Tesla Scores Major DOE Loan

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Tesla Motors is getting a solid backer above and beyond any investment: Uncle Sam.  The company announced that it has received approval for about $465 million in low-interest loans, from none other than the US Department of Energy, to accelerate the production of affordable, fuel-efficient electric vehicles.

The company said it plans to use $365 million for production engineering and assembly of the all-electric family sedan (Model S).  This is no go-cart sedan either.  The Tesla Model S can carry up to seven people and can travel up to 300 miles per charge.  It has an anticipated base price of $49,900 after a $7,500 US federal tax credit.

The company noted that the Model S lifetime ownership costs are equivalent to a conventional car with a sticker price of $35,000.  This is due to the low cost of electricity vs. gasoline and a relative lack of service and maintenance.

Tesla expects to start Model S production in late 2011 in a state-of-the-art assembly plant employing about 1,000 workers.

The other $100 million is earmarked for a powertrain manufacturing plant, and that plant will also supply all-electric powertrain solutions to other automakers to accelerate the availability of mass-market electric vehicles.  The new facility will employ about 650 people.

Tesla is in the final stages of negotiation for facilities in California.  Based on how dire the situation is in California, it is not a stretch to think that Tesla has the upper hand in the negotiations.

The loans are part of the Advanced Technology Vehicle Manufacturing Program which are being announced by auto companies today that are meant to give incentives to new and established automakers to build more fuel-efficient vehicles.

Tesla is one of the companies that many investors expect to come public. You can imagine that this will give the company more leverage for an initial public offering when it wants to.  It has raised venture capital and Daimler is a 10% stake holder based on the most current information we have.

Jon C. Ogg
June 23, 2009