Worst case scenario

[ftlum]

I was listening to the radio the other week and there was an off hand comment about how people thought it'd be unlikely that Tesla would survive as a company. After doing a bit more reading, things started looking a bit more worrisome; CEO being out of cash, etc.

So, in trying to decide if I should buy a Tesla, I was thinking about what would happen if the company went bankrupt.

First, what would happen if I put a deposit down on the 'S' and the company folded? Would I be have no recourse to get my deposit back?

Next, what would happen if I acutally got a Tesla and the company went bankrupt down the line? What tends to happen to cars without makers? Especially cars that are extremely unique like a Tesla? If it breaks down, are you pretty much done for? I would imagine you'd never be able to sell the car (except to people who need spare parts!). Are there any historical examples of what happens in these situations?

thanks,

- Frank

 

[kgb]

On cars.com, there are 6 Delorians for sale... they range in price from $24k - $32k. At delorian.com there are "restored" cars for $45k. Does anyone know how much they were new? In any case, these aren't bad for a >25 year old car. You can also look into the Tucker Car or the Edsel... see what happened to them.

Delorian
Edsel
Tucker

CNN Money - 6 Failed Car Companies

Anyone know of other failed car startups?

 

[qwk]

If they went BK before you got your car you would most likely loose your deposit. However, since the government loaned Tesla a very large sum of $$ this is not going to happen. Since they are a public company now, they can issue more shares if they need more cash.

If they go BK after you get your car, the value would go up, not down. These cars are very unique, and fun to drive, light years ahead of what the major car companies have to offer when it comes to EV's. As far as repair, it's just like any other car there are always people who can work on them.

 

[Palpatine]

I live in the Seattle area. If Tesla goes bankrupt, there are still two qualified Tesla trained service individuals that live here. They would likely get other jobs in the local area and still be around.
So I imagine they would be available to hire if something needs to be fixed and parts are available.

Parts might be a problem. However with Delorian there was an investor who bought up all of the remaining inventory of parts.
He had a business of supplying the current market and even building a few more cars from all of the remaining parts.

I believe there is a federal law requiring car manufacturers to maintain a certain amount of parts for discontinued car models.
If there are enough cars on the road, there will be aftermarket parts.

Also, there is shared design between the Lotus Elise and the Tesla Roadster.
So some parts cross over and are interchangable.

 

[Palpatine]

Having said all of that, I doubt Tesla will go bankrupt anytime soon.
Here are the approximate amounts of money raised in the past year that I can recall off the top of my head:

+$450 million in guaranteed low interest US government loans
+$50 million from Daimler investment
+$75 million from investment round to expand the store network.
+$50 million from Toyota investment
+$200 million from IPO
Total = over $800 million

Last quarter Tesla lost $38 million.
So they are losing about $150 million per year while they go through the development of the Model S for the next two years.

They will be around at least for the next 3-4 years. They surely have enough to get the Model S to market.
After that, it will require good sales of the Model S to sustain Tesla Motors long term.

Just my opinion.

 

[richkae]

I don't think there is significant danger of Tesla disappearing - most of these reports are analysts talking about Tesla surviving as an independent company.
If they ran into financial trouble, one of the big players would buy them. The worst case scenario would be that they declare bankruptcy before being aquired, but I think a bidding war would heat up long before that could happen. I think an aquired Tesla would continue to support the products and the brand as a division.

My worries about the model S:
1) The delivery date slips
2) The loaded car I want is a lot more than the base price ( I want 230+ mile range )
3) The other car companies catch up and provide real choices.
What a tragedy it would be to have multiple choices for a 5+ passenger pure electric car with 200+ mile range.
If that happened, the worst case would be somebody has a better car and I get my deposit back and buy it instead.

 

[EV_de]

... What a tragedy it would be to have multiple choices for a 5+ passenger pure electric car with 200+ mile range.
If that happened, the worst case would be somebody has a better car and I get my deposit back and buy it instead.

.
by end of the year there will be 5 seaters pure electric cars , but no one has the "German Autobahn (highway)" capability.
but End of 2011 there might by.
.
End of 2012 the will be for sure some alternatives .....
.
.

 

[ftlum]

I don't think there is significant danger of Tesla disappearing - most of these reports are analysts talking about Tesla surviving as an independent company.
If they ran into financial trouble, one of the big players would buy them. The worst case scenario would be that they declare bankruptcy before being aquired, but I think a bidding war would heat up long before that could happen. I think an aquired Tesla would continue to support the products and the brand as a division.

My worries about the model S:
1) The delivery date slips
2) The loaded car I want is a lot more than the base price ( I want 230+ mile range )
3) The other car companies catch up and provide real choices.
What a tragedy it would be to have multiple choices for a 5+ passenger pure electric car with 200+ mile range.
If that happened, the worst case would be somebody has a better car and I get my deposit back and buy it instead.

I had the same worries about the S. The current price point works for me, but if it's a lot more after extending the battery range, etc. it'll make it unaffordable.

If other mainstream companies catch up, I think Tesla will be in real trouble. If a person doesn't have to worry about the company's future, they'd be more likely to go with a different car and a company with a longer track record. Fortunately for Tesla, the Nissan Leaf is just about the ugliest electric car out there.

 

[qwk]

I'm pretty sure there is not going to be an EV with Tesla performance in the next 5 years. Tesla has no competition when it comes to range AND performance.

I don't know about the rest of you, but when I shell out 50+k for a car, it has to be fun to drive.

 

[Palpatine]

I'm pretty sure there is not going to be an EV with Tesla performance in the next 5 years. Tesla has no competition when it comes to range AND performance.

