Zero emission car makers get tax break in California

Electric, hybrid and fuel cell car companies just got a big boost in California, with the announcement of a significant incentive which eliminates sales and use tax on the purchase of manufacturing equipment for zero emission car makers in the state.

San Carlos, Calif.-based Tesla Motors is the first to take advantage of the program, with plans to make its upcoming Model S sedan in the Golden State, but there are other car makers that could end up taking a look at the deal.

The new California tax incentive policy covers several zero emission vehicle technologies, including fuel cell electric vehicles, battery electric vehicles, plug-in hybrid electric vehicles, hydrogen internal combustion engines, advanced technology partial ZEVs and low speed electric vehicles.

The advanced technology partial ZEV category includes regular hybrids.

The tax break comes under the California Alternative Energy and Advanced Transportation Financing Authority, which is exempt from paying the taxes.

Under the new policy, the authority will buy the equipment, financing the purchase by taking out a loan or selling bonds, with the car manufacturer making lease payments to the authority for use of the equipment.

The manufacturer also has the option to buy the equipment outright from the authority, while keeping the benefit of the tax exemption.

Vicki Northrup, operations manager for Menlo Park, Calif., electric car company Think North America, told the Cleantech Group that the company hasn't had a chance to look at the new tax incentives, but she said that the company has stated that "should demand reach a point where it makes sense, from a cost standpoint and a delivery standpoint, that they would explore the opportunity in the future to look at a manufacturing site somewhere in North America."

Earlier this year, Oslo, Norway-based Think Global formed Think North America in partnership with RockPort Capital Partners and Kleiner Perkins Caulfield & Byers (see Think electric cars coming to North America).

Think's vehicles are currently made in Norway.

While California is the most populous state in the U.S. and has the most motor vehicles in the country, Northrup said it's far from the only market for the vehicles themselves.

"Since fuel hit four bucks a gallon, you would think that California would be pretty much predominately the one calling and e-mailing and asking for information, but I've heard from every single state," she said.

And some consumers are concerned that electric vehicle makers are only going to sell in California, according to Northrup.

"I think there's demand all over the United States, certainly different pockets," she said. "It would be foolish for any manufacturer to sell in only one state."

The company plans to start selling its compact Think City vehicle in the U.S. in 2009. The Think City has a top speed of about 65 miles an hour and can run for up to 110 miles on a single charge, according to Think Global.

Another electric car maker, Irvine, Calif.-based Fisker Automotive, has yet to announce where it will build its planned plug-in electric hybrid luxury sedans, but a Fisker spokeswoman said she expects that information to come out shortly.

Last September, Fisker teamed up with Quantum Fuel Systems Technologies Worldwide (Nasdaq: QTWW), also based in Irvine, for electric sedans with prices starting at $80,000 (see Attack of the plug-in hybrids!).

Fisker expects initial domestic deliveries of its first car, the Karma, to start in the fourth quarter of 2009 in North America, with planned deliveries to Europe in 2010.

In the case of Tesla, the company is expected to save between $7 million and $9 million under the new tax break program on its projected $100 million investment in manufacturing equipment sold in California.

Tesla's $60,000 Model S was previously slated to be manufactured in Albuquerque, N.M., but the company changed gears when California came up with the tax break offer.

Tesla's battery pack is manufactured in California, but the company's high speed Roadster is currently made in the U.K., with final assembly done in California.

The company is targeting late 2010 production for the new Model S.

Tesla has yet to pick a site for its new plant, but it could be eligible for additional tax credits nearing $7 million if it breaks ground in a designated Enterprise Zone.

In January, Gov. Arnold Schwarzenegger named eight Enterprise Zones statewide, including Siskiyou County, San Joaquin County, East Los Angeles, Salinas Valley, Kings County, Oakland, West Sacramento and Santa Ana.

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