IP Uh-Oh: Tesla Filing Reveals Roadster Production to End in 2011

Electric car purveyor Tesla filed paperwork for a $100 million IPO with the SEC earlier today, and after deeper perusal of the 173-page form S – 1, the company looks to be treading on extremely thin ice. The filing has revealed that not only will the company stop making its only car — the Lotus Elise-based Roadster — in 2011 because Lotus will be retooling its plant to make way for a new Elise/Exige line, but also that it has no solid agreements in place for further development or procurement of electric powertrain components with third-party suppliers. While the company hopes to have a new Roadster on the road by 2013, the discontinuation of the present car means Tesla would have no vehicle to sell for the better part of two years — unless of course its proposed Model S sedan magically appears in 2012.

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The filing — specifically, the 39-page-long “Risk Factors” section — makes Tesla’s entire operation look quite shaky as it includes far more than the usual warnings about outside factors that could affect a company’s business.

It’s no secret that the future of the company rides on the success of the Model S and Tesla says that it already has 2000 orders. However, 2012 is less than two years away and the company still does not have a way of actually building the sedan. In fact, the company lists 11 assumptions that it’s operating under with regards to the launch of the Model S:

that we will be able to identify and secure an appropriate facility for the manufacturing of our Model S;
that we will be able to secure the funding necessary to build out and equip the manufacturing facilities in a timely manner, including meeting milestones and other conditions necessary to draw down funds under our loan facility with the DOE;
that we will able to develop and equip the manufacturing facilities for the Model S without exceeding our projected costs and on our projected timeline;
that the equipment we select will be able to accurately manufacture the vehicle within specified design tolerances;
that our computer aided design process can reduce the product development time by accurately predicting the performance of our vehicle for passing relevant safety standards, including standards that can only be met through expensive crash testing;
that we will be able to obtain the necessary permits and approvals, including those under the California Environmental Quality Act and the National Environmental Policy Act, as well as building and air quality permits, to comply with local zoning, environmental and similar regulations to operate our manufacturing facilities and our business on our projected timeline;
that we will be able to engage suppliers for the necessary components on terms and conditions acceptable to us and that we will be able to obtain components on a timely basis and in the necessary quantities;
that we will be able to deliver final component designs to our suppliers in a timely manner;
that we will be able to attract, recruit, hire and train skilled employees, including employees on the production line, to operate our Model S manufacturing facility;
that we will be able to maintain high quality controls as we transition to an in-house manufacturing process; and
that we will not experience any significant delays or disruptions in our supply chain.”

It generally takes established automakers that do not have to worry about supplier contracts, facility procurement, and government permits at least three years to bring a new vehicle to production, so we fail to see how Tesla is going to produce the Model S by 2012, barring a minor miracle. The company admits that it does “not have a full production intent prototype, a final design, a manufacturing facility or a manufacturing process.”

Furthermore, the production of the Model S also depends on Tesla finalizing a number of agreements with Daimler (which has a small stake in the company) that would result in the German automaker providing it with access to parts as well as engineering help. There are also clauses that would allow Daimler to terminate all of its agreements should current CEO Elon Musk leave the company or invest in another automaker.

Even if Tesla manages to overcome the multitude of hurdles in its way, it remains a mystery as to how it would make money in the time that passes between the end of the present Roadster and the launch of the Model S.

The full text of the SEC filing can be found HERE.

By Kirill Ougarov