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Elon Musk at proposed San Jose Facility Site  (Source: Bizjournals.com)
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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RE: Scam?
By Ringold on 2/1/2009 3:39:08 AM , Rating: 2
First of all, there's a difference between government money and venture capital. The former is a subsidy, the latter is not. I wont define basic terminology here.. I imagine the post you were replying to was insinuating not that the company wouldn't succeed without debt -- yes, obviously most companies use debt -- but that it wouldn't succeed without government subsidizing it to a degree that the private market may never willingly do.

But second of all, I've read that VC is actually not that hard to come by in "green" industries, if you've got a solid business plan. I've read more complaints about finding and retaining top talent than finding money. The key part is having a solid business plan. I think banks, VC's and others being much more careful who they lend to would generally be considered a good thing these days.


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