Abu Dhabi Joins Feds as Tesla Backer

If you have an extra $60,000 in 2011, Elon Musk has the car for you

With a $109,000-plus sports car as its only vehicle on the market, Bay Area-based Tesla Motors would appear to a niche player on the auto scene. Yet parties including the U.S. government and a fund in Abu Dhabi are counting on the company's electric cars to one day go mainstream.

Tesla's company headquarters is in San Carlos.  It plans to move its main manufacturing operations to Southern California, but there is some speculation out there that if the Fremont NUMMI plant closes, they could lease a portion of that huge facility instead.
In June, the U.S. Department of Energy said it would lend Tesla $465 million to help it develop green car technology. Monday, Aabar Investments acquired part of the 10 percent stake in Tesla that Germany's Daimler AG paid $50 million for in May.

The Roadster isn't exactly a car for the masses. With a design loosely based on the Lotus Elise sports car, Tesla boasts that its 248-horsepower motor accelerates it to 60 mph in under four seconds.

Yet both the government and Tesla's investors believe that the carmaker is destined to be more than just a fringe player. Tesla itself says that the Roadster -- of which it has delivered about 500 -- is only the beginning.

"Tesla didn't start with the Roadster because the founding team thought that the world needed another sports car," spokeswoman Rachel Konrad said. "Rather, they knew that aiming at the high end of the market would allow them to turn a profit ... then cascade it down to more affordable cars."

In March, it inched closer to that goal when it unveiled the Model S electric sedan. Tesla expects to price the vehicle at $49,900 after a $7,500 federal electric car rebate. (The true sticker price is almost $60,000.) The car is slated to go on sale in late 2011 and travel as far as 300 miles on a charge. Tesla said it has already received more than 1,000 reservations for the vehicle.

Tesla's ultimate goal is to produce about 20,000 Model S vehicles per year, Konrad said. The Department of Energy loans are crucial to that plan. Tesla has said it will use $365 million of the DOE money for production engineering and the assembly of the Model S. It will use $100 million for a California power train manufacturing plant expected to employ 650 workers.

Konrad says Tesla's strategy is similar to that pursued by cell-phone and flat-screen TV makers, which started off selling their products to wealthy early adopters then cut prices to mainstream levels as the technology developed.

But even if Tesla succeeds at bringing the Model S to market, it will face tough competition from other carmakers by then. General Motors Corp., which emerged from bankruptcy protection last week, plans to have its gas-electric Chevrolet Volt on the road by then, for example. GM has not announced pricing for the Volt, but it's expected to cost between $30,000 and $40,000.

Nissan Motor Co., the third-largest Japanese automaker which secured $1.6 billion in Energy Department loans, plans to introduce plug-in electric vehicles in the U.S. in 2010. It plans to use the loans to retool its plant in Smyrna, Tenn.

A new bump in the road for Tesla appeared in May when Tesla's now-departed cofounder Martin Eberhard filed a lawsuit against Tesla's South African-born CEO Elon Musk, alleging libel, breach of contract and a slew of other misdeeds. Musk has denied the allegations and is seeking to have the suit dismissed, Konrad said.

In the mean time, Tesla is focusing on selling the Roadster and is working on a project supplying battery packs and chargers for Daimler's smart brand. Tesla is scheduled to open a dealership in New York on Thursday, its third dealership in the U.S. and its first outside of California.

"The Model S is roughly half the price of the Roadster, and we are also working on other more affordable projects," Konrad said.

Copyright AP - Associated Press
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