Not long after its stock took a nasty
20 percent dive on the New York Stock Exchange, sending it back closer to
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
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
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
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
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.