Tesla Sees Pre-Order Cancellations

The electric car company announced a superior charging station design while renegotiating a loan with the federal government.

By Scott McGrew
|  Thursday, Sep 27, 2012  |  Updated 8:01 AM PDT
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Tesla Roadster Unveiled

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Tesla announced a super-fast charging station design in southern California, while its accountants were renegotiating a federal loan with the Department of Energy.

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Tesla Stock Falls

Monday was a big day for Tesla: a new, super-charging station was announced -- and they renegotiated a $465 million federal loan. Tesla founder Elon Musk bounded onto a stage in southern California to introduce a new electric charger that will give a full charge to his company's cars in about 45 minutes. Meanwhile, his financial team renegotiated a $465 million loan with the Department of Energy.
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Monday was a big day for Tesla: a new, super-charging station was announced -- and they renegotiated a $465 million federal loan.

Tesla founder Elon Musk bounded onto a stage in southern California to introduce a new electric charger that will give a full charge to his company's cars in about 45 minutes. 

Meanwhile, his financial team renegotiated a $465 million loan with the Department of Energy.

Tesla was able to delay payments until February 2013 according to documents filed Tuesday with the Securities and Exchange Commission. The fledgling car company faces an Oct. 31 deadline to come up with a plan to pay back the entire principal early, however. 

The same day, Tesla filed for permission to issue 4.3 million more shares of stock to raise cash the company's CFO, Deepak Ahuja, told The Wall Street Journal that Tesla is at its "lowest cash position," though records show the company has $250 million in liquid assets.

Investors rankle when companies make secondary offerings of stock, because the increased number of available shares make the shares they already own worth less. 

Shares have also been under pressure as investors take a closer look at the company's latest financial documents.

To be fair, all financial statements read a bit like the diary of a junior high student facing the first day of class at a new school.  "What if no one likes me? What if I trip down the stairs?" Tesla's latest submission to the SEC reads much the same way.  

The company warns about nearly everything, from the possibility the factory will burn down (page 11) to the number of times BBC television show Top Gear repeats the episode panning its cars (page 15).

However, a number of realistic worries do give investors pause.

1,000 CANCELLATIONS

Tesla says it had to return $5 million in deposits to customers who canceled their reservations for a new Model S sedan after the car company asked them to "configure their cars or risk losing their production spot." 

In other words, 1,000 customers rich enough to put down $5,000 in deposits decided not to actually buy a Model S when told it was ready to be built. The company did say 1,600 new reservations were placed in the same time frame.

Tesla says it has $133.4 million worth of customers' money as deposits for the Model S and Model X Crossover (which at this point is not even in production).  

PRODUCTION PROBLEMS

The company will make half as many sedans in the near future as anticipated due to problems obtaining parts. Not only are parts in short supply, the company says some suppliers are providing substandard parts. The documents do not explain which suppliers or what parts. The problem puts production "four to five weeks behind previously announced goals."

COULD CHANGE DESIGN

The company raised the possibility it may have to "make additional modifications to the [Model S] design" if it cannot find a good supply of parts.

CHANGING MILEAGE STANDARDS

The Environmental Protection Agency has revised the standards by which electric car makers should measure a car's mileage. Tesla has not yet tested its Model S under the new system and is concerned it will have to lower estimates about how far the car can go.

THE MONEY ISSUE

As with any startup, Tesla's biggest challenge is the burn rate. The company warns "we currently anticipate that if we do not raise the proceeds anticipated from [the new stock sale] and do not otherwise adjust our operations" it may not be able to meet the Department of Energy's standards to maintain its loan agreement.

Department of Energy loans have of course been a lightning rod after a similar loan to Solyndra (located just 2.5 miles south from Tesla) went sour in 2011. Another DOE loan to electric car maker Fisker was frozen after that car company failed to meet the loan agreements.

Fisker continued to manufacture  its Karma sedan, but just today Consumer Reports said it was "full of flaws" and could not recommend consumers purchase the car.

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