Green Tech media Article: Tesla to Big Three: Let's Be Friends

paco3791 · 02-21-2008, 06:34 AM

The following is a link and text of the article. Some very interesting new tid bits.

Greentech Media | Tesla to Big Three: Let's Be Friends

Quote:

Tesla to Big Three: Let's Be Friends
The electric-car startup says it wishes to remain independent, but also wants a large automaker to produce its third model, a compact sports car. The company also divulges details about its financing and production plans for the Roadster and soon-to-be-renamed White Star sedan.

Tesla Motors is extending an olive branch to the Big Three. But will they take it?
The electric-car wants to partner with a large automaker that can manufacture its third model at "high volumes," Vice President Darryl Siry told Greentech Media at Piper Jaffray's Clean Technology and Renewables Conference in New York City on Wednesday.
The third model is expected to be a compact sports car that Musk previously said would cost between $30,000 and $35,000.
While Tesla plans to manufacture its first two models on its own -- with a planned annual production run in the tens of thousands for its second model -- it sounds like the company has reconsidered the idea of competing with the major-league manufacturers in favor of a production partnership.
With scale being key to lowering vehicle prices, that's a smart move, according to Eric Fedewa, vice president of global powertrain forecasts at automobile research firm CSM Worldwide.
"The problem is distribution," he said. "For any manufacturer coming into this market, the barriers really would be sales and service and having the distribution channel and dealer network. Those would be the biggest challenges, in addition to manufacturing. So partnering with an existing manufacturer that's already got that distribution makes a lot of sense."
But don't take the partnership plans as a sign that Tesla is for sale.
While he said an initial public offering isn't a sure thing, sales, marketing and service VP Siry added the company would much prefer to remain an independent car company than the alternative: getting bought.
"From an investor standpoint, somebody is going to look at us and say, 'If they are betting the bank on being an independent car company, that's an ambitious goal,'" Siry said. "It's one we are very confident in. [Being purchased] is not our desired outcome."
The blogosphere has been abuzz with Tesla news and speculation after the company told the Financial Times of its plans to raise debt and equity financing -- including an IPO -- to bring its second model, a sedan codenamed White Star, to the market (see Green Cars Cruise Forward, as well as posts in Earth2Tech and VentureBeat).
Siry gave more details at the Piper Jaffray event, saying that the company will set its IPO based on its milestones, ongoing operation costs and the capital it needs for the development of its sedan.
"It's not so much a 'Let's wait for a great IPO time to all become liquid and cash out,'" he said. "For us, an IPO is a logical way to access equity financing that's cheaper. And at a certain point, going to the public markets is just the wise the thing to do from the cost-of-capital standpoint."
That said, he added, market conditions will play a role in determining whether the IPO actually happens.
"Of course, the board is going to have to look at [an IPO] in the context [of] the condition of the markets," Siry said. "The conditions right now aren't very good. But a year from now, we don't know. If you are going in toward the end of this year and the conditions in the marketplace are as bad or worse, then I'm sure the board will reconsider that."
Siry confirmed that the company closed a $40 million bridge loan on Thursday and said that, assuming conditions improve, the company has set it sights on a "large Series E" equity fund raising -- of roughly $75 million to $100 million -- in the late summer, with an IPO early next year.
Tesla already has completed the pre-application process for a loan guarantee from the U.S. Department of Energy, and the amount of equity the company will need to raise will depend on how much debt financing it can get at what price, he said.
The company plans to use its total funding -- which will amount to $250 million, according to the Financial Times -- to set up sales and service centers, Siry said. Expanding from the sales offices it already has announced in Menlo Park, Calif., and Los Angeles, Tesla plans to open one in New York late this year, then expand into Chicago, Seattle, Miami and other locations across the country in the first half of next year, he said.
Siry also divulged more information about the startup's production plans, saying Tesla plans to produce about 1,800 Roadsters for the U.S. market this year and to expand into international markets, such as in Europe and Asia, in 2009 or 2010.
The sedan, which Earth2Tech says will soon be getting a new name, will start in the $50,000 to $70,000 range, with sales of between 10,000 and 20,000 cars starting in 2010, he said. Chairman Elon Musk said earlier this month the company planned to produce 20,000 to 30,000 of the second model annually (see First Tesla Production Roadster Arrives).

