Tesla chooses San Jose over New Mexico.

In a move local officials say will propel the creation of San Jose’s “cleantech cluster,” Tesla Motors Sept. 17, 2008, announced plans to manufacture its Model S electric sedan in the Silicon Valley city.

Construction of the $250 million production facility is slated to begin in mid-2009, with the first sedans rolling off the line in late 2010.

The company also says it plans to move its corporate headquarters and research and development facilities to the 89-acre site. Under the terms of a 40-year lease between San Jose and Tesla, the first 10 years will be rent-free, after which the automaker will pay $1.5 million per year, with annual 2 percent increases after 20 years.

When Tesla scratched a proposed New Mexico plant in favor of an undetermined California site in June 2007, San Jose wasn’t a contender for the new facility, Mayor Chuck Reed told Sustainable Industries [see “Tesla nixes New Mexico plan,” www.sustainableindustries.com, Sept. 2008].

Reed says he convinced Tesla executives to settle in San Jose by highlighting his city’s development team, which will work with the automaker to meet its tight timelines.