Tesla admits to underpricing Roadsters, still hopes profitability is near
By Darren Murph 
posted Jan 22nd 2009 5:33AM
posted Jan 22nd 2009 5:33AM
[Via Edmunds]
Update: Response from Tesla is after the break.
The options pricing change affects nearly 400 US customers who ordered 2008 MY Roadsters but have not yet taken delivery. These customers paid base prices betwen $92K and $98K. This does not affect EU customers or those who ordered Roadsters with the current base price of $109,000. Customers may cancel their orders for a full refund.
Tesla did *not* make this difficult but necessary decision to nickel-and-dime customers or to get a little extra cash to pay for operational expenses; we closed a $40 million financing round late last year that covers daily expenses. Rather, we increased options pricing to boost margins on every car sold to make the company more attractive to the next round of investors -- be they shareholders after an IPO, another round of venture capitalists, or the federal government in the form of low-interest loans. Everyone knows the gloomy fate of automakers that fail to make a profit on every car: they can't proverbially make it up on volume. Tesla's Roadster business unit is expected to be cash-flow positive by mid-2009.
Tesla did not change options pricing lightly, and we have been very frank with customers about our rationale. Tesla's early customers have been amazing evangelists for EVs generally and Tesla in particular; they've stayed with the company through thick and thin in many cases for well over two years, and we hope they remain our biggest enthusiasts and fans. Although many are still understandably upset, we have recieved very positive and supportive comments from others, who appreciate why we need to increase margins.
Next thing you know, these socialist hippy environmentally car companies will want a bailout!
If they don´t get subsidized yet, it should happen as these companies atleast push new technology. Though I fail to understand how come a company is so poorly at price estimating. Even early in development it should be possible to come close to about 10% of the actualy production costs instead of being off 35% without actually making any profit so it´s more 40 to 45%. I wonder if the 140.000 usd includes the promotional work as well actually which makes me think the actual loss is probably even higher.
I want a bailout too, so does everybody these days.
Socialist hippy companies?! Wow, do you even know what these terms mean?
don't be fascist substance90
@JZ
You know very little about price estimating, evidently. The more the parts, the higher and newer the tech involved, the less accurate the estimating will be. Not to mention under the impact of the current "Global" financial crisis that affects pretty much every company around the globe, It's even harder to get an accurate reading out of this "Global" mess.
Just in case you're not being sarcastic, eggo...
http://www.tfd.com/socialism
No, really. Check it out. Thinking for a few minutes will only hurt a little, I promise.
@Dude, have you not been paying attention? The US government has been paying for large corporations R&D for decades. They spend a premium on military products that are then sold for less to other governments. They give "tax breaks" to every large industry under the sun, all of whom pass on the savings to their CEOs. And lets not forget big pharma and health care, because we have no national health care we spend more per capita then anyone else. Switching to national health care would actually save us money over what we spend now on our half ass help 3% of the population programs. We are the worst kind of system, a capitalist system that has corporate handouts. But only if you're big enough (just ask the small family farmers, oh wait they're mostly out of business thanks to subsidies).
Unforntunately, this is one company that I really want to make money. Unlike the Detroit automakers, Tesla is unique and has a lot more potential IMO. Not that I could ever afford one, but I hope they don't lose steam because of this.
Let's get this straight they build a 140,000 electric vehicle and sell it to 90,000. + 6000 in after the downpayment gotchas and the comments here are about how innovative this company is and how we want it to succeed???
Any one of the existing auto makers could have built and produced that car for less than 140000 but they are not niche players. Not to mention that tesla has still only shipped, what 100 of these miracle cars.
Give me a break, they are 40% over budget and over a year behind in production schedule. This is hardly anything more than well publicized vaporware.
Once batteries for this type of vehicle drop to reasonable price a real car company, with realistic vehicle claims and a working drivetrain will make and sell electric vehicles for the masses.
Enough hype it is time to be grounded in science.
I don't really understand how the Roadster is vaporware, as several dozen have already shipped and are presumably being driven.
