Tesla executives say they chose San Jose because the company wasborn in the Silicon Valley and its current headquarters is just 20miles away, which means its engineers and executives reside in thegeneral area as well as the rest of the company's 250 employees. Inaddition, it's where the skilled high-tech work force is generallylocated, and California is where it expects to find the most buyersearly on. The company's first two showrooms are in Menlo Park inNorthern California and Santa Monica in Southern California.

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"Big deals like this happen when both parties have somethingsignificant to gain," said Tesla president and CEO Ze'ev Drori at aTuesday morning press conference. "Locating Tesla's headquarters,manufacturing and R&D in San Jose will allow us to proceed withminimum disruptions and virtually no dislocations."The cities areworking on a 40-year lease agreement that includes no rent for thefirst 10 years. Tesla would pay $1.5 million a year for theproperty for the next 10 years, and then for the final 20 years itsrent would increase at a rate of 2% per annum. To build the campus,Tesla will use a $150-million loan guarantee from the US Dept. ofEnergy and a $150-million private capital round led by GoldmanSachs. In addition, the state of California will essentially waivethe sales tax on $100 million worth of equipment for Tesla. Inreturn, Tesla will construct the campus with LEED-Goldcertification as its goal.

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Construction of the campus is expected to generate 600 jobs and$40 million in wages. Permanent jobs at the campus would total1,000 and have an annual payroll in excess of $100 million.

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The workers will be focused on Model S, Tesla's zero-emission,five-passenger luxury sedan powered by a lithium-ion battery pack.It is expected to have a base price of about $60,000 and get about240 miles per charge. The first sedans will likely roll off theassembly line in late 2010. Initially Tesla plans to produce 15,000vehicles a year and eventually ramp up to 30,000.

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Tesla's first production vehicle is the Roadster, azero-emission, all-electric, two-seat sports car. On sale now inthe United States and Europe for more than $100,000, the Roadsteris assembled, and will continue to be assembled—at a Group LotusPLC factory in Hethel, UK. Tesla has delivered about 30 Roadstersso far, and is ramping up production to meet demand. More than1,200 people have reportedly put down deposits.

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As part of its expansion Tesla has been adding experience. MikeDonoughe, who spent 24 years at Chrysler, is now the Tesla EVPoverseeing both the Model S and Roadster programs. Deepak Ahuja,formerly a controller at Ford, is now Tesla's CFO. Franz vonHolzhausen, former director of design for Mazda North America, isdesigning the Model S.

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