CEO Elon Musk says despite a slow launch of the Model S, Tesla will go cash positive next month.
Despite lagging initial production, Tesla Motors founder Elon Musk insists his start-up battery-car company is on track – but in a new blog posting, the billionaire entrepreneur also revealed that Tesla will begin paying back its federal loan ahead of schedule.
In July, Tesla launched production of its first mainstream product, the Model S sedan, but it has since cautioned that production snags have limited output and will cause it to fall short of sales targets for the year. Musk confirmed that “unfortunate” delay in his post but insisted that “journalists (have) gained the wrong impression” about the company’s health and prospects.
Notably, the executive insisted “we expected Tesla to become cash flow positive at the end of next month,” but he also said that given the auto industry’s history of unexpected snags – whether from natural disasters or supply chain disruptions – the California start-up is seeking to raise new private equity.
At the same time, it is planning to accelerate its payback of the $459 million loan received from taxpayers as part of a special program to promote green technology. The Department of Energy program has come under fire following the failure of Solyndra, a solar panel manufacturer – and has become a pawn in the presidential battle between Republican contender Mitt Romney and President Barack Obama.
Pointing out that the loan has helped create 3,500 jobs, Musk wrote in his blog that the company will immediately prepay the principle repayment actually not due until next March, a total of $14.5 million.
“Tesla has always made its DOE payments on time and has never asked to delay repayment ever. I don’t know how to state this more clearly,” Musk wrote, adding that, “Far from being worried about our survival, the DOE is highly bullish about our future and doesn’t want us to delay early repayment of the loan if we have the cash on hand to do so.”
Musk’s optimistic blog post came just hours before former Massachusetts Gov. Romney listed the company among the “failures” of the low-interest loan program. In fact, the GOP candidate was in error by suggesting that half of the loans granted by the DoE were granted to failed companies. Though Tesla and Fisker Automotive – which Romney also mentioned by name – have had their recent problems, both insist they are making positive progress.
(Fisker’s new CEO outlines his company’s strategy, suggests second model will launch production early in 2013. For more, Click Here.)
Tesla has had a much slower start-up than expected, nonetheless. For the entire third quarter it produced just 359 Model S sedans, though production is ramping up, according to Musk, who previously indicated it should be at original target levels around year-end. Going into September, the production rate was just 25 cars a week. A month later that was over 100.
“While we are indeed a few weeks later than we would like, this is perhaps not a terrible outcome for a product as advanced and complex as the Model S, particularly given that Tesla is doing manufacturing of full vehicles for the first time with a new team and new suppliers,” Musk wrote in his latest blog post.
Though Tesla has become one of the whipping boys for the GOP presidential campaign, Musk has said that he would expect only a “minor” impact on the company if Gov. Romney were elected. Indeed, it is not clear exactly what real changes would be enacted by the presidential contender – who had actually been a strong proponent of green energy while Massachusetts governor.
What is more concerning is the overall pace of growth of the electric vehicle market. During an appearance at the Paris Motor Show last week, Renault/Nissan CEO Carlos Ghosn acknowledged he is “disappointed” in EV sales, the Nissan Leaf actually seeing demand drop since the beginning of 2012. But the executive insisted, “We will be patient,” as sales build.
(For more on Ghosn’s comments, Click Here.)
Musk has also asserted that it will take time to build demand for battery cars like the Model S which ranges in price from around $54,000 to more than $100,000 depending on the range of the battery pack and other options.