News: The Tesla Gains Weight

Letter From Silicon Valley

BURLINGAME, CaliF. -
Silicon Valley’s sleek all-electric sports car, the Tesla, just got a little plumper. Will the extra weight slow down sales?

The company behind the $100,000 cars, which are scheduled to hit the market this fall, have previously promised that they would be able to go 250 miles on a single charge. Now they've scaled that claim back, though they insist it will still cover more than 200 miles.

Tesla Motors is one of Silicon Valley's leading examples of a "green venture" that is building a business without government subsidies or supports. The company has been funded by private money and customers are signing up to buy cars without the promise of government kickbacks.

But that distinction won't mean much if the car doesn't have enough juice to go the distances that most people drive.

Executives at the San Carlos, Calif.-based startup gritted their teeth last week and informed early customers that recent road tests of a prototype have led to a few design changes to improve the safety and reliability of the vehicle. All those little changes add up.

“There is no single 100-pound (or even 50-pound) addition,” wrote Chief Executive Martin Eberhard on the company’s official blog.

A more reliable door latch, for instance, turned out to be a bit heavier. Machining a few key parts in sturdier aluminum instead of magnesium added a few more pounds. A better audio system that included higher-end speakers nudged the car’s weight up, too.

All told, the changes bring the Tesla to a weight of over 2,600 pounds, but less than 2,700, according to Darryl Siry, vice president of marketing. Originally, the company had calculated the roadster would weigh about 2,500 pounds.

The projected maximum distance on one charge assumes that the car is carrying two passengers. Could a couple of hefty suitcases in the truck wind up shortening a trip?

Tesla executives say they’re offering a conservative estimate of the car’s performance.

“We don’t want to communicate any further revisions to range unless they are upward revisions,” Siry says.

Tesla’s fans don’t seem to be sweating the details. “My … touring motorcycle only gets 100 miles on a tank,” wrote one contributor to the online Tesla chat board. “It’s never been a problem for me.”

A fully loaded Tesla costs about $100,000. More than 380 people have plunked down deposits of at least $50,000 apiece to be among the first to get a roadster when they are available. Although those deposits have not been put into escrow accounts, they are fully refundable, Siry says.

“There are customers who won’t purchase it because the money isn’t in escrow,” Siry says. “They can buy the cars later.”

Siry says that the company is not using those deposits as cash. Tesla has already raised $60 million in financing, about half of which was provided by Tesla Chairman Elon Musk, who struck it rich when he sold his PayPal business to eBay.

The company expects to close a new round of financing in the next few weeks.

Manufacturing of Teslas is expected to start by early September, which could put the first cars on U.S. roads by October, Siry says.

Tesla won’t be the first all-electric sports car; France’s MVS Venturi Fetish, which debuted at the 2004 Paris Motor Show, gets that prize.

However, the company says it plans to build only 25. So far, it has sold 5 of the cars, 2 slated for delivery in the U.S. The cars sell for approximately $400,000 apiece.

http://www.forbes.com/technology/2007/04/19/tesla-weight-gain-tech-enter-cx_ec_0419techtesla.html

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Column: Can Silicon Valley Reinvent The Car?

Letter from Silicon Valley

SAN CARLOS, CALIF. -A week or so ago, I took my first trip in a Tesla. It is one cool California ride: a smoldering, red convertible with two low-slung bucket seats. I could practically feel the road as we purred along Silicon Valley's scenic Highway 280, accelerating nimbly past BMWs and other ho-hum gas guzzlers. And we were quiet--almost as quiet as my desktop computer--because the Tesla runs on pure electric juice.

Tesla Motors, based here about 10 miles north of Palo Alto, aims to do to the auto industry what Apple once did to the plodding mainframe computer business. The company has a radical idea, a pragmatic approach to technology, a business model borrowed from the computer industry and a flair for style. The first Teslas are expected to reach customers' driveways early this autumn. The key question isn’t whether the company can build one car or even a few hundred--it's whether Silicon Valley can reinvent the automobile business.

Or ask yourself this: If you had $100,000 to spend, would you consider plunking it down for one of the first Tesla roadsters? For equity in the company? Or would you steer clear?

Tesla's radical trend is simple--environmentally-friendly technology can be sexy. Forget about clunky sandals and snub-nosed cars. Tesla's roadster packs the sizzle of Angelina Jolie in a tight T-shirt.

There's nothing particularly practical or economical about this snug two-seater with its single cup holder. Fully loaded with leather seats, a hard top and a sweet sound system (and, yes, a port for your iPod), a Tesla roadster will set you back $100,000. But it’s the stuff legends are made of: In four years, with a staff than now numbers 170 and $60 million of private capital (almost half from its chairman, Elon Musk), Tesla has created an all-electric car that makes people drool.

