Remember back in 2008 when electric car maker Tesla Motors changed its mind and decided to move the production of its Model S electric car from New Mexico to California? Well, so does the developer that was going to build a 150,000 square foot facility in New Mexico that was going to produce the Model S. The developer, Rio Real Estate Investment Opportunities, has now filed a law suit against Tesla for fraud, breach of contract, negligent misrepresentation and negotiating in bad faith, over Tesla’s decision to abandon the deal and is seeking damages and attorney fees.
The complaint, filed back in May (and embedded below), says that Tesla was going to lease a building that Rio Real Estate Investment Opportunities was going to build for $1.35 million per year for ten years, plus a 2 percent annual increase. The developer says it spent money on creating environmental reports, obtaining government approvals, and developing engineering designs for the site. Rio Real Estate says it entered into a binding development agreement with Tesla on February 19, 2007, and as a result of the lost deal, they’ve suffered financially.
Tesla denies the allegations and also is seeking to the move the trial to federal court from New Mexico state court. I’ve reached out to Tesla for more details, but the company isn’t commenting at this point.
I’m not sure about how valid the complaint is or how binding the contract was, but I do know that the deal between New Mexico and Tesla had progressed to the point that New Mexico Governor Bill Richardson had publicly announced that the Model S would be built in New Mexico back in early 2008. The state of New Mexico had committed millions in incentives for the deal, and Tesla was supposed to get $20 million in incentives, according to the court filings.
But instead of sticking with New Mexico, Tesla opted to build the Model S in California. At the time that Tesla announced the California deal in the Summer of 2008, Tesla said having its manufacturing and headquarters close by in California would provide benefits. The Chronicle also reported at the time that California offered such strong incentives that the equipment incentives in California could save Tesla $9 million.
At the press conference where Tesla announced the manufacturing deal in California, then Governor Arnold Schwarzenegger said that when Tesla had previously decided to manufacture in New Mexico it “drove me absolutely insane. My administration does not like to lose.” Governors Richardson and Schwarzenegger’s teams reportedly had an “entertaining rivalry,” over getting more clean power into their states.
The suit comes at a time when Tesla is looking to ramp up its manufacturing — and spending — to get more of its Model S cars on the roads. Tesla plans to ship roughly 500 of the car in the third quarter of this year, and another 4,500 before the year ends. In 2013, Tesla plans to ship 20,000 of the Model S.