We grill Tesla's Chief Financial Officer on just how well the business is doing
By Gavin Conway on October 6, 2011 2:15 PM
Company CFO Deepak Ahuja is responsible for looking after the finances of Tesla Motors–creator of the Roadster sportscar, the Model S luxury sedan and the soon-to-be-unveiled Model X crossover vehicle–as the company gears up to produce 20,000 cars a year.
Good thing he’s got half a $billion in his back pocket…
TCP: We’ve heard the rumours, so tell us Mr. Ahuja, is Tesla actually making any money yet?
DA: Right now as a company we are selling roadsters and powertrain components and services to Daimler and Toyota and our gross margin has been very respectable, However, the bottom line is we’re not making money because of our huge investment in our new production facility.
TCP: If you’re not making any money, how on earth are you going to fund the new Model S? Another government loan, perhaps?
DA: We don’t need government funds to deliver the Model S and in fact, we have no applications pending at this moment with the government for any additional loans.
With the development of the Model S, the engineering, the prototype building, to manage that cash requirement we have $330,000,000 on hand and a $330,000,000 loan facility that we can draw on. So we have $660,000,000 of sources of cash available. We believe that’s more than sufficient to take the Model S to market and to bring the Model X [crossover] to market after that, which will be some time in 2013. So we feel very comfortable with the trajectory from a cash point of view.
Roadster sales and powertrain component sales will continue through next year when the Model S comes so it's not as if we have any gap in revenues.
The Tesla Model S sedan (pictured) will be delivered to reservation holders starting end of 2012
TCP: So when will Tesla actually start turning a profit?
DA: If we had structured the company to only sell Roadsters and powertrain technology, we would be a profitable company now. But we want to very aggressively ramp up our production and our revenue base. In 2007, we had zero revenue, today in 2011 it will be closer to $100million. Next year we will be over £600million, the year beyond we will be maybe close to $2billion, so that is another 300% ramp each year that we’re doing. To do that ramp we need to spend the money now.
What we have predicted is that by 2013 we will be at steady state production of 20,000 units and at that point we’ll be fully profitable.
TCP: 20,000 cars a year is huge for a niche player, nearly three times what Ferrari sells. Is that realistic?
DA: At 20,000 units we are going to take a sliver of the automotive market. It’s only one percent of the premium luxury segment, which is very small. Quite frankly I think we are quite conservative with our 20,000-unit estimate. I think this car is going to be an absolute hot seller. We already have over 6,000 reservations. People have put down a minimum $5,000 for this car and we have a lot of people who have put down $40,000 to get the signature series. Demand is not an issue.
TCP: A new factory, a new car and a new powertrain all at the same time. Is that possibly too ambitious?
DA: The powertrain is not really new for us. With the Roadster, we’ve seen 15 million miles of real-life driving experience with our customers. What we are doing with the Model S is taking that to the next level of evolution. But it’s not new technology for us anymore. The core technology is the same but we have made significant design enhancements which have allowed us to get to a much higher performance and much more compact packaging of our powertrain while very significantly reducing cost.
TCP: How’s business with Toyota and Daimler going?
DA: Toyota is going extremely strong and so is Daimler. We are providing the entire electric powertrain for the RAV4 EV and that will go into production sometime next year by Toyota in North America. The powertrain will be produced here but it will be assembled in the RAV4 factory in Canada. We’re not indicating the number we’ll produce, but what we have said is that the total business is worth about $100million to us.
With Daimler, we have provided them with the battery pack for the Smart EV, for 2,100 of them. We also provided the battery pack for their A-Class EV, about 500 of them. And Daimler is actually a bigger investor in Tesla than Toyota. They are represented on our board and are very active. They have also invested $20million more in Tesla.
We continue to talk to other OEMs all the time but it’s a bit premature for us to indicate anything upcoming until it is fully signed.
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