Electric car upstart Tesla Motors is at a crossroads as it readies to deliver its first Model S midsize luxury sedans. The automaker had planned to start delivering the $50,000 to $90,000 cars to customers by July but has since announced plans to jettison the schedule by a month and move up to June, perhaps to start mitigating mounting losses and jumpstart revenue.
Makes sense. Tesla Motors recently announced last-quarter losses of $89.9 million–up significantly from the first quarter of 2011′s $48.9 million. Note that’s to be expected from any company developing a new product, especially one as forward-thinking as the Model S, which features a 14-inch tablet PC mounted in its center console to control all of its HVAC and stereo functions.
But company founder and CEO Elon Musk is optimistic, saying 2012 will be a “year of two halves,” with the Model S’s launch generating revenues of $560 to $600 million by year’s end. With the company attempting to fill 5,000 of its 10,000 preorders this year, that just might happen. There are some problems, though.
The car cannot go on sale without the National Highway Traffic Safety Administration crash-testing it first. That hasn’t happened yet, and we’re less than a month from Tesla’s target date. Musk told Automotive News he doesn’t know when that will happen, either. Some of the stamping dies Tesla has ordered for the Model S haven’t come in yet, so the automaker is planning on using the units it made for the prototypes for the first batch of production cars. Most automakers would never attempt such a substitution, as prototypes are made of softer, cheaper metals because they’re only designed for a limited run; Tesla apparently sees differently. Musk said he’s confident the production dies will arrive soon enough for large-scale production.
Tesla anticipates once production gets rolling, it will be able to produce 20,000 of it the electric sedans annually in the plant once shared between Toyota and GM for the Chevrolet Prizm and Toyota Corolla. The company has only made 2,250 Tesla Roadster sports cars, of which it said it pocketed a 28-percent profit margin on each car. It also plans to co-produce 2,600 Toyota RAV4 EVs. Tesla just recently signed on with Mercedes-Benz to create an electric car. The mass production of such cars will most likely bring down prices on electric-car batteries.
Automotive.com’s take: Tesla’s hedging on anticipated revenue in a year when politicians are attacking the electric startup and other recipients of federal green technology loans. It’s not going to be easy for Tesla, and we anticipate plenty of teething, plenty of using the company as a chess piece in the media to push agendas. Tesla has the potential to be a stable company in the future, but it also as the distinct possibility of flopping like LeBron James in an NBA playoff game. The company is wildly, overly ambitious, and it’s bleeding cash, hedging on the Model S selling in numbers that may not be realistic.
Tesla is planning to use its remaining $104 million in federal loans over the next half-year–a fraction of its original $465 million–and if it doesn’t use them correctly, it could be the next Solyndra very easily. Some politicians think it’s already there; we don’t. But Tesla looks like it’s shooting for the stars. Here’s hoping the automaker knows what it’s doing.
Sources: Detroit News, Automotive News (Subscription required)
By Jacob Brown