Tesla Motors’s Second Electric Car Will Be Made in San Jose

By CLAIRE CAIN MILLER

Tesla Motors’ second all-electric car, the Model S, is one step closer to reality.

On Wednesday morning, the company will announce a deal to lease 89 acres of land in San Jose, Calif. to build a company headquarters and a 600,000-square-foot plant to produce the battery-powered Model S sedan. (The company’s first model, a $109,000 roadster, is assembled in England and California.)

“This could bring 1,000 green-collar manufacturing jobs, which we’re trying to get back after losing a lot in the bust,” said San Jose Mayor Chuck Reed.

Tesla is the most recent clean technology company to set up manufacturing in Silicon Valley. “We have had a change here in the last year in manufacturing jobs, and Tesla is the latest,” Mr. Reed said, citing thin-film solar companies that are also manufacturing in the region.

The Model S will drive on the power from a lithium-ion battery pack and will be able to travel about 200 miles per charge. It will hit the roads at the end of 2010, the San Carlos, Calif., company said, and will sell for around $60,000. That is half the price of the 2010 Tesla Roadster sports car, which has a one-year waiting list.

Tesla generates a lot of excitement in Silicon Valley, thanks in part to high-profile backers that include Jeff Skoll, former president of eBay; Larry Page and Sergey Brin, co-founders of Google; and Tesla chairman Elon Musk, co-founder of PayPal. Venture capital investors include Capricorn Investment Group, Technology Partners, VantagePoint Venture Partners and Draper Fisher Jurvetson.

The decision to manufacture the Model S in California came as a surprise when it was announced in June. Tesla backed out of an earlier agreement to open the plant in New Mexico. Ze’ev Drori, Tesla’s chief executive since November, wanted the car to be made in California, where Tesla has been based since its founding in 2003.

“Silicon Valley is the birthplace of the silicon revolution. Now Silicon Valley is going to be a birthplace again, this time of the clean tech industry, and Tesla epitomizes that industry,” he said.

California made it easy by offering Tesla incentives worth around $15 million and possibly more, Mr. Drori said. That includes waiving rent for the first 10 years of the 40-year lease on the San Jose property and waiving state sales tax on $100 million worth of equipment. New Mexico was reportedly offering Tesla around $7 million worth of incentives...