Tesla Motors CEO Elon Musk with the Model S.
Tesla Motors, the ambitious electric vehicle start-up company spawned by California billionaire and entrepreneur Elon Musk, acknowledged in its filing with the U.S Securities and Exchange Commission it was falling behind in its efforts to produce its sleek new EV, Model S, leaving the company in danger of failing to meet the terms of its $465 million loan from the U.S Department of Energy.
Consequently, Tesla is looking to sell $128 million in new stock, seeking relief from the terms of its loan from the U.S. Department of Energy and negotiating new deals with suppliers, the company said in its SEC filing.
Tesla’s disclosure comes during what is already a bad week for the builders of electric vehicles. Chrysler Group announced Monday it was suspending testing of more than 100 plugin electric pickup trucks because of unexplained battery fires, while Consumer Reports panned the $107,000 Fisker Karma in its review.
“For the quarters ending September 30, 2013, and December 31, 2013, we currently anticipate that without taking advantage of additional revenue opportunities or making adjustments to our spending, we expect that we will need to seek an amendment from the DOE to modify the fixed charge coverage ratio covenant,” Tesla said in its filing.
The bad news for Tesla comes as it made a major announcement about its a planned network of Supercharger charging stations that reduces the time required to re-charge the Model S’s batteries to just 30 minutes for a half charge.
Click here to read about the Supercharger.
Tesla said it has sought relief from some of the terms of the DOE loan and is pushing ahead with the stock sale. Tesla shares lost 10 percent of their value in trading Tuesday.
“As of September 23, 2012, we have produced a total of 255 Model S vehicles, including 77 Model S vehicles produced during the week ended September 23, 2012. We anticipate producing over 300 vehicles in the third quarter. We plan to continue our ramp up in order to reach our objective of weekly production of 400 Model S vehicles before the end of 2012 which should enable us to produce more than 20,000 Model S vehicles in 2013,” Tesla said in the SEC filing.
“We now anticipate that we will deliver between 200 and 225 Model S vehicles to customers in the third quarter and between 2,500 and 3,000 Model S vehicles in the fourth quarter. As such, we believe we will be approximately four to five weeks behind our previously announced Model S delivery goals as of the end of 2012,” it added.
“To increase the rate of production of Model S, we have taken a number of actions, including working with suppliers to help improve quality and timely delivery of parts, adding automation and second shifts in certain manufacturing areas, increasing training of our manufacturing staff to improve manufacturing processes and making changes to personnel in our quality control department. We anticipate, however, that manufacturing and supplier issues will continue to arise,” it said. The production snarls mean that Tesla’s revenue will drop to $44 million during the third quarter, placing a serious strain on the company’s cash reserves.
Tesla said that on the positive side, it has now logged approximately 13,000 reservations for the Model S, up from approximately 11,500 on June 30. In addition, the company’s 11 design stores around the United States have logged more than 1 million visitors, so it believes there will be sufficient consumer demand when the company reaches its objective of building 400 cars per week.
“We also continue our development projects with our strategic partners, such as Toyota, which is launching the experimental all-electric Toyota RAV4 for which Tesla has supplied the battery and electric powertrain system. Additionally, Tesla continue to work on collaboration with Daimler,” the SEC filing noted.