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Tesla says it can turn a profit on a volume of 20,000 Model S EVs sold a year. The Model S will retail for $57,400.  (Source: Tesla Motors)

Tesla was briefly profitable on a volume of 1,000 Roadster EVs shipped a year. The Roadster retails for $109,000.  (Source: Tesla Motors)

The key to the automakers profitability at low volumes lies in its smaller, more affordable battery pack, which the company says is more advanced than its competitors' designs.  (Source: EV Authority)
Cheerful outlook on Model S may be calculated to offset recent pessimism

Not long after its stock took a nasty 20 percent dive on the New York Stock Exchange, sending it back closer to its initial public offering price, Tesla Motors Inc. has released a cheerful report promising great things financially.  Tesla's plans all revolve around the Model S mass-market electric vehicle, an entry-level luxury electric vehicle that Tesla is racing to design and bring to market.

Though the Model S won't make it to Tesla dealerships until 2012, the company is already promising great things.  In an interview with Bloomberg, Chief Technology Officer J.B. Straubel claims that the Model S will be profitable at 20,000 units sold per year, without direct government aid to the automaker.  That claim is bold, considering that experts predict that Nissan and its affiliate Renault SA are expected to have to sell 500,000 units of their Nissan LEAF EV to be profitable.  Similar estimates exist for General Motors Chevy Volt.

So how can Tesla hope to turn a profit on 1/25th of the volume?  Tesla says the key lies in its approach to lithium-ion batteries.  Tesla uses smaller lithium-ion cells, similar to those in laptops.  Its batteries are produced by Japanese electronics giant Panasonic Corp.

By contrast Nissan, GM, and others are using larger packs.  NEC, a Japanese firm, produces Nissan’s pack while GM's is made by South Korea's LG Chem Ltd.

Tesla's vehicle is expected to retail for $57,400 USD, versus $41,000 USD for the 2011 Chevy Volt or $32,780 USD for the 2011 Nissan LEAF EV.  The current generation Tesla Roadster 2.5 retails for $109,000 USD.

According to The Wall Street Journal Nissan's battery pack costs about $750/kWh.  Tesla says it will deliver at a cost of around $200/kWh.

Mr. Straubel states, "[Nissan] will have a cost challenge that will be more difficult to solve.  It will require a lot higher volume before they really get to a cost point that is internally sustainable."

David Reuter, a spokesman for the Nissan's North American unit would only comment, "The Nissan Leaf product program will be profitable over its life cycle," declining to comment on how long that "life cycle" might be.

Brett Smith, an analyst specializing in alternative propulsion vehicles at the Center for Automotive Research in Ann Arbor, Michigan, agrees that Tesla is outsmarting its competitors.  He states, "There’s a method to their madness.  Tesla is using cells that, while not exactly the same as those in laptops, can be made on existing lines that already mass-produce them.  Especially for a small manufacturer, there’s a logic to what they’re doing."

The fact that Tesla was briefly profitable when it was solely operating based on the Roadster and not investing significantly in the Model S lends support to the company's claims, as well.

Still Tesla's plan depends on increasing its production and output by a factor of 20 -- it currently only ships around 1,000 Roadsters a year.

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$60 000
By lifewatcher on 1/3/2011 4:07:14 PM , Rating: 2
Perhaps times have changed and people make much more cash than ever before, but to me the price of this car with, let's face it, limited use is just too steep for the mass market. Based on what Tesla says, the profit margins are high and the company can be out of the red with only few cars sold, but maybe it'd be wiser to sell more cars cheaper...

RE: $60 000
By Souka on 1/3/2011 4:42:28 PM , Rating: 4
Same here... 32K for a Nissan Leaf?

Or one could pick up a similar sized ICE car for 20K. That $12K savings will go toward 20+ years of gas....

I say 20+ years, because with the Leaf, you'll probably be driving 8k or less a year unless they come up with a massive fast-charge network, or swappable battery stations like they're doing with a Renault car in Denmark(?).

For now... just give me a economical 2/4-door that is a proven technology.

RE: $60 000
By kraeper on 1/3/2011 4:53:38 PM , Rating: 2
I agree, but then I suspect that you and I aren't in the market for any $60k cars to begin with. Such people do exist, and there's a pretty good chance that some are even tree-hugging hippies who think Electric cars will save the world. And even at that, I gotta say this is a decent looking car. Wouldn't buy one, but it ain't bad.

RE: $60 000
By Ammohunt on 1/3/2011 5:44:21 PM , Rating: 1
You mean the wealthy? the people the current administration and liberals in general despise?

RE: $60 000
By Souka on 1/3/2011 5:51:53 PM , Rating: 2
Ok then, 32K for a BMW 328i Sedan ...18/28mpg

I think it's more pratical :)

or for under 60K get a BMW M3!

RE: $60 000
By Ammohunt on 1/4/2011 2:50:48 PM , Rating: 2
In todays economy think any car used under 10k

RE: $60 000
By kattanna on 1/4/2011 11:28:12 AM , Rating: 2
also people who are in the market for a $60K car are most likely to already have a 2nd car to get around the EV's limits

RE: $60 000
By Flunk on 1/3/2011 4:53:09 PM , Rating: 2
20,000 units is hardly mass market and the price is competitive with other luxury brands (Acura, BMW, Mercedes, etc.).

I don't think the issue here is price, it's more convincing luxury vehicle buyers to buy a car from a largely unknown brand.

The reason they aren't making a economy car is that it wouldn't be cost effective for them as an electric-only motor company.

RE: $60 000
By Hulk on 1/3/2011 5:04:07 PM , Rating: 2
As Nissan states "480V fast charging should not be used on a routine basis as this type of charging seriously degrades battery life" or something to that effect.

RE: $60 000
By Solandri on 1/3/2011 6:35:45 PM , Rating: 1
Yeah. The faster charges are also less efficient, potentially defeating a large portion of the energy savings from using electric.

Unless capacitor batteries make any progress, I'm thinking the way things are going to develop are quick-change stations where you drive into a station, pay them, and a machine quickly swaps your current battery pack for an already-charged pack. Then the station can charge the pack at their leisure. There are a lot of engineering challenges with that, but they seem more surmountable to me than speeding up the charge rate of existing chemical battery technology.

RE: $60 000
By Spuke on 1/3/2011 7:30:16 PM , Rating: 2
Yeah. The faster charges are also less efficient, potentially defeating a large portion of the energy savings from using electric.
The faster charges are not less efficient. The batteries have X cycles (charge and discharge) before they're dead and higher voltage charging, in this case, reduces the amount of available cycles. In this case, if you want longer battery life, you reduce the charge voltage.

RE: $60 000
By Jedi2155 on 1/3/2011 8:01:49 PM , Rating: 2
I'm pretty sure the charge voltage is similar or close to it although I'm not sure of the exact charge profile (constant voltage/constant current), but I'm assuming they mainly increased the constant current level of charging in a fast charger.

RE: $60 000
By Spuke on 1/3/2011 8:42:17 PM , Rating: 2
I thought normal charge voltages were 120 and 220?

RE: $60 000
By Spuke on 1/3/2011 8:46:10 PM , Rating: 2
Ok, looks like 240V is supposed to be typical. There's some comments from Nissan about fast charging too.

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007

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