Don’t pull the plug quite yet on Elon Musk’s electric sports car startup Tesla Motors. After laying off 18 percent of its workforce two weeks ago (69 people out of 384, we have confirmed with the company) and reportedly burning through all but $9 million in cash, Tesla is getting another lifeline in the form of a $40 million convertible. That is convertible as in debt, not convertible as in riding with the top down. Investors have now sunk $186 million into the company.
Add to that the tens of millions of dollars in deposits that Tesla has already collected for 1,200 vehicles (only 50 of which have been shipped). These are $110,000 machines, some of which already have been paid in full and others which have deposits on them ranging from $5,000 to $60,000.
Despite all of this cash coming in, Tesla was still dangerously close to running out of money. That is what is so alarming. Building a car is not cheap. But this is not a cheap car. Tesla still has 315 employees, and is building an automobile manufacturing plant in San Jose, California.
Elon Musk has taken over as CEO and the company’s next vehicle, a more modestly-priced sedan, is now on the back-burner. All efforts are now on getting as many of the sports roadsters out the door as possible at a profit, and licensing its electric-battery power train to other car companies such as Mercedes-Benz.
Will this $40 million infusion be enough to get Tesla to the finish line and profitability or will it run out of gas trying?
I was lucky enough to test drive a Tesla at a party last week. That is one bad-ass car. Fast as f$^k with no gears to shift (so really, really fast acceleration and fun to drive).
The company will be successful because it’s such a great product, in my opinion.
I just got word that my Tesla is almost ready. having driven one for almost a week I have to agree with Phil: it’s amazing. I drive a Corvette, and am very loyal to the brand, but once the Tesla arrives I’m going 100% green going forward.
Since they are only burning ~$3m a month the $40m should take them 39 months out. That should get them through the recession even if the huge government support doesn’t happen.
Frankly, I think they should have focused all their energy on the Roadster and delivering it from the start. Clearly they got a little ambitious based on the demand for the Roadster. From where I sit they need to show the world they can fill the other 950 orders quickly and it will all work out.
Gas is going right back to $4+ a gallon, and it’s fairly clear that long-term it will be $7-10 a gallon as the world runs out and the getting to the remaining oil takes 2-3x the amount of money.
I’ve got a very close friend who drives the Tesla Roadster every day and his other car is a $200k exotic losing it’s value under a car cover. ‘Nuf said.
Can’t wait for http://www.tesla16.com to show up!
“Since they are only burning ~$3m a month the $40m should take them 39 months out. ”
Do you really approach everything so simplistically? Who is going to build and pay for that factory? The service infrastructure?
They are waiting on a $100M grant from the government on machinery for the factory. If that doesn’t come through then what?
I can’t believe people invest in you…
The ONLY hope Tesla has is to stop production of the sedan, and focus 50% of its efforts on getting the roadster out with a high level of quality, and 2) Licensing its technology.
Fingers crossed! The first step toward a mainstream electric car was to make them sexy. I think Tesla’s got that wrapped up, if they can deliver.
I’ll take two.
Is Tesla an internet company or is Erick just looking to be bumped up the waitlist for his roadster…?
I’ll bet a company like Toyota is just licking its chops praying for Tesla to run out to cash so they can buy them for a firesale price and really go all in with the investment to vamp up production.
I doubt it. Toyota has more advanced technologies at lower prices –The “Tesla” brand has been dying for a while now.
The current buyers are very wealthy individuals who would pay $100K for any toy…
I think the problem was that Tesla started out with too little money for what they were trying to do. How much did the Prius cost to develop?
Tesla won’t run out of gas. They’re electric. They’ll just run out of juice.
Unfortunately, this company will not survive. Why? because they are producing a very expensive lemon… [$110,000?]
I did test three of their cars and all of them had transmission problems.
They are very fast and smooth but the ones I drove would stall in the middle of the road… would not want to drive it on a highway.
Also, the technology has been flawed from the start: you drive the car for about 40+ miles and then you have to plug it in for several hours; the tiny batteries they use [about 6,400!] fail often too.
