AP Auto Writer
It's a make or break moment for electric car maker Tesla Motors.
Tesla has lost nearly $1 billion selling high-end electric sports
cars to the likes of George Clooney. Now it's going to attempt to sell
them to the rest of us - and try to make money doing so.
The company's first mass-market, five-seat sedan will be delivered
Friday. The car, called the Model S, will either propel the company to
profitability or leave it sputtering on the fumes of a $465 million
government loan.
"The Model S is the going to be the first true mass market product
experiment for Tesla, one they cannot afford to fail," says Jesse
Toprak, vice president of market intelligence at car buying site
TrueCar.com.
Tesla, the brainchild of PayPal billionaire and SpaceX founder Elon
Musk, has always been a moon shot. Analysts and auto industry insiders
scoffed at the idea that a new car company could be created from scratch
and built in a high-cost state like California. Boardroom turmoil and a
string of technical problems repeatedly delayed the launch of the
company's only car, the $109,000 two-seat Tesla Roadster.
Tesla survived by creating something so unique that the price tag was
almost irrelevant: A beautiful car that could tear up a race track
without burning a single drop of gasoline. Celebrities flocked to it,
giving Tesla a cache that an established brand like Cadillac could only
dream of.
Now Tesla must do something much more difficult. It has to convince
more traditional car customers to buy an expensive vehicle with limited
range from a small, untested company.
The Model S carries a starting price of $49,900 after a federal tax
credit - about the same as a Lexus RX hybrid crossover. Models top out
at $101,550, or about the same as a hybrid Fisker Karma sports car.
A car that's half the price of the Roadster lets Tesla break into a
bigger market, but those customers will take a hard look at the value
they are getting. This isn't a trophy car to park on Rodeo Drive. It's a
sedan for hauling kids and groceries.
The high price will limit sales, says Rebecca Lindland, an analyst
with IHS Automotive. She doubts Tesla will reach its goal of selling
20,000 Model S sedans in 2013. Nissan has sold just under 30,000
all-electric Nissan Leaf sedans since they went on sale at the end of
2010. But the Leaf is little more than half the price of a Model S.
Still, the Model S already has broader appeal than the Roadster.
Tesla says more than 10,000 people have put down a refundable deposit
for the sedan, and it expects to sell 5,000 this year. The Roadster has
sold just 2,150 since 2008
The first sedans will be delivered to customers Friday at Tesla's
factory in Fremont, Calif., a plant the company bought for $42 million
in 2010 from its former operators, General Motors Co. and Toyota Motor
Corp. Tesla will host 12 test drives around the country this summer for
reservation holders.
Tesla didn't make executives available for interviews ahead of
Friday's event. But at the company's annual meeting this month, Musk
said he's "highly confident" that Tesla will meet its goals. That
includes making a profit in 2013.
Even if buyers take a chance on Tesla, the risks don't end there. A
charging network doesn't exist in the U.S., and electric-car owners can
run out of power between stops. There's no gasoline engine that kicks in
as a backup, as there is in the electric Chevrolet Volt.
Tesla is trying to ease worries about range by throwing in a charger
with three kinds of adapters that can be used at home or at public
charging stations. It's also planning a network of fast chargers at
highway exits. Buyers can upgrade to a battery with an industry-best 300
miles of range. The base model can go for 160 miles on one charge.
The company's retail strategy is also untested. Its 14 U.S. stores
have a tiny presence compared with Lexus' 230. When Roadsters need
repairs, Tesla deploys technicians to the owners' house. It will be far
more expensive to do that if Tesla sells as many Model S sedans as it
hopes. The company's plans for servicing the cars are hazy. Musk said
recently that Tesla simply wants to make cars that don't need servicing.
"We want every aspect of that car to be as perfect as possible," he said.
For investors, the Model S will test whether the company is built for
endurance or a quick test drive. So far, the company's glamorous
founder and its sculpture-like cars have generated enough buzz to keep
the stock hot. Its price has nearly doubled from its initial public
offering level of $17 a share two years ago.
Tesla's current stock price of $32 assumes achievements the company
has yet to accomplish, says Carter Driscoll, who researches clean energy
companies for Capstone Investments. The company has lost $759 million
since it was founded in 2003 and has never made a profit. It survives,
in part, on its loan from the U.S. Department of Energy. It also sells
electric drive systems to Toyota and Daimler AG.
"It's sexy," says Driscoll. "People want to believe in it. But there are so many what ifs, ands or buts."
But if you're a believer, all you have to do is point out Musk's
latest accomplishment: Last month, his SpaceX venture became the first
private company to send a cargo rocket to the International Space
station.
Moon shots can work.
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