I also don't really feel that the "hype" is over the car itself as much as the fact that it may indicate a paradigm shift. It's an example of a high performance sports cars that also has a reduced environmental impact. The company itself may fail, but the concept has a chance of taking hold.
I think it should read something more like:
"At any rate, the firm is aiming to get build costs down to $80,000 by summer, with profitability AND QUALITY following close behind."
how on earth are they expecting to magically lower the production cost of a vehicle by 30% and not cut any corners in terms of materials quality, design, etc
opps that should read \decreased\ quality.
clearly 4 am is not my hour.
Exactly...these 'changes' they're making are likely to go with cheaper, lower quality alternatives. I doubt they have the financial muscle to squeeze their suppliers like the big automakers do.
It's inevitable with any product over time - quality goes down as manufacturers strive for profitability.
Eggo. Huh? The reason they're not making money is obvious.
The market will always bring the cheapest technology to the fore. The problem is that cheap technology (combustion) is BAD because of the negative side effects/externalities to society. ( I can't believe I'm explaining this to Karl Pilkington. I feel stupid)
The government (See: Korea, South) is supposed to help out these kinds of companies to promote the technologies which EVERYONE KNOWS are not profitable until the economies of scale kick in. Tesla shouldn't be asking for a 'bailout' the should have gotten government support AGES ago.
You retards don't deserve Barack Obama, seriously. Pick up a book. *shakes head.
Since when did you socialists know how to use the internets?
It's not the job of Government to fund the R&D for peoples dreams.
It makes me laugh; America, the only place where people with convertible cars require A/C.
Six grand for a power cable and some rims! I guess Tesla has learned a thing or two from Monster cable!
This company is doomed like the DeLorean.
If I had 80G's to spend I would get me a Nissan GTR.
Tesla is probably the only car manufacturer which actually deserves a bailout.
However - even though the Lotus Elise chassis is awesome - the assembly and chassis should be outsourced to one of the Big 3 in the US, instead of shipping cars back and forth between the UK and California.
I used to like the thought of this car. But then I read Clarkson's review. Apparently the car has special tyres to reduce rolling resistance to extend the driving range, but that seriously damages its cornering ability. It's like having a Lotus Elise but fitting bicycle tyres...
Actually that's not accurate (Top Gear is rarely accurate). The current tires on the Tesla are Yokohama AD07 tires which provide low rolling resistance but also come standard on Elises.
http://www.teslamotors.com/performance/tech_specs.php
http://www.lotuscars.com/elise_190.html
Compare the tires. They are exactly the same.
Goes to show don't trust anything Top Gear says as fact, always verify. It's just entertainment.
The sport version provide better a048 tires which are like track tires. They wear faster but perform a lot better.
Good point. Clarkson's actually criticised the set-up of the Tesla's wheels (not tyres) in the Sunday Times article: "To minimise rolling resistance and therefore increase range, the wheels have no toe-in or camber. This affects the handling."
The initial cost estimating was done when the GB Pound was around $2; now that the pound has fallen to $1.40, they shouldn't be having these issues. I conclude their cost estimating was even worse than they admit.
I find the car impressive, but the fact that they are building it in California (like Aptera) indicates to me a lack of seriousness on the business side of the house. No one with any financial sense would open a factory in that state, given the regulatory and fiscal climate there.
When they move production to say Alabama or Tennessee, I'll believe they are serious about business.
I'm sure after the 6k power cable and wheels they'll come up with something else that you have to by. A great idea. get people to by something you havn't even made and then charge them more for extra stuff and still not even deliver. Then jump ship to timbuktu.
I agree its almost impossible for a real company to be that far off in pricing. Especially a start up since you have to make a profit. Also agree on the california manufacturing. Theres a reason I85 as become the new automobile corridor. The new KIA plant is MASSIVE (yea yea i know, not like that means anything)
They are in huge trouble; here is the root of the management issues:
http://www.boingboing.net/2009/01/21/profile-of-paypal-an.html
They applied for funding but the feds have found so many holes in their plans, budgets and engineering that they got too many bad marks to get funding without a massive work-over, plus the feds have the production details of every other EV in America and all of the others make Tesla look like idiots. No VC will now fund them. The vehicle technology is now out of date.
