September 17, 2008 / 4:06 AM / 11 years ago

Tesla plans Silicon Valley electric car factory

A pair Tesla Roadsters is shown at Tesla Motors in San Carlos, California June 30, 2008. REUTERS/Robert Galbraith

LOS ANGELES (Reuters) - California electric sports car-maker Tesla Motors is building a $250 million Silicon Valley plant to produce sedans that will roll onto U.S. highways in late 2010, the company said ahead of a Wednesday announcement.

The two-seater Tesla Roadster grabbed attention as a must-have toy — Gov. Arnold Schwarzenegger is a customer — with solid environmental credentials in the state that often sets national trends on clean air and energy.

San Jose Mayor Chuck Reed said the northern California town known for technology would be home to the factory and was rushing headlong toward so-called clean tech. “We’ve still got lots of other tech here, but the solar companies are growing,” he said in an interview ahead of the factory announcement.

Tesla Chief Executive Ze’ev Drori in a separate interview said he expects manufacturing of the five-passenger, $60,000 Model S sedan to hit a rate of over 15,000 a year by the last quarter of 2011. Tesla will build the factory on its own.

“We have enough money,” Drori said, adding that Tesla is a couple of months away from closing up to $100 million in private equity financing, and that the U.S. Department of Energy has approved $150 million in loan guarantees. The state of California also has offered significant tax breaks.

Other carmakers are planning zero-emission vehicles, and major manufacturers including General Motors Corp and Toyota Motor Corp are racing to make plug-in hybrids that can drive on battery power and then switch to gasoline when they need power.

“I am sure there will be competition,” said Drori. “We hope there will be competition. Competition will accelerate demand.”

Reporting by Peter Henderson; Editing by Carol Bishopric

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