DOWNEY – Tesla Motors, in negotiations to open a vehicle production facility in Downey, reached a deal with state representatives this week to avoid paying sales tax on manufacturing equipment.

The agreement between Tesla and the California Alternative Energy and Advanced Transportation Financing Authority means Tesla will not pay sales tax on $320 million worth of manufacturing equipment.

Under the deal’s terms, the transportation authority will assume title of manufacturing equipment purchased by Tesla directly from vendors.

When the transactions are completed, the transportation authority will transfer title of the equipment back to Tesla.

The arrangement will save Tesla more than $28 million.

State law exempts the transportation authority from having to pay sales tax on equipment used to manufacture “advanced transportation products.” The tax break can be passed on to qualifying producers of zero emission vehicles.

“By helping Tesla stay and expand in California, this agreement will create valuable jobs for our battered economy,” said State Treasurer Bill Lockyer, who chairs the transportation authority. “And it will bring the added bonus of benefiting our environment. (Zero emission vehicles) are efficient and clean, and a critical weapon in our fight against climate change.”

Tesla has not chosen a final location for its Model S production facility, but company representatives said they are seeking a site with exisiting infrastructure.

According to the agreement between Tesla and the transportation authority, Tesla will have six months to upgrade the facility, during which an average of 40 local construction workers will work daily on two shifts.

Another six months will be needed to install production machines, requiring 70 tradesmen.

When the facility becomes operational, two shifts will be split among approximately 600 production workers, including 60 facilities personnel and 130 employees in office operations.

Tesla spokesperson Ricardo Reyes said he had no update on site negotiations, but said the agreement with the transportation authority “will allow us to accelerate the production of fuel-efficient electric cars and electric powertrain components for other automakers.

“Silicon Valley has been our home from the start, and we hope to help California continue to be a leader in green collar job growth,” Reyes said.

Downey officials would not comment on negotiations with Tesla, but Mayor Mario Guerra called the tax incentives “good news.”

**********

Published: October 30, 2009 - Volume 8 - Issue 28