The company that built the first mass-produced, all-electric car will keep its manufacturing plant in California, thanks to a new tax break.

Gov. Arnold Schwarzenegger and state Treasurer Bill Lockyer worked out the deal for Tesla Motors Inc. after learning that the Silicon Valley-based company would build its second-generation vehicle in New Mexico.

The financial break, announced Monday, allows Tesla to avoid paying state sales tax on equipment it buys to build its Model S. That will save the company 7 percent to 9 percent on each purchase.

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The five-passenger sedan is expected to cost about $60,000 and will be able to travel 225 miles between charges to its electric engine.

Schwarzenegger says it drove him "absolutely insane" to learn Tesla planned to take its environmentally friendly technology to another state.

The governor was among several celebrities who lined up to buy Tesla's first-generation electric sports car, the Roadster, which has a base price of $109,000.

The car goes from a dead stop to 60 mph in just under four seconds and tops out at 125 mph. The roadster takes 3 1/2 hours to recharge when its batteries are depleted.

Schwarzenegger is awaiting delivery.