Tesla Model S
  • Tesla Model S
  • Tesla Model S

  • tesla model s
  • tesla model s

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Tesla Model S
  • Tesla Model S

  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
  • Image Credit: Tesla Motors
Elon Musk is the brash CEO of Tesla Motors, and he has been known to make some bold statements. Whether he's talking about the price of li-ion batteries in the coming years or when his own company would deliver the now-available Model S all-electric sedan – to say nothing about leaving the planet with SpaceX – he thinks big. He's usually entirely optimistic, but recently he was downright cautious. Speaking at the National Clean Energy Summit in Las Vegas, he said that:

The challenge that Tesla faces over the next few months is scaling production enough to achieve a certain gross margin on our product so we can be cash flow positive. That's extremely important. If we're unable to do that, we'll enter the grave yard with all the other car company startups of the last 90 years.

Sounds like Musk is saying that if Tesla can't ramp up production to meet certain internal targets (we'd guess something around the previously mentioned 5,000 units by the end of 2012), then the company could fold. As GigaOM put it, getting to 5,000 in the next four-and-a-half months, is "like the Monster Truck version of ramp ups: totally extreme." Combine this drive with the pressure to not make any mistakes, and you've got the ingredients for another Musk quote. From the Summit, he said, "It'll definitely be a very tough road over the next 6 months. We can't afford to make a lot of mistakes."

Six months, four and a half months, a few months, what's the difference? The real question is whether Tesla can achieve the goals that Musk himself says are vital to keep the company out of the automotive graveyard.