The “Volt” will also fail: it would start selling for $40K when we could get a better, more advanced [imported] car for $20K. It is sad, but Detroit will never learn…
Mercedes is developing its own electric cars: they have massive resources and above all, German engineering…
couple of quick fact checks here:
1. The range of the car is 220 miles. Car reviewers have verified this already. Also, that range will only go up as they a) evolve the car’s hardware and software and b) batteries get more efficient.
2. I borrowed the first production car for week and know a couple of folks who own the cars and they’ve had no problems. From what I understand from folks inside Tesla they are *obsessing* on quality.
3. Tesla is going to provide the technology to Mercedes. So, if Mercedes does well so does Tesla. frankly, I could see Tesla making more money off of powering other car companies than with their own sales. http://blogs.ed...-batteries.html
you are correct the Tesla Roadster is FAST AS ALL HELL!
best j
But is this a web blog, or a general economic blog?
Why Are you talking about Tesla Motors?
Because the founders of this company (at least one) is coming from the internet world (Musk). Probably that’s why…if Thiel will finance another movie that will be mentioned here. When Musk’s rocket went into the space it was talked about it here…so…
They hired a bunch of Detroit gear heads to thelp them out- which is good. The SIlicon guys have the battery deal down but quality in the drive train and a smooth production line are big keys to success.
@chris — I admire your optimism… which is the equivalent of smiling and drinking champagne while the boat is slowly sinking…
After $186M+ invested this company IS failing because is building a defective, inefficient product that would never sell in large quantities…
Going “green” is absolutely the best way, but the “Tesla” way is just business silliness…
I have just relocated to Silicon Valley, and have actually seen some Tesla cars being driven around. They look great and I wish Elon success.
Seems to me like licensing their technology would be the best way to bring value to shareholders and create the most good in the world. We don’t need another brand of automobiles – as much as I admire the Tesla name for so many different geeky reasons.
Established manufacturers like Toyota, Porsche, BMW already have the infrastructure and the distribution muscle to take Musk’s innovations to market much more efficiently. I think this must be Plan B.
“Established manufacturers like Toyota, Porsche, BMW already have the infrastructure” … plus, they are ALREADY developing a more efficient and advanced technology than Tesla is. Why license their already failing and antiquated technology?
BTW Toyota will kick Porsche, BMW and any other major manufacturer’s butts on this field. BMW produces great, beautiful vehicles that… are not reliable.
[Disclaimer: I have never bought a Japanese vehicle, and never will]
Hmmm – they hired a bunch of guys from Detroit. We’ve identified the source of their problem… should be easy to fix!
Ditto.
But even so, and unfortunately, this company is heading to the Dead Pool of automotive failures.
I wonder if Erick puts Arrington’s name down instead of his, would there be less negative comments.
@Mogilny Please educate us and list all the positive, *real* facts about the Tesla company and its products. Thank you!
Beautiful looking car!
But it will fail for this reason…
People who want high performance cars want to hear the engine scream, the smell of unburnt fuel, shifting the whole driving experience.
Tesla will be a novelty car at best.
Doesn’t look good for Tesla…think of the billions of dollars and decades of R&D that has gone in to Ford, GM and Toyota vehicles! How can Tesla release a quality product in only a few short years? Not to mention the auto industry is taking a monster hit right now.
Ok…this is confusing….
why would any body buy from Tesla?? With Volt from Chevy and Honda with new electric cars, investing in Tesla is awkwardly weird.
http://www.livbit.com
The “Volt” IS a failure already: nice looking car, but inefficient and expensive.
It will not be ready for another two years and at $ 40,000 it is basically a sports car that we could drive to the store, to the mall and then go back to plug it in for about 6 to 8 hours if we want to drive it again.
Thanks but no thanks. Detroit flops again.
I’m not sure you understand the Volt’s technology. If you drive further than the 40 miles, the gas engine kicks in. I’ll bet 95% of your driving is in 40 miles or less increments. I know mine is. And that extra 5% is covered by the gas engine which is what we all use now.
The math is still a little fuzzy, but as soon as it get closer to 30k I think you will be surprised.
@Salem – Sure, but I’m afraid that I am one step ahead of your thinking: the goal is to use an ‘all-electric’ vehicle, otherwise, still relying on gasoline does not resolve much, does it? At least here in the US.
