LOS ANGELES – Just in time to steal some of the green technology buzz from the Los Angeles auto show, which opened last week, Tesla Motors Inc. recently scores national headlines announcing it is a step closer to building a plant for its electric Model S sedan in the city of Downey, about 25 minutes south of downtown L.A.

In reality, Downey’s city council has approved an $8.7 million deal with Industrial Realty Group (IRG), the company that owns the majority of the 80-acre (32-ha) parcel proposed for the startup auto maker’s production facility.

The city’s mayor says the agreement, which forgives IRG about $7 million in leasing fees and earmarks another $1.7 million in taxpayer money for added site improvements, all but clears the way for an operating contract with Tesla.

But, the auto maker still has not said whether it will locate its electric-vehicle manufacturing facility in Downey, on land where NASA once built parts for the Apollo space program, or locate farther south in Long Beach, at a former Boeing 717 building site.

The Long Beach city council Tuesday night approved $28.6 million in financial incentives to attract the new Tesla plant.

According to a report in the local newspaper, the package could include:

  • A 50% sales tax rebate for a term of 10 years.
  • $2 million loan for facility improvements for 10 years.
  • More than $37,000 in tax credits for hiring qualified employees (per employee).
  • Certain property, furniture and fixtures purchases to be deducted as business expenses.
  • A worker incentive package that includes services such as employee recruitment, screening and training to be performed by the Workforce Investment Network.

Wherever it ends up, Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. (LACEDC), says the new Tesla plant will be “a stake in the ground” that demonstrates to other companies “the desirability of having a Los Angeles-area location.”

Industry watchers say Tesla needs to get the facility up and running soon if it expects to start deliveries of the electric sedan by its fourth-quarter 2011 goal. The Model S is expected to start at $49,900 and provide a range of up to 300 miles (483 km).

The auto maker expects to see about 1,000 of the all-aluminum models produced in the first calendar year, followed by up to 15,000 in 2012, Mike Donoughe, former executive vice president-vehicle engineering and manufacturing, told Ward’s in September.

By 2013, Tesla anticipates building at least 20,000 Model S units on an annual basis, assuming a 2-shift production schedule, he said.

Representing about 1,500 new jobs, the Tesla plant would mark the return of car manufacturing to Southern California for the first time since the former General Motors Corp. shuttered its Van Nuys’ operation in 1992.

Toyota Motor Corp.’s Fremont-based New United Motor Mfg. Inc. 25-year joint-venture with GM, and the last remaining assembly plant in the state, is due to close in April.

But even without full-on manufacturing, Southern California long has boasted a dynamic vehicle retail and secondary-car market that includes company offices for many foreign and domestic auto makers.

The most recent data compiled by the LACEDC shows retail sales of new and used cars and light trucks in the Greater Los Angeles area totaled more than $33 billion in 2004, with automotive parts adding another $2.4 billion. The report counted about 400 independent parts manufacturers throughout the area.

Today, Los Angeles is trying to create a green-tech corridor on the east side of the downtown area, Kyser says.

To that end, regional leaders are pursuing niche companies such as Tesla, which Kyser says are “somewhat smaller” than traditional American or Japanese auto makers, but “they’re very ambitious.”

In addition to the Van Nuys operation, GM through the 1960s operated a factory in South Gate, next to Downey, where it built Buick, Pontiac and Oldsmobile models. The former Chrysler Corp. assembled cars in the City of Commerce from 1932-1971.

Other regional auto plants have included Willys-Overland in Maywood, 1928-1954; Studebaker in Vernon, 1936-1956; Nash in El Segundo, 1948-1955; and Kaiser Frazer in Long Beach, in the years following World War II.

In 1914, Ford Motor Co. opened its first Southern California facility in Los Angeles proper, where it built Model Ts until 1930, when the auto maker moved the operation to Terminal Island, near Long Beach. About 1.5 million vehicles were produced at the second location before it too closed in 1959. From 1957 to 1980, Ford operated a second plant in Pico Rivera.

Bill Millard, senior docent at the California Automotive Museum in Sacramento and an unabashed V-8 engine lover, says in reality hundreds of car makers, many of them “start-to-finish” manufacturing outfits, sprouted up across the state from the early 1900s.

And lest people think Tesla’s sleek battery-powered rides are a new idea, Millard notes electric and steam-powered vehicles dominated the marketplace in 1900. Of the 4,192 horseless carriages registered that year, 1,682 ran on steam, 1,575 on electricity and only 936 were powered by gasoline.

Back then, just as today, EVs typically were cleaner and much quieter than gas models. But their electric “fill-ups” were good for only 40 miles (64 km) or so.

“Electric cars, in the beginning, appealed to a class of buyers, just as electric cars and hybrids appeal to a class of buyers today,” says Kevin Nelson, author of the recently released book, “Wheels of Change: From Zero to 600 mph, the Amazing Story of California and the Automobile.”

Consumers most interested in EVs and hybrids these days are “often commuters, ecologically minded people and seniors interested in saving money. But that’s only a segment of the car-buying populace,” Nelson says.

“So, the challenge of Tesla and hybrids, and the challenge of the Chevrolet Volt when it comes around, is to get out of the traditional box that electric cars are put into.”

Simply plugging in an EV for recharging also could be a problem over the next couple years, when at least 10 different auto makers plan to release their first-generation models.

Critics warn there won’t be enough charging stations to meet the onslaught. And what that demand will do to the country’s energy grid is anyone’s guess.

Ed Kjaer, director of Southern California Edison's electric-transportation advancement program, last August told an alternative energy conference in San Diego plugging in an EV uses roughly the same amount of energy as running one third of a household.

Because he suspects most initial EV users will live in areas with heavier populations, Kjaer anticipates power distribution overloads that will cause local outages.

EV advocates also will need to answer those who deny the claim EVs have zero-emissions and don’t pollute.

“If a coal-burning plant is providing the energy for that battery, then that coal-burning plant pollutes,” Nelson says.

The California Automotive Museum’s Millard puts it another way: “They’re trying to redefine physics.”

Kyser says Tesla first must choose a site and then improve it and build infrastructure. Success will come “when the first car rolls off the assembly line.”