Tesla DOE Loan Project #1: New Powertrain Facility at Stanford's Old HP Site

Less than two months after the Department of Energy gave Tesla Motors the green light for $465 million in low-interest loans, the electric car startup has identified its first project for the funds: setting up a powertrain assembly facility and new headquarters at the Stanford Research Park in Palo Alto, Calif., a little more than 10 miles south of its current headquarters in San Carlos. According to a release from Tesla this morning, the three-building complex, once occupied by Hewlett-Packard and Agilent Technologies, will be used to build electric powertrains for Tesla to use for its own cars, and also to sell to other automakers. So far, Tesla has announced one supply deal — for Daimler AG’s (s DAI) 2012 electric Smart car — but the startup has long described its powertrain business as an additional source of revenue beyond electric vehicle sales. Under the DOE’s delayed Advanced Technology Vehicle Manufacturing program, the Obama administration decided to give that battery pack effort a boost this summer, awarding some$100 million of the \$465 million in loans to help set up manufacturing for battery packs, electric motors and other components (the bulk of the loans are meant to finance a production facility for Tesla’s planned Model S electric sedan).

Winning over contracts with more automakers won’t be easy, however, given that some of the biggest players (General Motors (s GM), Nissan (s NSANY), Toyota (s TM) and Ford (s F), for example) have made other plans for their battery packs — either building them in-house or tapping other suppliers. So while key deals for powertrains and battery packs in at least the first generation of plug-in vehicles intended for the mass market have already been snapped up, having a state-of-the-art production facility could certainly help Tesla as it vies for contracts down the road.

We’ve asked Tesla about the production capacity of the Palo Alto site, where the company says it expects begin renovations in “early fall” (the DOE has set Oct. 31 as the financial closing deadline for the loans) and initially employ 350 people. We’ll update this post when we hear back.

Photo credit Tesla Motors. Map courtesy of Stanford Research Park (Tesla’s facility will be at 3500 Deer Creek Rd., shown in the lower left of the map above).