I don't know about the rest of you, but when I shell out 50+k for a car, it has to be fun to drive.

I think you are correct. I don't recall any announcements from the major auto companies about a sedan equivalent to the Tesla Model S in terms of luxury and performance at $50,000 to $60,000.

These cars take 3-5 years from when they are planned until they are in the showroom.
Most of these EVs have been announced years in advance for the green brownie points they earn the companies.

If the Model S arrives in 2012, then Tesla could easily have 2 years owning the EV luxury market before anyone else has an equivalent product to compete.

The type of customer who buys a BMW 5 series or 7 series is going to want a Tesla Model S.
That person is not going to buy a Nissan Leaf.

Has BMW or Mercedes committed to an EV program of any significance yet? I recall a few two seaters or a small Mercedes.
But anything that would really be equivalent to one of their nice sedans?

 

[PeterW]

James, do you think Tesla will have a demand equivalent to 20000 cars a year for the Model S?

 

[Palpatine]

James, do you think Tesla will have a demand equivalent to 20000 cars a year for the Model S?

I honestly don't know. From what I heard, they are now on pace to sell about 600 Tesla Roadsters per year at $109,000.
If I recall, that is about the same sales volume as Lamborgini.
I think there are certainly a lot more people that can afford a $50,000 car than a $109,000 car.

They already have 3,000 deposits of $5,000 or $40,000 for the Model S.
Certainly by 2012 they will have more deposits. Perhaps as many as 10,000 deposits if they ever start pushing them.
That is likely enough to keep them busy for the first full year of production.

From everything I have heard and seen, Tesla Motors is not even really pushing the Model S at this time.
Their sales staff is totally focused on selling Roadsters.

 

[Todd Burch]

My guess is that the demand is there for the Model S. In the U.S., as long as the price doesn't inch too close to the $65-75k range (after the US tax credit), then we're in Lexus/BMW/Mercedes range...of which there is a pretty significant demand.

 

[PopSmith]

They already have 3,000 deposits of $5,000 or $40,000 for the Model S.
Certainly by 2012 they will have more deposits. Perhaps as many as 10,000 deposits if they ever start pushing them....Tesla Motors is not even really pushing the Model S at this time.

As soon as Tesla has a more solid date for the Model S launch they'll more-than-likely start to push it. For now there really isn't a reason to push Model S deposits.

IIRC, in the S-1, Tesla mentioned they are contracted to buy a specific number (~1,200?) of "gliders" from Lotus, even if they can't sell that many Roadsters.

As for Tesla's financial health, the only things I could see threatening their future would be:

1) If Tesla can't make enough of a profit on each Model S sold at it's current price point ($57,400 base).

2) If Mercedes, Audi, and/or BMW came out with a solid, competitive vehicle and pushed it. Of course, Mercedes and BMW seem concentrated on Fuel Cell development. Audi's only shown a few electric concepts (the non-fully-electric A1, the R8 e-tron and the R4).

 

[Iz]

From what I've seen, Model S will have little competition during the next several years. When one considers range and styling Model S will be in a class by itself.

 

[vfx]

If there is a threat I would watch Audi. The Etron they dangled for a few moments was really nice and Martin is there in the background

 

[Cobos]

Are you sure Martin's work with VW would immediately be transfered to Audi? I'm not sure how close the ties are there on the engineering side? Thus far all we've seen from Audi points to them being able to compete with the Roadster not the Model S surely?

Cobos

 

[vfx]

Nope, not sure. The Audis have been cool and so is Martin. There's my logic.

 

[tomsax]

I understand the risks in putting down a Model S deposit, but what are the rewards?

If there are 3,000 deposits and they produce 20,000 units per year, the difference between being at the top of the list and not yet on the list is less than three months of production. After Cathy and I finally took delivery of our Roadster 2.5 years after placing a substantial at-risk deposit, new customers could place an order and get a Roadster in less than three months.

Even more, the Model S deposit agreement I read early in the process (so it may have since changed) doesn't actually promise anything: not the specs, not the price, not the delivery date, not even the delivery order. In fact most of the agreement is about how things can go wrong and how Telsa "may cancel this reservation at any time for any or no reason" even after your car has entered production.

Perhaps there are a lot of customers who want to buy a Model S but don't like the reservation agreement, and there will be an avalanche of orders when there is an actual purchase contract available. The people on the list win in that case, but is there another reason for placing a $5,000 bet on a Model S reservation?

 

[Todd Burch]

Tom,

Good question. I thought about this as well before I made my deposit, and here's the conclusion I came to:

1) I think the biggest reason I put down a deposit was because I wanted to give Tesla a sign of support...a deposit was the way to do it.

2) Production rate is supposed to *ramp up* to 20,000 units a year. First year will probably be 12,000 max--maybe 8,000 as a more conservative estimate. So those not on the reservation list might have a year or so wait, perhaps longer.

3) I expect that as things harden up (price, options, etc.) that there will be a large wave of reservations. I would not be surprised to see over 10K+ reservations by the time production begins. That estimate might be a little high, but it also might be low. Given the price point and the current stage of finalization, I estimate reservations will ramp up significantly as things harden up. Most people just love the look of the car--and ignoring the other benefits, that goes a long way.

4) The signature edition reservation holders will obviously get a big benefit (premium options thrown in, etc.)...but I would not be surprised if Tesla did a little something extra for regular reservation holders--perhaps a free option, a little discount, something like that. Obviously not a guarantee, but it wouldn't surprise me.