A $465 million low-interest federal loan will help Tesla Motors build its planned powertrain production facility in Palo Alto's Stanford Research Park, the U.S. Department of Energy and Tesla announced Thursday afternoon.
The loan will also be used to build an assembly plant in Southern California.
Tesla has a showroom in Menlo Park.
The Department of Energy Thursday finalized the loan for the manufacturing facilities, which are expected to generate an estimated 1,600 jobs.
The Palo Alto site will assemble electric-vehicle battery packs, electric motors and related electric-vehicle control equipment both for Tesla's own electric vehicles and for sale to other automobile manufacturers.
Tesla, currently based in San Carlos, announced in August 2009 that it will move its corporate headquarters to Palo Alto, into a renovated 350,000-square-foot facility formerly occupied by Hewlett-Packard and Agilent Technologies, located at 3500 Deer Creek Road.
The loan will also go toward construction of an assembly plant in Southern California for Tesla's Model S sedan.
Rep. Anna Eshoo, D-Palo Alto, an advocate of electric vehicles, expressed pride in representing Tesla and Silicon Valley.
"Tesla's innovative work will create green jobs in our state and our region which will decrease our dependence on foreign oil, and help develop a robust domestic electric vehicle industry," Eshoo said in a statement.
U.S. Sen. Dianne Feinstein also commended the news, stating that job creation should be a top priority for the government.
"I hope this is the first of many such awards that will help return prosperity and opportunity to the people of California by keeping our state at the cutting edge of new, clean technological sectors," she said in a statement.
While its initial models would be pricey, Tesla said it aims to produce affordable cars for the average buyer and lower the cost of electric vehicle technology.
The low-interest loan was approved in June 2009 and issued through the department's Advanced Technology Vehicles Manufacturing Loan program, established by Congress in the Energy Independence and Security Act of 2007 to fund the retooling of factories to produce more fuel-efficient vehicles.
The Tesla loan is the second such loan to be awarded under the program.