Tesla Motors (TSLA) on Friday rolled out the first Model S luxury sedans for customers, a milestone that many hope could rev up the entire electric car industry and help return high-end manufacturing jobs to California.
Hundreds of Tesla employees, dignitaries and media jammed a small corner of the cavernous factory to wait for a Silicon Valley first: electric cars rolling off a Fremont assembly line aimed at Middle America.
Tesla co-founder and CEO Elon Musk told the crowd that the company aimed at nothing less than showing “that an electric car can in fact be the best car in the world.”
Turning to the assembled employees in red T-shirts, he added: “Thanks to the fantastic team here at Tesla. You rock!”
Jeff Skoll, eBay’s (EBAY) first president, was the first customer to drive off in a gleaming red Model S. He has invested millions in the company and praised Tesla for delivering the cars ahead of schedule, even though many experts said it couldn’t be done.
“We were talking about which is harder to build, a rocket or a car,” said Skoll, referring to the fact that Musk is also CEO of the rocket company SpaceX. “We decided it was a car. There isn’t a lot of competition in space.”
Gov. Jerry Brown, who was greeted with wild cheers, called the rollout “another example of California on the move — cutting-edge technology picking up where others left off. It takes courage, a lot of risk-taking, a lot of money.”
Swinging back at those who say California, mired in debt, has lost its footing, Brown said, “All of you are part of the state that is leading the country, if not the world. This car is another example of (that) boldness.”
The stakes are high for the success of the Model S, and not just for Tesla. Its efforts represent a chance for California to add more high-end manufacturing jobs amid a continuing sluggish economy and a 10.8 percent unemployment rate. And the electric car industry, which has suffered from setbacks and sluggish sales over the past year, needs a boost.
“It marks, hopefully, the transformation of Tesla from a wannabe to a mainstream automaker,” said John O’Dell, a senior editor at auto information site Edmunds.com.
Tesla’s pricey sedans, which sell for between $57,400 and $77,400 before government rebates, are aimed at those with relatively deep pockets. But Musk said plans already are under way for Tesla to build a car that will cost less than $30,000 to make electric cars “affordable to the mass market.”
Tesla said it will make 5,000 cars this year, and 20,000 next year. The first 1,200 to be delivered are the deluxe Signature Series Model S, which sell for as much as $105,400 before rebates. Tesla plans to offer the Model X sport-utility vehicle in early 2014.
All of Tesla’s vehicles are designed with the tech-savvy in mind: The Model S’s, which have a range of 160 to 300 miles, depending on the battery size, have a “smart” key in the shape of the car and a dashboard resembling a giant touch-screen iPad.
The Model S represents a make-or-break move for the Palo Alto-based company as it tries to move beyond the high-end Tesla Roadster, which had a price starting at $109,000 and are now out of production. Musk said Friday he is determined to keep the company independent.
“A lot of people have been very, very skeptical” about Tesla’s potential for commercial success, O’Dell said. “When you want to be an automaker, you are competing with multibillion-dollar conglomerates.”
Friday’s event underscored the soaring ambition of Musk, the PayPal co-founder who in addition to bankrolling the birth of an automaker in Silicon Valley backed the private SpaceX rocket company. Its Dragon spacecraft made history last month, becoming the first commercial vehicle to launch and dock with the International Space Station.
Musk’s mentality, O’Dell said, “is very, very Silicon Valley. It’s entrepreneurism on steroids. … They had a huge learning curve but they powered through it.”
By Musk’s account, the outcome of that effort, the Model S, “is the best car in every dimension that matters — its performance or safety or handling, the technology, the interface, the styling, the aesthetic. It’s really something that is fundamentally better.”
In handing over smart keys to the first customers of the Model S weeks ahead of schedule, Tesla surprised many auto industry experts, said Theo O’Neill, an analyst at Wunderlich Securities. Last fall, auto executives in Detroit insisted to him that Tesla could not deliver 5,000 cars this year, he said.
“It’s going to prove everybody in Detroit wrong,” O’Neill said. “They all say what Tesla is doing isn’t possible.”
The company, though, still faces plenty of bumps in the road to becoming the first and only profitable Silicon Valley automaker. It remains in the red financially, posting a loss of $89.9 million for its most recently completed quarter, up from a loss of $48.9 million in the same period a year ago. Tesla has said it needs to sell 8,000 vehicles to start making a profit, but already has orders for more than 10,000 Model S sedans.
Tesla has shown it can attract early adopters willing to spend a lot of money for an unproven car. The bigger challenge is driving down costs to reach a wider audience, said Jesse Toprak, an analyst with automobile research and pricing website Truecar.com.
“There are only so many tree-huggers and rich people you can sell to,” he said. “The only way it will reach mass scale is if people in Middle America can buy this car and save money.”
Contact John Boudreau at 408-278-3496; follow him at Twitter.com/svwriter.
Tesla Motors
Founded: 2003
Headquarters: Palo Alto
Employees: 1,700 worldwide, including 800 at its Fremont factory
Production: Tesla expects to produce 80 to 100 cars a day by the end of the year.
Model S: The all-electric sedan comes in three models that range in price from $57,400 and $77,400, before government rebates.
Range: The vehicles can travel 160 to 300 miles between charges, depending on the battery size, the company says.
Coming next: The Model X, a sport-utility vehicle, is expected in early 2014.
Source: Mercury News reporting
