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.

“It has to be a collaboration,” Reed says.