with the law...


RE: CA.. No Way..
By ekv on 1/30/2009 4:38:42 PM , Rating: 2
and laying most of your employees

Did you mean "Laying off your employess" ? 8)

Laying your employees will definitely get you in trouble with the law ... [unless you're a politician, unfortunately].

Btw, I agree that CA isn't cheap. Many years ago, there were a spate of reforms and taxes were lowered. Then slowly taxes have been raised, government has expanded, etc. I don't even have to say what party is in power, do I. Due to gerrymandering it's hard to vote the bums out. I'm surprised more states don't lower their taxes, they could easily steal a ton of business from us, in CA.

RE: CA.. No Way..
By Ringold on 2/1/2009 3:16:08 AM , Rating: 2
I'm surprised more states don't lower their taxes, they could easily steal a ton of business from us, in CA.

Other states have, and the process is ongoing. California will find itself in the position familiar to failing socialist economies; in a budgetary hole and a pale shadow of its former self, wondering what the hell went wrong when they had such wonderful intentions.

RE: CA.. No Way..
By bhieb on 1/30/2009 11:27:43 AM , Rating: 2
What I find most interesting is when it was venture capital they only needed $100 Mil but now that it is government funding they are going for $250. Nice.

RE: CA.. No Way..
By kkwst2 on 1/30/2009 10:31:20 PM , Rating: 2
Well, it's government dollars so they're roughly equivalent. The other $150 million is to plow through the red tape to actually get the money. :)

RE: CA.. No Way..
By Oregonian2 on 1/31/2009 3:08:18 AM , Rating: 2
Yes, that extra 150 Million is to provide the "transparency" to prove the other $100 Million wasn't wasted government spending.

P.S - Since when is silicon valley in "Southern California". When I used to theoretically live in San Bruno (near S.F.'s airport) mumble-mumble years ago I was in Northern California. But that was a long time ago, is it considered Southern California now? UC Berkeley changing name to "USC #2"? :-)

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