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In an effort to ensure that Tesla builds its Model S electric-sedan in California, the state has struck a tax incentive agreement with the San Carlos company. Governor Arnold Schwarzenegger’s office said that a state agency will temporarily hold a title worth of $320 million equipment to be purchased by Tesla and will not pay the sales tax on the transaction, reports Reuters.

The arrangement will allow Tesla Motors to save more than 9 percent of the total cost of equipment purchases to build the Model S sedan. The electric-company will use $238 million to set up a production facility.

While no location has been decided on, Schwarzenegger’s office said potential locations include the cities of Long Beach and Downey.

Tesla will use another $59 million to upgrade Tesla’s Palo Alto powertrain production facility.

The tax deal is separate from the $465 million low-cost loan Tesla received from the U.S. Department of Energy.

Tesla Model S:

- By: Omar Rana

Source: Reuters

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