Some have called Tesla Motors the ‘wild card’ of the $8 billion first round of loans distributed through the Department of Energy’s Advanced Technology Vehicles Manufacturing program (ATVM).  Founded in 2003, Tesla may have seemed an unlikely candidate for a $465 million loan, with other larger U.S. automakers, including GM, struggling to avoid layoffs and keep dealerships afloat.  So why is it that a tiny start-up out of San Carlos, CA, which has yet to turn a profit, became one of three lucky recipients? There are two reasons: fully electric vehicles (EVs) and American jobs.

The loan proceeds will be divided into two projects, the first of which is a manufacturing facility for the fully-electric Model S sedan.  Tesla claims that the Model S has a range of up to 300 miles per charge, a five minute battery swap, and seating for seven.  The Model S is expected to be twice as efficient as hybrid vehicles, with production commencing in 2011.  Battery packs and electric drive trains are the focus of the second portion of the loan.  Beginning in 2011, Tesla will manufacture these products for its own vehicles, as well as those of other automakers.  The Model S manufacturing facility is expected to create 1,000 jobs in Southern California, while the battery plant will employ approximately 650 people in the Bay area.

How exactly did Tesla attract the attention of the DOE out of the more than 100 applicants for the ATVM loans?  It is easy to surmise that Tesla’s success has a lot to do with the novelty of its EV.  While Ford and Nissan EVs can only achieve the average range of 100 miles, Tesla EVs offers three ranges:  160, 230, and 300 miles.   The Tesla EV carries a charging unit that can be fitted to various power sources, and minimally takes 3.5 hours to fully charge up the battery when plugged into a normal 120V socket at home.  This feature minimizes the cost to set up the necessary infrastructure, such as sufficient recharging stations, offering a possible view of how EVs can be a feasible future for the American transportation system.

The DOE’s attention may have stemmed from Tesla’s advanced battery technology, or possibly because it offers consumers choice.  Purchasing a car isn’t always a question of fuel efficiency; it’s often a question of utility.  The Tesla Roadster can go from 0-60 mph in 3.9 seconds, while the Model S does it in 5.6.  This may have been an issue that the DOE considered when choosing Tesla, since promoting EVs and hybrid vehicles hasn’t been easy.  Tesla has already received 1,500 orders for the Model S sedan, each with $5,000 deposits, and CEO Elon Musk expects to repay the $465 million loan before the 2022 deadline. 

Certainly, challenges still lie ahead for Tesla Motors, including actually earning a profit from its Roadsters.  And we cannot forget about the lawsuit brought on by Tesla founder Martin Eberhard, who asserts that Musk incorrectly claims he is the founder of Tesla and falsely accused Eberhard of responsibility for the company’s previous financial instability. Despite these challenges, Tesla’s future looks promising, but will the next generation of EVs be as successful as Nikola Tesla’s alternating current (AC) power, first introduced at the 1893 Chicago World Fair? 

Other Links:

Department of Energy’s ATVM press release

Comparisons between loans for Ford, Nissan, and Tesla:  U.S. Technology Loans for Ford, Nissan and Tesla and Feds lend Tesla $465 million to build electric car

Previous Post  

Next Post

WaPo mostly right on energy security
May 14, 2012

Natural Gas and America’s Power Mix
May 11, 2012

King of the Hill
May 4, 2012