So far, 350 people have plunked down deposits of $50,000 or more to get one of the first Tesla roadsters. Many of those owners-to-be haven't even had a chance to go for a test ride. They just needed one of these clean-tech beauties. (Chairman Musk will get car No. 1 when it rolls off the docks. That seems fair: After all, he's paid about $30 million for his.)

Like the smartest Silicon Valley entrepreneurs, Tesla's founders have made great use of technologies invented elsewhere. The car's extruded aluminum chassis was pioneered by Lotus. Its battery is based on lithium-ion cells, just like those powering your laptop. Nineteenth-century physicist Nikola Tesla, the company’s patron saint, built the first AC induction motor. The 15 patent applications filed by the company largely focus on how to make all the parts work together and how to assemble various subsystems automatically.

There’s no "motor" under the front hood, just fans. The magic happens in the back. Power comes from the battery pack made of 6,800 lithium-ion cells, each about the size of a tube of lipstick, wired together into “sheets” in Thailand. The cells are identical to those that run laptop computers but are surrounded by computer smarts--a system that manages charge levels, cools the cells and sniffs for smoke. Executives say that the car's careful management techniques should make its battery pack last longer than the one in your laptop. Tesla will guarantee its battery pack for five years (or 100,000 miles).

Fans and critics will wrangle over Tesla's motor muscle. To its credit, the Tesla can leap from 0 to 60 miles per hour in four seconds and reach speeds of 130 mph. (I can't tell you how fast we were driving recently because the speedometer in this prototype was stuck. But the car accelerated as smoothly as the best rides I can remember.)

Don't plan a cross-country sprint with your Tesla, however. Company executives say it will log 250 miles between charge-ups. If you hook up a Tesla to a high (220 volt) charger--something that looks like a cross between a parking meter and a gas pump--the car will be back on the road in three and a half hours. It will need a seven-hour feeding at a standard (110 v) wall outlet. The car trunk is big enough for a set of golf clubs and a weekend bag. Leave home bags too bulky to fit into the overhead storage bin of a commercial plane.

Tesla’s business strategy is pure Silicon Valley. The company has made fine use of overseas suppliers and partners: The chassis is made in Norway, the brakes and airbags in Germany, the 900-pound battery pack assembled in Thailand and final assembly, at least for now, is done in England. Tesla does own one facility it considers a core asset: the Taiwanese operation that makes the motor.

Within the past few weeks, Tesla has announced it will open a 60-person research and development operation outside of Detroit. After much negotiation, the company decided to build its future U.S. assembly operation near Albuquerque, N.M., neatly outside the reach of the automakers' unions. That facility, slated to employ 400 and to produce between 13,000 and 25,000 cars a year, will build a four-door electric sedan, called "Whitestar," slated for late 2009.

Like Apple, which sells its wares in glitzy shops but not electronics chains, Tesla has no interest in the usual car dealership arrangement. "Our customers are not comparison shopping," says Darryl Siry, Tesla's vice president of marketing. Tesla plans to open five wholly owned "customer centers" in the U.S. over the next 18 months--two in California, one each in New York, Chicago and Florida. Those pit stops will sell cars, service existing customers and of course, sell branded tchotchkes such as T-shirts. “People keep asking for them,” Siry says. “They should be ready soon."

Siry is mum about when Tesla might be cash-flow neutral. But starting production in the U.S. will take big bucks. It’s anyone’s guess whether that could come from more sugar daddies, a traditional automaker as partner or an initial public offering. The "Risk Factors" section of a Tesla prospectus might be as big as a phone book, but in certain market cycles, investors hardly care.

After a long IPO dry spell, technology companies are once again sprinting for the public market even though profits are still only a distant hope. About a third of the tech companies that did IPOs last year were unprofitable, according to Thomson Financial. Earlier this month, wireless broadband company Clearwire raised $600 million in its IPO, even though it has warned investors it will likely continue losing money through 2008.

Recent business history has shown that Silicon Valley can rock the world--create disruptive innovations that genuinely change the way we live and work. No one had a Web browser 15 years ago; now most of us can't live without one. Some other dreams, however, such as online pet food, proved to be mirages.

Tesla's founders certainly want to end up the winner’s circle. All they need to do is prove that their business model is half as alluring as the roadster.

http://www.forbes.com/technology/2007/03/18/tesla-electric-car-tech-cz_ec_0319valleyletter.html

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