Developer Sues Over Former Plans For Tesla Model S Factory in New Mexico

Lawsuits are in the air. The latest comes a new one aimed at Tesla Motors. Tesla is a product of Silicon Valley – the first automaker to be able to make that claim. The company has had its headquarters located in Palo Alto, California since its founding in 2003. It seems fitting then that its production plant would be located in the area as well. However, that wasn’t always the case.

When development of the Model S was announced, Tesla was still looking for a manufacturing site to build it. The company was considering greenfield (new development) and brownfield (former factory) sites. We heard many different possibilities about a location – such as a brownfield Long Beach, CA and Downey, CA. In early 2008, it was announced that Tesla would build a new facility in New Mexico, thanks to attractive incentives. Six months later, California’s legislature worked to put together a more attractive package for Tesla, and California was selected instead.

Things ended up working out better than anyone could have imagined with the NUMMI factory deal that was completed in 2010. The rest is history, and since then the New Mexico project hasn’t been mentioned – until now. Developer Rio Real Estate Investment Opportunities is suing Tesla over the aborted project. They say Tesla struck an agreement with them in early 2007 to produce an 150,000-square foot factory that Tesla would lease out for $1.35 million a year. Something quite doesn’t add up with those figures – firstly the contracting out to a separate entity, and then leasing it back for such a low sum a year on what is a major capital expenditure.

But, we digress – Rio says it spent money on draft work like government permits, and engineering designs for the factory. For Tesla, things couldn’t have worked out better. NUMMI was the perfect site, and the downturn enabled a lot of factory equipment to be purchased on the cheap. An all-new manufacturing facility would have been very expensive, and likely would have pushed the Model S’ launch date back significantly. Sometimes, things work out better than you can ever plan. Unfortunately for Rio that was the case. It remains to be seen if they have a case or not – if there was contingencies on Tesla’s part they likely don’t.

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