As Tesla Motors slowly increases the small production volumes of its assembly plant in Fremont, Calif., CEO Elon Musk is reliving a challenge that also bedeviled the world's biggest automaker when it owned the plant.
For all its scale and prestige, even Toyota Motor Corp. struggled to get its supply chain to manufacture nearby in California.
Musk is determined to build Tesla into a large-volume producer of electric vehicles. But the supply industry reality is that parts makers are reluctant to invest in capacity in a remote location where there are no other potential customers.
"Nobody wants to open a factory in California," says a former executive of Toyota's North American manufacturing operations, who worked with Toyota's suppliers but asked not to be named. "For all the reasons everybody knows too well: It's high cost. Real estate is expensive. The regulations are difficult. Environmental impact issues are trouble. You name it.
"We had some success recruiting suppliers -- but not as much as we wanted."
Tesla declined several invitations to talk about prospects for localizing its supply base around the Fremont factory, a huge plant that it bought from Toyota in 2010 for the bargain sum of $42 million. But sources familiar with its efforts say that while meaningful localization has not yet happened, the situation is subject to change.
"I'm hearing from a few of our fellow suppliers that they are really thinking about it now," says a supplier executive from the Midwest-Southeast U.S. automotive belt whose company supplies Tesla but asked not to be named. "A couple of them have told me they are at least considering the idea of a California plant. And I think some will do it.
"It's really hard to make it work. But when you talk to Tesla's people, they are so pumped about what they're doing that you really believe in the project."
The project is anything but modest.
Musk wants to build a full range of EVs at the former Toyota plant, which is in turn a former General Motors plant. Fremont is 2,400 miles from Detroit and the traditional U.S. supply base that is centered there. Toyota and GM operated the California plant from 1984 until 2009 as New United Motor Manufacturing Inc., producing Toyota and GM-badged vehicles. GM's financial crisis of 2008-09 caused it to bail out of the plant. Toyota continued to operate alone there until 2010.