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Will Tesla Motors reach 2010?
- Thread starter Palpatine
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- Tesla Inc.
Unfortunately, I voted "NO"
It is not that I am not hopeful that they will succeed, and it is not that I am not optimistic on their prospects ..... in fact, I am a "customer" for the MY2009. The sad fact is that as a multiple high-tech entrepreneur, I realize (perhaps more than many) the challenges they face in the current funding environment.
I sincerely hope that i am wrong.
--DRM
It is not that I am not hopeful that they will succeed, and it is not that I am not optimistic on their prospects ..... in fact, I am a "customer" for the MY2009. The sad fact is that as a multiple high-tech entrepreneur, I realize (perhaps more than many) the challenges they face in the current funding environment.
I sincerely hope that i am wrong.
--DRM
I believe that Tesla MUST get the loan for the Model S program. The Roadster might be profitable on a per unit basis this summer, but that likely doesn't include the overhead of the entire company. The volume is simply too low on the Roadster to carry the entire company.
They need the higher volume sedan to spread out their overhead costs over more units of production.
If Tesla does not get this loan to move forward, I think they will be filing for bankruptcy eventually. I have no idea if that is 2009 or 2010.
For the purposes of this poll, I voted YES. I think Tesla Motors will receive the loan. Speaker Nancy Pelosi represents quite a few Roadster owners in her district around San Francisco.
They need the higher volume sedan to spread out their overhead costs over more units of production.
If Tesla does not get this loan to move forward, I think they will be filing for bankruptcy eventually. I have no idea if that is 2009 or 2010.
For the purposes of this poll, I voted YES. I think Tesla Motors will receive the loan. Speaker Nancy Pelosi represents quite a few Roadster owners in her district around San Francisco.
graham
Active Member
I did not vote. I hope Tesla survives, but I do not think their chances are as 1-sided as the poll results make it seem. Tesla still has many challenges to overcome.
They almost closed the doors 4 or 5 weeks ago. They kept their doors open by doing actions which have caused many customers to request refunds. They did get a round of private funding - but a car company requires an enormous amount of credit to run. Much of that new funding will probably be needed to be just to float enough cash around to continue to build the cars.
They do have a large backlog of customers which is good for cash flow. They have increased prices so that helps, but the initial deposits (nearly half of the revenue) of the remaining 2008s were spent long ago on R&D and other overhead. The 2009s in theory give a mild profit - but that list has not been growing significantly as far as we can tell. When they reach the end of that backlog in 6 months or so they will need to have some other income to sustain the company.
The Roadster is expensive enough that it will be a challenge to continue to sell new ones at a high rate in the current economy once this initial rush is gone. They have said they could survive as a company on as few as 1000 Roadster orders a year - but since they started taking orders in 2006 they have barely gone over 1000 orders total. Since that time, the economy has tanked, and they have significantly raised their prices. They will get a bump from going international - but it is unclear if that will be sufficient. Hitting 1000 new orders per year will be tough.
They need the Model S to justify the overhead of the company. However, they cannot pay for the Model S without more funding. Significantly more private funding in the next 6 months (while the Roadster backlog is draining) will be tough. They may get a little by pre-order deposits once they unveil the S, but it is not clear that this will be enough on its own.
They have challenges with the Public funding too. We know of 4 public funding initiatives for Model S: City of San Jose, State of California, First Fed loan, Second Fed loan.
They have one Federal loan in which they say they are "a lock" to get - pending 2 things: 1) A place to build the cars (which had been waiting on an environmental impact study) and 2) $50 million of their own money. The San Jose site was one environmental impact study away from reality - but because it is new construction it prevents them from getting the second Fed loan. Since they can't easily come up with $50 million of their own right now they abandoned their San Jose site to try and get the second loan. This puts 3 of the 4 loans on hold.
