Tesla Motors To Be Profitable Selling Electric Cars By April, It Says Page 3

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Tesla Model S

Tesla Model S

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Tesla had to fly in the 21-inch tires from Europe because it took longer than 30 days for the tires to arrive from the maker--which required payment in 30 days.

The company, unwilling to pay for goods it hadn't received yet, held its payments until the tires arrived--which caused the tire maker to cancel its credit line. Mayhem ensued.

Once the situation got sorted out, the halt in sea shipments meant Tesla had to pay to fly in the tires to keep its production lines rolling.

"I wanted to punch myself in the face for that one," Musk said.

Slamming an analyst

And he had specially harsh words for one industry analyst, IHS Automotive, which had projected that Tesla would build 1,500 cars a year--not the 20,000 it projected and is now working toward.

With Tesla an unknown quantity to the auto industry's parts suppliers, those companies tended to rely more on third-party estimates than on the volumes of their parts Tesla had actually ordered.

"Suppliers looked at that forecast, and tooled up for some puny number of parts," Musk said, and were "caught flatfooted when we said, 'No, we really did mean the order we sent you'."

Tesla Motors had a number of conversations with suppliers where they "realized we really weren't kidding about that."

Now, Musk said, suppliers are more ready to believe that the company's production goals are serious--and price breaks for higher volumes of parts are kicking in as well.

That includes the price of the lithium-ion cells for its battery packs, supplied by Panasonic (which also owns part of Tesla Motors).

The cost of its cells will fall this spring, Musk said, which will have a beneficial effect on profitability for all Model S variants.

Leasing eventually

While Tesla already has a leasing partner--Athlon--lined up for its European customers, in North America, all deliveries are now outright purchases.

Leasing is something the company wants to offer, Musk said, and it could arrive in the second half of this year. Tesla wants to make sure the terms of the lease are "compelling," and talks with financial institutions are "progressing in a good direction."

Large banks, he noted wryly, tend to like the notion that Tesla will be profitable in Q1--it gives them "greater confidence" that the startup carmaker is a company they would want to partner with.

Next year, Musk concluded, "leasing will be a big factor" for Tesla. In Europe, it will be "at least a moderate factor" this year.

Tesla Road Trip from MD to CT, Feb 2013 - Tesla Model S cars at Delaware SuperCharger location

Tesla Road Trip from MD to CT, Feb 2013 - Tesla Model S cars at Delaware SuperCharger location

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SuperCharger announcement coming

Musk nodded briefly to the existence of the controversial review in The New York Times, in which a Model S ended up on the back of a flatbed truck.

He acknowledged that in colder regions, the SuperChargers should be more closely spaced--120 to 150 miles apart, perhaps, rather than the current 200-mile separation between SuperCharger locations in Delaware and Connecticut.

The company is rapidly deploying more SuperCharger stations, he said, including in Texas, the Chicago area, and other East Coast locations.

And he hinted at future upgrades to the SuperCharger system. "We've got a fairly meaningful announcement about a step change in SuperCharger technology coming later this year," he said.

That had originally been what the company wanted to have the New York Times review cover--so, Musk said, "Who knows?" Tesla might invite the Times to do another review later in the year.

Acknowledging hard work

During the call, Musk paid tribute to the hard work of the entire Tesla Motors team.

The results being reported today, he said, are due to "an enormous amount of hard work by a really dedicated group of people. We're going to be profitable, which is a pretty big deal, but it took an enormous amount of blood, sweat, and tears to get there."

"It's difficult for me to overstate the level of difficulty," he said, "but we're going to do it. I'm really proud of that--and we can say that with confidence."


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