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What You Need to Know About Tesla's Future

 
1,593 views Mar 14, 2011

Tesla Model S prototype on the road, January 2011, screen capture from video

Tesla Model S prototype on the road, January 2011, screen capture from video

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Electric-car maker Tesla Motors announced this week an update to its plans to deliver its Model S sedan, a hotly watched launch for the company.

It’s not just electric-car fans who are itching to hear the progress on the Model S (pictured), which starts at $57,400 before federal tax incentives. Investors are watching the Model S’s progress closely too. This represents the first time Tesla is building a car from scratch, and the company aims to ramp up to a capacity of 20,000 of Model S cars a year by 2013.

Toyota Motor Corporation president Akio Toyoda, at Tesla stand, 2011 Detroit Auto Show

Toyota Motor Corporation president Akio Toyoda, at Tesla stand, 2011 Detroit Auto Show

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Investors are looking for Tesla to hit the benchmarks it has set for itself. Tesla has to get the $42 million former NUMMI factory up and running, train hundreds of new hires and actually become a successful startup in the auto manufacturing business. The factory is meant to be a future ground for other Tesla models, too.

But most crucially, Tesla needs to deliver the Model S on time. The car is due out in mid-2012.

Capstone Investments analyst Carter Driscoll told VentureBeat today that Tesla’s earnings last quarter was “okay,” and the company’s gross margins are improving (26 percent for last year, compared to 9 percent in 2009), but he still considers the stock overvalued.

“They still have a long road to execute,” Driscoll said. He’s something of a skeptic, though — last year he issued a price target of $22 for the stock, causing it to slide. It’s now trading around $24.

Here are some key points to keep in mind as we track Tesla’s progress this year and next:

TSLA stock still has a great deal of short interest

Tesla’s stock still continues to attract a lot of short interest, or investors seeking to profit from a drop in its price. As of Feb. 28, Tesla’s short interest was nearly 10 million shares, while its average trading volume was 2 million shares. That means buyers looking to bet against the stock outnumbered sellers nearly five to one.

Tesla will have to start paying back its loans by 2013

Tesla Roadster art car by Laurence Gartel

Tesla Roadster art car by Laurence Gartel

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The company received a $465 million loan guarantee from the Department of Energy last January. Up to $101.2 million was available under the first term loan facility to finance 80 percent of the costs for its powertrain facility. The remainder, $363.9 million, was intended to finance up to 80 percent of the development and manufacturing facility for the Model S.

The loan advances for the powertrain facility can be repaid in 28 equal quarterly installments starting on Dec. 15, 2012, according to SEC filings. If Tesla takes advances for the powertrain facility after that date, then it will owe the cash in 26 equal quarterly installments starting on June 15, 2013. All outstanding amounts will be due on Sept. 15, 2019.

The cash it owes for the Model S funds will be repayable in 40 equal quarterly installments starting Dec. 15, 2012. If it takes advances out of that loan facility after that date, then the advances will be due in 38 equal quarterly installments starting on June 15, 2013. All outstanding amounts under the Model S Facility will be due and payable on the maturity date of Sept. 15, 2022.

In the case that Tesla can’t meet those payments, though, it’s unlikely the DOE would allow the company to default. The DOE recently restructured its loan terms for troubled solar company Solyndra, includingextending the amortization period for the loan, according to VentureWire.






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Comments (5)

  1. fb_100001444034909 avatar Richard Marks Posted: 3/14/2011 9:44am PDT

    Just remember that the Roadster was basically a Lotus already certified for US sales and was in production. All that Tesla needed to worry about was the drive system and they had many problems bringing the Roadster to production. Now they have the drive system done, but who knows what steps they are taking to improve the drive system. Like most EV companies, the major efforts have been to lower costs. The fact that they spent a lot of money on powertrain development say they are working hard on this. BUT, they are doing a new all aluminum vehicle from scratch. This is not easy without having a team that has worked together before doing a complete vehicle program. The Roadster was over a year late to reach production. I suspect that the deeper Tesla gets into the development, the more "issues" they will discover that they did not know, they did not know. These are killers in both added cost and time. I will be very surprised if Tesla can deliver on their promised first delivery time projections. Tesla is a lot more talk than substance....and the article missed that Tesla will only sell the larger $30,000 battery pack at start up so the $54,700 model will not be available until at least 1,000 "Signature Series" models are built at $77,400.
    I admire their guts, but it takes a lot more than guts to be successful.
     
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  2. fb_1089324431 avatar Tom Saxton Posted: 3/14/2011 1:02pm PDT

    Richard: I'm not saying it's going to be easy to get Model S done on time, new engineering never is, but you've got the facts wrong on the Roadster.
    While Tesla started with the Elise chassis, they made significant changes to it. In addition to the changes needed to accomodate the heavy battery pack and different weight distribution, they also changed the side structure to improve ingress/egress (which then caused it to fail the side impact test, requiring more work). The Roadster only shares about 5% of its parts with the Elise, the big win being the dash and airbag assembly which had already passed safety tests.
    By far the biggest delay was the transmission. It turned out to be impossibly difficult to build a two-speed transmission that could take the torque their electric motor produces. Switching to a single speed transmission made it a better car, even if they did break Musk's promise to deliver the original performance specs on the 2008 model year cars.
    In a lot of ways, I expect it would be easier to build a car from scratch rather than modifying an existing gas platform. Tesla long ago starting hiring experienced auto industry engineers.
    I wouldn't be so quick to discount what they can do, but I'm not buying any TSLA stock. I already took my big gamble to contribute to Tesla's success by putting down a deposit on a Roadster in 2006, two years before they were delivering cars in quantity.
     
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  3. fb_100000005296979 avatar Kent Beuchert Posted: 3/14/2011 2:41pm PDT

    Richard is wrong on a number of points, the most obvious being his use of the roadster development as an example of anything relevant to the sedan. He apparently doesn't know the story of the roadster, which I won't go into, but will say that the people developing the sedan are the best out there. von Holzhausen was by far the most talented GM stylist of the past half century, and GM let Mazda steal him.
    A large part of a car's success is based on its looks, and the Model S has a winner in this regard, something Marks apparently doesn't realize. He also apparently doesn't know that the sedan has already been built. I know exactly what its design is, inside and out, from the expository videos. This is hardly the unknown quantity that Marks claims it to be. Designing a really good car is the hard part. But anybody can build it - just ask VW and MB.
    Musk's smartest move was to build a car that competes in a price range that allows an electric to compete economically, despite its high battery costs. Also equally smart was his decision to make the car one that people would actually want to own,
    irrespective of its power source. We all saw the over-the-cliff dropoff in interest in the Volt after it was redesigned. And now Chevy is apparently selling far fewer than everyone thought after the enormous publicity attendant upon its premier.
     
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  4. By jeffhre Posted: 3/14/2011 10:12pm PDT

    The roadster was not "already certified" and was never "in production" by Lotus. The airbag ( http://www.wired.com/autopia/2008/01/feds-exempt-tes/ ) which it does share with the Elise, even had to be certified in the Roadster completely independently of the Elise. notice the crash testing in ( http://www.teslamotors.com/blog/50-state-legal ).
    See ( http://www.teslamotors.com/blog/slip-sliding-away ) for ABS and traction control testing.
    It's good to take comments with a grain of salt ( or an ocean full as the case may warrant) until the proof is shown. Right Kent?
     
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  5. By David Manwell Posted: 3/15/2011 5:57pm PDT

    I can hardly wait for this to hit the streets!
     
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