If we talk about hybrids, we could *really* buy now excellent new models at half the ‘Volt’ price… And, by the way, we already have the technology to make all-electric vehicles that would need to recharge *once* every one to two weeks!
Naturally, this technology have been desperately fought against tooth and nail by the big automakers and oil companies alike because, if implemented [and it will] they could eventually go into bankruptcy.
The original goal was always to use the Roadster as a launching pad to the more profitable and widely accessible sedan. If Tesla stalls and can’t release the sedan by 2010-2011 like they predicted, I don’t see them lasting for long. That’s the car I can afford and am putting off a new purchase until then. However, if they can’t deliver, I’ll just buy a plug-in Prius in a few years.
dfs
de ce??
Hmmm….does the name DeLorean ring a bell? I applaud their effort…but designing, manufacturing and retailing in one company is too much to bite off. Should have followed successful companies like Porsche and VW and outsourced manufacturing to Magna Steyr. There’s too much capacity in the auto biz…why not take advantage of this? Doesn’t make sense to build manufacturing capacity.
another 40 million for them to waste again.
>The original goal was always to use the Roadster as a launching pad to >the more profitable and widely accessible sedan.
That was the original plan, but not because it made sense, but because the slick sexy roadster satisfied the ego’s of the backers. This company is a joke – more toys for rich boys with a lets pretend business model. If the goal was to build a practical car, they should have just done so.
Starting a car company in the 650 is about as VC-campaign-caviar as you can get. Ok, the thought leaders are here, but any kind of manufacturing, assembly or even administrative costs are going to be out of whack with what the auto industry can handle.
I wish them luck, but I feel a bomb coming.
I don’t see Telsa making it long term either, but I applaud their brash attempts despite the odds. The next decade will be very rough for much of the civilized world as oil consumption increases at a staggering rate just as the rate of oil production sharply declines. It’s at this inflection point that chaos will become widespread if other forms of engery are not availalbe to close the gap between supply and demand for oil.
China and India have more than half the world’s population, and the sharp increase in oil consumption in these countries will tip the scales within the next decade. Going for a Sunday drive in your favorite sports car and driving to work will be the least of our worries. However, obtaining enough food to feed the family will become increasingly difficult beyond the year 2020.
If you think I am foolish, then keep this simple fact in mind. Anyone with knowledge of the trucking and shipping industries will tell you that our perishable goods are available on a nearly just-in-time basis. If you don’t believe me, then check the facts for yourself. The world leader’s are extremely worried, but the won’t share the full details because of the unrest that will follow the fear, uncertainty and doubt.
This is not a note from a dooms day monger, but it does include some of the facts about the reality we all face in the early 21st Century.
I for one, really hope they make it. They are truly innovative company. Best of luck to them.
Oh common, you fools, this is pure PR post! Google has invested in Tesla and it sits on infinite cash. God knows how much they pay for such PR to this Arrington asshole
Could this be their stiffiest competition? http://tinyurl.com/5jautw
LOL, the air car is cute.
But there are also more serious Tesla contenders out there, like the Mindset (http://www.mindset.ch). Looks less like a Lotus, but will probably be more usable for every day life (4 seats, plug-in hybrid).
They were never in danger of running out of money. Come on guys, you know the game.
I haven’t driven it yet, but I can’t wait.
I thought I saw in a recent article that Dodge was going to build it and call it something else. Or maybe it’s a completely different thing.
https://www.chr...ge_vehicles.php <–link
Their marketing and advertising campaigns suffer drastically…people will buy hype! The technology is still a few years away, but people in the industry I spoke with say that Tesla will be o.k. if the money doesn’t run out before 2 more models are launched.
with a 100,000 price tag no wonder they cant make any money. maybe they should invest in a more affordable vehicle. Correct me if I’m wrong, but arent electric companies big business just like oil companies ? So if history tells us anything, once demand goes up with all of the green vehicles using electricity whos to say the electric companies wont jack up prices ? then how much more affordable would it be to be green. Dont get me wrong is great, unless we price ourselves out of it.