By Deborah Gage
Posting in Cities
Its IPO is great news for the auto industry -- but what about manufacturing, sales and repairs?
Tesla defied its critics again on Tuesday, raising over $226 million in a public offering even though it's only sold about a thousand cars and doesn't expect to make money "for the foreseeable future."
But Tesla CEO Elon Musk seems undaunted as usual. In Tesla's road show last week, which you can see here, Musk compared Tesla to Silicon Valley tech powerhouses like Apple and Google rather than aging, struggling car manufacturers like Ford and General Motors.
"The Tesla Roadster is product 1, and version 1's typically suck," Musk said. "This one is good -- it kicks ass," and, he went on, Tesla's cars will only get better.
The Model S will have a 17-inch touch screen computer embedded in the center console with 4G wireless so you can browse the Web and check e-mail (not while driving!). "It will be an apps platform for third-party developers. It will be mind-blowing for the car business. But it's par for the course in Silicon Valley."
The car will eventually go farther (300 miles), charge faster (45 minutes), get a battery swap in under a minute and accelerate to 60 mph in under six seconds. Its powertrain is a platform that will be adapted to other Tesla cars -- a sedan, cabriolet, van and crossover SUV, all coming "soon."
But if Tesla plans to sell cars even to the 2,200 or so people on the waiting list for its next model, the $50,000 luxury sedan Model S, due in 2012, it has some challenges ahead, and customers should be asking questions.
- How will Tesla's cars be repaired? So far that's not much of a problem, since there aren't many cars out there, but Tesla has no car dealerships and plans to open only 50 sales and service centers around the world. Roving service technicians called the Tesla Rangers will visit customers who don't live near a store -- or you can send your car in to get repaired -- but if the car breaks down, you could be in for a wait.
- How far can these cars actually go? "Recently," Tesla said in its S-1, filed with the SEC, "the EPA announced its intention to develop and establish new energy efficiency testing methodologies for electric vehicles, which we believe could result in a significant decrease to the advertised ranges of all electric vehicles, including ours." Also, Tesla notes, the car battery's ability to hold a charge tends to deteriorate over time (which you'd expect), and the car's range depends somewhat on the weather -- range is reduced by five to 10 percent when the temperature is -20 degrees C, and the car slows for safety reasons when the powertrain gets too hot.
- What role will Toyota play in manufacturing Tesla's cars? (An agreement between the two is not worked out, although Toyota will invest $50 million in Tesla, which will in turn buy the now closed Toyota-GM manufacturing plant in Fremont). Will it be the corner-cutting Toyota whose dangerous cars were exposed this year by the Los Angeles Times and ABC News or the efficient and constantly improving Toyota that we'd admired before that?
- Also, will Tesla be able to manufacture its cars fast enough to meet demand -- assuming Tesla has enough demand, since not all states permit sales of cars over the Internet? And what about the new manufacturing techniques Tesla has planned? Will they work?
Musk, who is himself named as a risk in Tesla's S-1 because he divides his time between Tesla and two other companies -- SpaceX and SolarCity -- has no doubt that Tesla can handle all of its challenges.
Regardless of what happens to Tesla, though, its IPO is great news for the auto industry. Tesla and its competitors will create more electric and hybrid cars. There will be more car chargers, a stronger electric grid and (we hope) a push to generate more electricity from renewable energy.
Also, the IPO marks another turning point for Tesla -- U.S. taxpayers, through a loan from the DOE, are now providing less than half of Tesla's funding.
(If you're interested in the history of Tesla, and another take on the company's future, here's a good story from Reuters).
Jun 29, 2010