The second Fed loan is for much more money and is much more favorable financially in that it does not require them to pony up their own new private funds to get it - but it has more strings attached like "you have to refurbish an existing plant instead of building a new one". This is the loan where they have had to battle all the public outcry of "Tesla is asking for a bailout to make cars for the rich." It is unclear how easy it will be to qualify for this loan as it seems the rules keep changing.
So Tesla is gambling on getting that second loan. They hope if they do, they can also get the first loan, and if it is in California the California one too. However, if they miss the second loan, pretty much everything falls down with this plan.
Realistically, their chances of making it are far from certain. However, they are not zero either. And they have defied many odds by getting as far as they have already. I am hopeful - but I am not sure my hopes are completely grounded in reality.
They almost closed the doors 4 or 5 weeks ago. They kept their doors open by doing actions which have caused many customers to request refunds. They did get a round of private funding - but a car company requires an enormous amount of credit to run. Much of that new funding will probably be needed to be just to float enough cash around to continue to build the cars.
They do have a large backlog of customers which is good for cash flow. They have increased prices so that helps, but the initial deposits (nearly half of the revenue) of the remaining 2008s were spent long ago on R&D and other overhead. The 2009s in theory give a mild profit - but that list has not been growing significantly as far as we can tell. When they reach the end of that backlog in 6 months or so they will need to have some other income to sustain the company.
The Roadster is expensive enough that it will be a challenge to continue to sell new ones at a high rate in the current economy once this initial rush is gone. They have said they could survive as a company on as few as 1000 Roadster orders a year - but since they started taking orders in 2006 they have barely gone over 1000 orders total. Since that time, the economy has tanked, and they have significantly raised their prices. They will get a bump from going international - but it is unclear if that will be sufficient. Hitting 1000 new orders per year will be tough.
They need the Model S to justify the overhead of the company. However, they cannot pay for the Model S without more funding. Significantly more private funding in the next 6 months (while the Roadster backlog is draining) will be tough. They may get a little by pre-order deposits once they unveil the S, but it is not clear that this will be enough on its own.
They have challenges with the Public funding too. We know of 4 public funding initiatives for Model S: City of San Jose, State of California, First Fed loan, Second Fed loan.
They have one Federal loan in which they say they are "a lock" to get - pending 2 things: 1) A place to build the cars (which had been waiting on an environmental impact study) and 2) $50 million of their own money. The San Jose site was one environmental impact study away from reality - but because it is new construction it prevents them from getting the second Fed loan. Since they can't easily come up with $50 million of their own right now they abandoned their San Jose site to try and get the second loan. This puts 3 of the 4 loans on hold.
The second Fed loan is for much more money and is much more favorable financially in that it does not require them to pony up their own new private funds to get it - but it has more strings attached like "you have to refurbish an existing plant instead of building a new one". This is the loan where they have had to battle all the public outcry of "Tesla is asking for a bailout to make cars for the rich." It is unclear how easy it will be to qualify for this loan as it seems the rules keep changing.
So Tesla is gambling on getting that second loan. They hope if they do, they can also get the first loan, and if it is in California the California one too. However, if they miss the second loan, pretty much everything falls down with this plan.
Realistically, their chances of making it are far from certain. However, they are not zero either. And they have defied many odds by getting as far as they have already. I am hopeful - but I am not sure my hopes are completely grounded in reality.
graham
Active Member
Doubtful. He said that he did not have the liquid funds to cover the customer price increase. He is worth a lot of money, but most is not liquid, and he has poured all that he has available into keeping Tesla's lights on. The outstanding deposits are a much bigger sum than the price increase. He explicitly said if Tesla goes under, people will probably not get their entire deposit back.
Unless by "forced to cover" you mean: "do you think people will be able to sue him personally for the money because he made promises to that effect?" Who knows?
The lucky thing is I think they have enough working credit at this point to deliver their current backlog. Unless something very bad happens, current customers will probably receive their cars.
You know, the funny thing about the public is that they seek what the rich have. Such as buy a used luxury vehicle even though repair cost of those vehicles are higher after the warranty.