TEG · 02-21-2008, 08:45 AM

Quote:

"Tesla plans to produce about 1,800 Roadsters for the U.S. market this year"

Isn't that 3x what they had previous said they would do?!

Cobos · 02-21-2008, 09:33 AM

Yeah I can see why they want to try to do that. As it stands now the demand clearly outstrips any supply and we'll probably see some crazy sales on ebay as the first models start to trickle out. To a certain degree that is fine for Tesla as PR, but it does show that if they had 50 more cars at that time they could probably raise prices to 120k and still sell everything they've got. I suppose Musk want to actually start earning money as well :) Now if they can ramp up production that fast is a different issue...

Cobos

DDB · 02-21-2008, 10:10 AM

Well, if I had to guess about the [formerly] Big 3 inquiry, I'd bet GM would not be as interested in partnering with Tesla for Bluestar production. They have all their resources it seems, invested in the Volt to begin talk of such a joint venture.

Chrysler's formation of their new entity (I forget the name) and the Dodge Zeo and other E-Revs at the Detroit auto show indicate the company may be willing to entertain such concepts for actual production. The ideas are already there.

Ford on the other hand, has nada when it comes to BEVs and E-Revs. IMO, I'm thinking they are the ones that could benefit the most from such a joint venture. Thoughts on this?

dwade · 02-21-2008, 10:45 AM

I agree that GM would probably be the least interested in the joint venture since the Volt is already well under way.

Chrysler and Ford are probably about on the same page, both have shown concepts but don't plan on producing any EV's or REEV's before 2012.

Chrysler showed its 3 ENVI vehicles and Ford had the Volvo Re-Charge concept a while back. Both have probably started investigating there options but have not begun investing major resources in electric vehicles. And both may be interested in a parnership in a few years when Tesla will start developing the Bluestar.

paco3791 · 02-21-2008, 01:24 PM

Quote:

...expand into international markets, such as in Europe and Asia, in 2009 or 2010.

This was one of the statements that caught me off guard. Do they really have the man power and resources to expand like this while also releasing the sedan at the same time? I would rather they focused on getting things buttoned down in one market before spreading themselves too thin.

malcolm · 02-21-2008, 02:41 PM

Quote:

So partnering with an existing manufacturer that's already got that distribution makes a lot of sense.

Er.... if this is so necessary / beneficial, wouldn't they need it sooner for tens of thousands of Whitestars?

Or is Tesla still intending to maintain independent dealerships until Bluestar?

What happens to Tesla Stores then?

TEG · 02-21-2008, 03:51 PM

Quote:

Originally Posted by DDB

Chrysler's formation of their new entity (I forget the name)

Envi thread here

What about BMW?

Cobos · 02-21-2008, 04:21 PM

Quote:

Originally Posted by paco3791

This was one of the statements that caught me off guard. Do they really have the man power and resources to expand like this while also releasing the sedan at the same time? I would rather they focused on getting things buttoned down in one market before spreading themselves too thin.

Of course I am blowing my own horn here, but from everything I've read getting a car accepted in the Europe after it has passed all regulations in the US, and that means no special requirements like the old type airbags, is pretty easy. As a general rule Norwegian DMV says if a car is allowed in the US it is also allowed in Norway. If we except UK with it's right-hand-drive I believe any changes needed are pretty miniscule. As most European models use NCAP test to validate crash safety they should pay for crash tests by NCAP to increase sales but I'm pretty sure 1-2 people working on this can get the car ready for a simultanous release in most of Europe.

Cobos

DDB · 02-22-2008, 05:04 AM

Quote:

Originally Posted by TEG

Envi thread here

What about BMW?

I get the sense they want an American brand. I know Lotus' body for the Roadster and production in England. BUT, does anyone else get the sense that Martin's original vision was to rekindle that American spirit?