Tesla Motors Investing in California's Green Infrastructure with Model S Production

Green drivers, politicians and businesses in San Francisco are excited that Tesla Motors is moving its new factory to northern California instead of New Mexico. Tesla’s decision to eschew the alternative fuel incentives offered by New Mexico for California can be explained in several ways. The motor company’s CEO Ze’ev Driori cited Governor Arnold Schwarzenegger and his continued commitment to alternative fuels as a reason for the Model S factory moving to California.

Tesla’s efforts to cut electric vehicle costs below $30,000USD should help consumers understand this shift to the Bay City. The Model S will retail for $60,000USD, contain five seats and run for 225 miles between charges. Tesla’s past models have exceeded $90,000 with options and accessories. It makes little sense for Tesla Motors to stray too far from its management team during the development of a new generation of vehicles given the high costs of production.

Driori and the Tesla Motors brain trust must realize that the company’s target demographics live in San Francisco instead of Albuquerque. The Model S sedan will be attractive to professionals with significant amounts of income and high concern for the environment. New Mexico’s efforts under Governor Bill Richardson to attract green businesses do not necessarily match the state’s demographic profile. The people of New Mexico may care about the environment at the same level as the residents of San Francisco but lack the same financial means.

The most compelling reason for Tesla to shift gears to San Francisco instead of Mexico is the state’s incentives toward green vehicle manufacturers. The Assembly passed AB118 recently to fund alternative fuels and clean vehicles on a wider scale over the next decade. Tesla will take advantage of the state’s relaxation of sales taxes on production equipment to make the San Francisco facility more affordable. The motor company will need to work out a lease agreement with the California Alternative Energy and Advanced Transportation Financing Authority to achieve these savings.

There are two reasons why drivers should care about this latest move by Tesla Motors. The affordability of the Model S sedan due to decreased production costs means that consumers will see Tesla vehicles soon that fit into their budgets. California’s creative funding and tax exemption efforts for alternative vehicle producers will be tested out for every state interested in similar efforts. The joint successes of Tesla and California could lead to a domino effect nationwide toward electrical vehicles.