"Besides building rockets for NASA and trying to revolutionize the home solar-panel business, Internet zillionaire Elon Musk, 37 - he helped found and then sell PayPal for $1.5 billion - is also trying to keep alive his electric-car venture, Tesla Motors [see our test of the Tesla roadster on page 66].
Q: Lately, Tesla has generated bad news.
A: It's been a bit of a soap opera just on a personal front. Some of the guys I paid to originally take the AC Propulsion technology and create a production car out of it turned out to be some bad apples, and bad apples hire bad apples. Over the past 18 months, the entire management team has changed.
Q: Where do things stand now?
A: We're at a steady clip of 15 cars a week, rising to 30 cars a week by spring, and getting our costs under control. [The costs] were way higher. A year ago they were $140,000 [a car], and that's just direct labor and materials, and we were selling these things for $92,000. The prior management team had been representing to myself and the board that the car cost $65,000. Pretty bad.
Q: Indeed. How will you fix it?
A: Right now the costs are steadily going down. We're somewhere around mid-to-low 90s in the cost of the car. When we factor in optional equipment, we're at a slightly positive margin. Call it break even. We have another revision of the power train that enters production in June and gives some additional performance. That allows us to offer the "Roadster Sport", as well as reduce the costs. We've saved money on the supplier side by either renegotiating with our suppliers or finding different ones.
Q: What can you say to reassure buyers fearing you might go under?
A: Even in the worst case of an Armageddon scenario, I'll personally refund people [their money] if need be. I think there's very little danger of that. We've raised around $40 million, and a bit of news that hasn't come out yet [is] General Electric is investing in Tesla. [GE Capital] will be the second-largest investor in this round, after me. Our business plan that we presented to investors gets us to profitability by the middle of this year, even if some negative stuff happens.
Q: Any advice for someone starting a car company?
A: Have a high pain tolerance."
Q: Lately, Tesla has generated bad news.
A: It's been a bit of a soap opera just on a personal front. Some of the guys I paid to originally take the AC Propulsion technology and create a production car out of it turned out to be some bad apples, and bad apples hire bad apples. Over the past 18 months, the entire management team has changed.
Q: Where do things stand now?
A: We're at a steady clip of 15 cars a week, rising to 30 cars a week by spring, and getting our costs under control. [The costs] were way higher. A year ago they were $140,000 [a car], and that's just direct labor and materials, and we were selling these things for $92,000. The prior management team had been representing to myself and the board that the car cost $65,000. Pretty bad.
Q: Indeed. How will you fix it?
A: Right now the costs are steadily going down. We're somewhere around mid-to-low 90s in the cost of the car. When we factor in optional equipment, we're at a slightly positive margin. Call it break even. We have another revision of the power train that enters production in June and gives some additional performance. That allows us to offer the "Roadster Sport", as well as reduce the costs. We've saved money on the supplier side by either renegotiating with our suppliers or finding different ones.
Q: What can you say to reassure buyers fearing you might go under?
A: Even in the worst case of an Armageddon scenario, I'll personally refund people [their money] if need be. I think there's very little danger of that. We've raised around $40 million, and a bit of news that hasn't come out yet [is] General Electric is investing in Tesla. [GE Capital] will be the second-largest investor in this round, after me. Our business plan that we presented to investors gets us to profitability by the middle of this year, even if some negative stuff happens.
Q: Any advice for someone starting a car company?
A: Have a high pain tolerance."
