America’s newest car maker, Tesla Motors, has yet to turn a profit since its founding waaay back in 2003. But founder and frontman Elon Musk believes that 2013 is the year that the fledling electric car maker will make a profit. Why? Well for one reason, the 6,500 unit production run of the 2012 Model S is already sold out. But is Musk counting his chickens before they hatch?
Big Money Coming In
In an interview with Bloomberg, Musk revealed that the intial offering of 6,500 Tesla Model S sedans area already spoken for. Now all Musk has to do is actually build and deliver all 6,500 sedans without any major mechanical snafus. With prices on the Tesla Model S ranging from $60,000 to over $80,000 (including the pricey Signature series), selling out of production on day one would mean a substantial windfall for Tesla.
If the average Model S brings Tesla $70,000, then Tesla would be able to rake in over $455 million, substantially more money than Tesla has had on hand at any previous point. Tesla can also count on income coming from sales of the Toyota Rav4 EV, a joint Toyota-Tesla product set to launch late next year. Tesla is also selling battery packs to companies like Mercedes, so 2012 and 2013 could indeed be the watershed year for Tesla.
Tesla has been operating at multi-million dollar loses for nearly a decade now. Even in 2011 Tesla expects to spend between $30 million and $55 million more than it makes. So far the company has received over $814 million in funding, without turning a profit, and $331 million of that came from government energy loans now under intense scrutiny.
Running a successful car company is no small task, and many an innovative automaker has found its way to an early grave by being too far ahead of its time. Tesla would be the exception, rather than the rule, if it is able to carve out a nice niche in the electric vehicle world for itself. I truly believe that the Model S sedan is the make-it-or-break-it moment for Tesla. If Tesla can get this sedan launch off the ground smoothly and with limited issues, they will be setting themselves up nicely for a future with an emphasis on EV’s.
But, if Tesla blows the launch and sells a shoddy vehicle, or one that does not meet expectations, it could be the end of a decade-long experiment to see if electric vehicles can support an entire car company. And it could be a huge setback for EV’s in general. So don’t get caught up in the hype; Tesla still has a long road ahead of it.