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Tesla gets federal loan; nearing profitability

by Sean Howell

Tesla Motors has received $465 million in a low-interest federal loan — money the company says it will put toward the production of a "family sedan," and toward manufacturing parts for other electric automakers.

The electric carmaker announced June 23 that the Department of Energy had approved the loan. It comes through a program enacted in 2007 that provides incentives for manufacturing "advanced technology vehicles."

Tesla has a sales and service center on El Camino Real near Partridge Avenue in Menlo Park. Its headquarters are in San Carlos.

In a press release, Tesla said it would use $365 million to produce the "Model S," an electric car that at $49,900 would be significantly more affordable than the $101,500 Tesla Roadster. (Both prices factor in a $7,500 federal tax credit.)

The remaining $100 million will go to manufacture the power-generating components of a car, such as the engine and transmission, to be sold to other electric automakers. The company says the move will accelerate the development of electric vehicles.

Tesla estimates that the Model S factory will employ about 1,000 workers, with the powertrain facility employing about 650 workers.

Tesla expects to begin delivering the Model S in 2012.

Production cost drops

The cost of materials for the roadster has dropped to $80,000, a fact that should help the electric car company "cross over into profitability next month," according to Elon Musk, Tesla's CEO.

The total cost of the parts and components that make up the car was as high as $140,000 in September 2007, according to Mr. Musk.

The description of the roadster's precipitous drop in cost was buried in a screed posted on the company's Web site on June 22. In the post, Mr. Musk responds to a lawsuit by Tesla founder Martin Eberhard of Woodside, who has accused Mr. Musk of libel and alleged that the company had broken an agreement with Mr. Eberhard.

In the post, which shares its title with the first three words in the book of Genesis, Mr. Musk correlates the drop in the cost of materials with Mr. Eberhard's demotion and subsequent departure from the company. In addition to summarizing the company's history and his own involvement with Tesla, Mr. Musk also includes e-mail threads dating back to 2003.

For more information, or to read Mr. Musk's post, visit teslamotors.com. To read Mr. Musk's post, click on the "blogs" link at the top of the page.