Tesla's plans to eventually build a pair of new factories for the Model S and powertrain components in San Jose, CA have run into a ditch. The move was announced last September, just before the (official) collapse of the world's financial markets. However, the plan ran into trouble quickly when Tesla was unable to complete a $100 million round of Series E venture funding. Not long after that, the up-start nearly ran out cash before existing investors put in another $40 million. The bulk of the $400 million required to build the two factories and move its headquarters from San Carlos to the new San Jose campus were expected to be provided by low interest loans from the Department of Energy.

However, the DOE loan program favors redevelopment of existing industrial sites and the San Jose location was a greenfield. Tesla is now looking for new locations including former factory sites in both the Silicon Valley area and Southern California. Without the DOE money, it will be extremely difficult for Tesla to build anything new and getting that loan will be increasingly problematic. The program requires applicants to raise matching equity investments of 20-30% of the loan amount, which in this case would amount to $100-150 million. Since Tesla already failed to raise that much last fall, it's not clear that it can happen now.

[Source: BizJournals.com]