Here, you have a case where the rich can pony up the initial high cost and then the public can buy it the second time around when the new models come out.
I voted "Yes" but that's like barely into 2010, not all throughout.
Edit:
Everyone here has probably heard that a good investor makes money in good times, but makes more money in bad times.
If that saying is true that the rich get richer and the poor get poorer? Why should the government back those making products for the poor?
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siry
Member
I am not voting but here is my $.02, building on Graham's thorough and almost totally accurate assessment.
The only thing I see that Graham got wrong is that the "second" fed loan program also has an equity match. It is set at a minimum of 20% of the project amount (which can be expressed as 25% of the loan amount) but it is up to the discretion of the DOE to require a higher "co-pay" if they feel it is warranted.
So Tesla will need to go raise a lot of money in capital markets even if they get the loan, but raising matching equity with a low interest loan from the government as guaranteed leverage should be attractive to many investors.
The only thing I see that Graham got wrong is that the "second" fed loan program also has an equity match. It is set at a minimum of 20% of the project amount (which can be expressed as 25% of the loan amount) but it is up to the discretion of the DOE to require a higher "co-pay" if they feel it is warranted.
So Tesla will need to go raise a lot of money in capital markets even if they get the loan, but raising matching equity with a low interest loan from the government as guaranteed leverage should be attractive to many investors.
I really hope Tesla Motors is successful and survives to make the Model S.
Tesla Motors has the potential to become for the USA the same as BMW is for Germany. A premium car maker for high performance, cutting edge auto technology and high quality.
But if Tesla Motors does go under, I am comfortable owning a Roadster with no warranty. Electric motors have reputation for being long lasting. And if there are 1,000+ Roadsters out there, I am sure that some 3rd party will discover a business for providing knowledge and parts. Those Roadster owners are high net worth and will be willing to pay for the support.
The value of the Roadster will likely increase and become an instant collectors item. If Tesla Motors fails, it will be a long time before anyone else tries to build something similar. The failure of Tesla Motors would discourage investors from trying that again.
That having been said, I think Tesla Motors will get the Model S government loan and move forward through 2011-2012 with that program. I also think they will get 3,000+ pre-orders if the deposit is around $20,000 to $25,000. That will produce another interest free loan of $60 million to $75 million for Tesla Motors. People will have confidence that the car will be produced if Tesla Motors gets the $250 million government loan.
Tesla Motors has the potential to become for the USA the same as BMW is for Germany. A premium car maker for high performance, cutting edge auto technology and high quality.
But if Tesla Motors does go under, I am comfortable owning a Roadster with no warranty. Electric motors have reputation for being long lasting. And if there are 1,000+ Roadsters out there, I am sure that some 3rd party will discover a business for providing knowledge and parts. Those Roadster owners are high net worth and will be willing to pay for the support.
The value of the Roadster will likely increase and become an instant collectors item. If Tesla Motors fails, it will be a long time before anyone else tries to build something similar. The failure of Tesla Motors would discourage investors from trying that again.
That having been said, I think Tesla Motors will get the Model S government loan and move forward through 2011-2012 with that program. I also think they will get 3,000+ pre-orders if the deposit is around $20,000 to $25,000. That will produce another interest free loan of $60 million to $75 million for Tesla Motors. People will have confidence that the car will be produced if Tesla Motors gets the $250 million government loan.
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graham
Active Member
Elon stated that the second loan was written in a way that it could consider previous investment in a project as the co-pay. This may have been wishful thinking on his part, or perhaps he was spinning a best-case scenario (or perhaps I just misinterpreted his statements). My take on it was that he was thinking that they could secure the loan with no additional private funds based upon the money already spent on the Model S.
graham
Active Member
I have gone through this mental exercise as well. The car should be serviceable by a good generic car shop, except for the electronics and the battery - and the battery will of course require eventual service. I was wondering if AC Propulsion might be able to service these parts in a pinch. While their parts are not the same, there are enough similarities that they may be able to replace the battery pack when that is required.
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