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  • 105 Comments
      Gabbo
      • 2 Years Ago
      This is assuming no "crises" occur that would require expensive recalls and fixes - doesn't sound reasonable to me to expect perfection. Buying this stock seems to be an absurd risk.
      Letstakeawalk
      • 2 Years Ago
      Here's a nice write-up that includes the rear suspension: "The rear suspension (below) is multilink with a lower A arm and upper lateral arms and coilover shocks. The main lateral arm is above the drive shaft, and the other lateral arm is in front of it, also functioning as a toe and camber control link. The upper lateral arms are actually short, wide extrusions which have been cut transversely. Each a little work of art, the lateral arms have gentle radii inside and out and trusses that gracefully follow the lines of force. The rear lower A arm has a pronounced tilt up toward the front of the car, which is an anti-squat geometry. The rear A arm is actually an H shaped casting." http://www.jeffchan.com/cars/ev/tesla/model-s/
      Rotation
      • 2 Years Ago
      purrpullberra: Having almost all the parts on hand (or even all of them but just not able to assembly them fast enough) is actually worst case scenario, because that means you have outlaid cash quicker than necessary and are taking it in slower than expected. Not having any extra parts on hand is the leanest, least cash-intensive situation, no matter what the final production rate.
      Nick
      • 2 Years Ago
      Here's what I don't understand: The Model S was launched 'as scheduled'. Now they're sweating bullets, scrambling to get 5000 built by the end of the year. If it started "as planned", then why the sudden stress?
        DaveMart
        • 2 Years Ago
        @Nick
        Musk made clear, in his words, that they have been red-lining it for ages on Tesla. It is true that this is pretty much crunch time though. Going to production always is, unless the company has folded before then.
      me
      • 2 Years Ago
      It seems you guys don't get it Musk is a smart man ... what better way to rally the workforce than this?! Tesla is fine relax
      • 2 Years Ago
      Do the math! A Tesla has less than 100 parts. A typical gas cars has thousands! You should be able to put them together about ten times faster.
        Rotation
        • 2 Years Ago
        Cars are produced with subassemblies. For example, they make the ICEs in another plant and then just drop them in. So it doesn't matter how long it takes to make one. Also, I cannot see how the Tesla has less than 100 parts. Even if you don't count the thousands of batteries. The drivetrain is simplified, but the other stuff is similar. Heck, the rear suspension has at least 20 parts per side. Also, fun fact, the rear suspension is not a double wishbone, at least on the chassis in the showrooms. This despite what Tesla says. Still looks like a nice suspension, but it lacks a lower wishbone.
      Grendal
      • 2 Years Ago
      @Marco Well said and well reasoned. Elon is far from being a perfect human being. But he is a charismatic businessman, somone who gets things done, and has an ego large enough that failure is an anathema to his sense of pride. I wouldn't bet against him and I have bet for him. If it's possible for Tesla to succeed then Elon will find the way to make it work and all indicators are that while they are stetched thin that they should be able to pull this off. So I expect they will. But I'm the optimistic side of the argument...
      Grendal
      • 2 Years Ago
      From oktrader: BTW: TAQA, the Abu Dhabi sovereign fund you referenced, has divested all of their TSLA shares (77% profit). From Reuters: [TAQA said it had sold the 7.3 million shares transferred to it by the Abu Dhabi Water and Electricity Authority (ADWEA) in December 2010. "While TAQA respects and has admiration for Tesla's vision, technology and products, Tesla was a non-core investment for TAQA that was originally made by ADWEA and transferred to us. We hope to use the profit to pursue energy opportunities in the MENA (Middle East North Africa) region," said a TAQA spokesman. ] From me: So the shares they got from Daimler and ADWEA were transferred to TAQA. They cashed in, took the profit and used the money on a different project of theirs. There was no fear that Tesla wouldn't make it - just business.
      Grendal
      • 2 Years Ago
      oktrader. This is not some crazy accident that 2-3 cars are coming off the line. The "terrible situation" you describe was always part of Tesla's plan. It's also part of every manufacturer's plan. It's a ramp up. No one has said they aren't going to hit their goal of 5000 by the end of the year. In fact, #2500 of the General Production cars has been contacted by Tesla to sign their contract for their car. They were given a possible delivery date of late November to early December. Tesla is doing some final tweaking of the car that has slowed the ramp up. They were ahead of schedule and now they are more even with their original schedule. Any more delays and they will need to scramble toward the end of the year but that still would not mean they won't hit their 5000 mark. The question is how much profit will be made, not whether they can produce the car at production speed.
      Marco Polo
      • 2 Years Ago
      @ oktrader, and Grendal Sorry, maybe it wasn't clear that my reference to TAQA, was intended within a historical context. I wanted to illustrate the diverse nature of the investors that Elon Musk has been able to attract. Tesla has always been seriously underfunded. It's a tribute to Elon Musk's skill as a promoter and businessman that Tesla has achieved so much. For less than a major OEM requires to fund a new model, Tesla has produced not one, but two revolutionary new vehicles. I don't disagree with Oktraders, analysis. It's completely accurate from a strictly business point of veiw. Tesla, Elon Musk, and the model S, have captured the imagination of a great many supporters. However, despite the optimistic faith in early profitability displayed by such commentators as PR, the fact remains that without new funding Tesla will not survive on it's ability to sell units for some considerable time. Oktraders observation that supporters are do not always buy stock, is valid. Conventional business wisdom would indicate Tesla simply doesn't have the luxury of time! But Elon Musk is not a conventional sort of guy. There's nothing obviously wrong with Tesla's business plan. It's true that a good deal of Tesla's profit predictions are based on risky new concepts, which could prove to be misjudgements. Conversely, these new methods could prove to be very profitable innovations in an otherwise staid industry. My concern for Tesla is that success is tied to the skill and fortunes of one man. Elon Musk is Tesla's greatest asset. Unlike oktrader, I believe Elon Musk still has sufficient reputation to attract major financing for Tesla from unconventional sources. But Tesla's greatest weakness is that it's fortunes are tied to one man. Elon Musk is not someone who easily accepts criticism, or works comfortably in harness. His failed marriages, partnerships, and humourless litigation are evidence of a singular personality. The connections with Toyota and Daimler, are not what Tesla fan's imagine them to be ! Tesla's fortunes are tied not only to Elon Musk's vision, but rely on his organizational and fiscal ability. Tesla's future is dependent on whether one man can prove to be flexible enough to meet the challenges of converting a Technology start-up, to an established industrial corporation. History tells us that the vast majority of visionary promoters, end up destroying what they create. Is Elon Musk a William C. Durant, or a Walter P Chrysler ? Only time will tell !
      throwback
      • 2 Years Ago
      The auto business has always been a very capitol intensive business, unlike dotcom start ups. It takes a lot of money to start up a new factory, never mind an entire car company. Most new car platforms run to nearly a billion dollars by themselves including development. Tesla is burning through money and I think Musk is just being realistic. They obviously need a cash infusion, it will be interesting to see where/if the funds come from. A VC firm or an automotive firm.
        Joeviocoe
        • 2 Years Ago
        @throwback
        I thought they were ready to payback some loans early. They could have plenty of cash on hand... yet still have everything riding on the Model S ramp up.
          Joeviocoe
          • 2 Years Ago
          @Joeviocoe
          Thanks LTAW, but I was referring to Rotations comment about paying off the loan early was nothing more than rumor. I've learned not to ask you for sources ;)
          Joeviocoe
          • 2 Years Ago
          @Joeviocoe
          oh okay, is there a link to that?
          Letstakeawalk
          • 2 Years Ago
          @Joeviocoe
          http://www.lgprogram.energy.gov/wp-content/uploads/2010/09/TESLACONDITIONALCOM.pdf Page 14. Section 14. "Principal Amortization and Maturity"
          Rotation
          • 2 Years Ago
          @Joeviocoe
          That story was nonsense. The entire thing was ginned up by an enthusiast discussion board from Tesla saying in their conference call that they would begin repaying the DoE loans "no later than" December 15, 2012. Someone got too excited about the phrase no later than.
          Letstakeawalk
          • 2 Years Ago
          @Joeviocoe
          Tesla is obligated to begin making repayments on both the Project P and Project S Loans beginning Dec. 15, 2012. From then on, the Project P Loan has 28 equal quarterly payments, and the Project S Loan has 40 equal quarterly payments.
        Grendal
        • 2 Years Ago
        @throwback
        According to Elon Musk and Deepak Ahuja (the CFO) during their quarterly conference call, they specifically said that they do not need a cash infusion for the Model S ramp up. They were asked the question three times in slightly different ways and in every case they said no.
      Smith Jim
      • 2 Years Ago
      No one ever said said starting an automotive company from scratch is an easy task.
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