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Tesla to manufacture the Model S in the Bay Area

In an event held today by Governor Arnold Schwarzenegger and electric vehicle startup Tesla Motors, a few more details were revealed about the lower-priced successor to Tesla’s Roadster, production of which is still getting underway.

In a surprise move, Tesla is canceling plans to build a manufacturing plant in New Mexico, where the company had been offered significant incentives to locate. It will now build its facility somewhere in the Bay Area, near its headquarters in San Carlos.

We’ve been calling Tesla’s next model the WhiteStar, based on various rumors that have leaked — likely intentionally — from the company. That car will actually be called the Model S; Darryl Siry, the company’s chief marketing officer, says that WhiteStar was only an internal project name.

The price tag for the Model S has also been clarified somewhat, with an expected target of $60,000. The vehicle, a sedan, will have a range of 225 miles per charge.

The move is encouraging, because California is mired in a $20 billion deficit, and it seemed unlikely the state would be able to attract some more labor-intensive cleantech jobs and facilities to the state, whereas New Mexico’s governor Bill Richardson has been aggressive in chasing cleantech companies.

However, Schwarzenegger was able to pull $100 million from a discretionary fund called the Alternative Energy and Advanced Transportation Financing Authority to buy equipment for Tesla, which will lease from California with an option to buy the equipment tax-free at the end of the term. In the tight funding climate, using special funds is necessary — San Francisco’s mayor used something similar to fund its new solar incentive plan.

The total package is estimated to be worth $9 million to Tesla, a better offer than New Mexico’s $7 million. However, there’s a long way yet to go. The Model S is planned to start production in late 2010, and Tesla is still on the hunt for $100 million more in funding, last we heard.

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