I mock yet again.
Chevy Volt, anyone?
I love it! A couple years ago when Tesla hit the scene, they were full of themselves telling the world how they were reinvent the auto industry. All those Stanford grads were smarter then the idiots in Detroit. They were going to show the Detroit Three how it suppose to be done. They didn't need to do marketing because they were 'disruptive technology'.
Now we find out that they had no idea what the car cost to make. It cost them $50k more then they were selling it for. I hate to break to you kids, but for all of Detroit's problems, they still know what it costs to engineer and build a vehicle well before they draw a single line on paper.
Now Tesla hired a bunch of seasoned auto Detroit guys to dig them out of their mess. Wait, I thought the Stanford 20-somethings (with all they egos) were smarter then the dinosaurs from Detroit. Wow, maybe there a little more to the car industry then they though
Musk bragged how Silicon Valley is smarter than Detroit. Not when it comes to cars apparently. The Big 3 are making net losses on their cars right now (meaning they are losing money, but each car sold reduces the loss). But Tesla has gone one better and is making a gross loss, meaning every car sold puts them more in the hole!
Now that's Silicon Valley knowhow in action! It's like pets.com all over again.
I just can't understand how the CFO or controller doesn't figure out the BOM in the first $50K of funding that you get? .. If you have blown through over $100M and you STILL have not checked your numbers then that is AMAZING beyond belief. Bright Automotive is ALL car guys and they WILL get their funding from the DOE Section 136 money (Which is delayed for unknown reasons) but Tesla will not get their money because they cannot show anything but an almost corrupt history in that they did $20M of work but spent many, many times more than that. That means they are the most inefficient car company in history.
Well, dispite the rocky start (which startup doesn't have a rocky start? It's even harder in the automotive market because you need connections to suppliers to get good prices), Tesla made a compelling product that actually works as advertised, and they have a long line of customers. Sure, it started out over budget but they reigned that in and now the costs are $90k-$100k (engadget actually quoted wrong saying they "hope to do so", but it says they have already done so in the actual quoted email). Still that means they still lose thousands of dollars per car or at the best selling them at no profit for the 2008 models because those sell $92k-$98k base price. The 2009 models sell for $109k so they can make a profit, but they won't hit the 2009 cars until the middle of the year. That is why they want to do this pricing scheme right now so they can start being profitable now rather than after the middle of the year. This will help attract investors for the next round of funding and help them get the government loan they are signed up for.
Dispite everyone still regarding them as vaporware and saying they haven't delivered anything, they have delivered 150 Tesla Roadsters. It's kind of ridiculous to say they haven't delivered any product (as some are saying in this thread).
On the other hand I have seen nothing of consequence from Bright Automotive.
How about they stop making Roadsters and start making cars that a (fairly) regular Joe will buy. You know, us Joe's with kids and dogs and stuff to load up into it on a everyday basis? I'll give 'em my money in a second for that...
"We lose a little money on each one, but we'll make it up in volume!"
Leave the electric cars to the big companies to develop. Having such a small production capacity the price of the cars will always be high while it'll still take forever to start making $$$
Oh My! What is the deal? Tesla issues:
Cheating:
http://www.boingboing.net/2009/01/21/profile-of-paypal-an.html
Battery Deal:
http://www.autobloggreen.com/2008/08/16/some-complete-speculation-on-the-daimler-tesla-deal/
Lawsuits:
http://valleywag.gawker.com/380125/tesla-finds-the-electric-car-business-is-a-litigious-one
Cancer:
http://www.saxton.org/tom_saxton/2009/01/tesla-price-increase.html
Bad karma from the start:
http://www.alleyinsider.com/2008/11/tesla-s-musk-calls-cofounder-the-worst-individual-i-ve-ever-worked-with-
More problems:
http://wheels.blogs.nytimes.com/2008/10/15/more-sparks-from-tesla/
Pissing off the customers:
http://www.thetruthaboutcars.com/tesla-to-angry-customers-its-all-about-us/