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

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 is among several celebrities who have ordered 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.

The cars started arriving this spring at Tesla’s first dealership, in the Westwood neighborhood of Los Angeles. Schwarzenegger is awaiting delivery.

Tesla’s decision to remain in California is unfortunate, said Fred Mondragon, secretary of New Mexico’s Economic Development Department. He said several European companies are eager to take advantage of New Mexico’s economic incentives for companies that develop clean energy.