Tesla Motors is extending an olive branch to the Big Three. But will they take it?
The electric-car wants to partner with a large automaker that can manufacture its third model at "high volumes," Vice President Darryl Siry told Greentech Media at Piper Jaffray's Clean Technology and Renewables Conference in New York City on Wednesday.
The third model is expected to be a compact sports car that Musk previously said would cost between $30,000 and $35,000.
While Tesla plans to manufacture its first two models on its own -- with a planned annual production run in the tens of thousands for its second model -- it sounds like the company has reconsidered the idea of competing with the major-league manufacturers in favor of a production partnership.
With scale being key to lowering vehicle prices, that's a smart move, according to Eric Fedewa, vice president of global powertrain forecasts at automobile research firm CSM Worldwide.
"The problem is distribution," he said. "For any manufacturer coming into this market, the barriers really would be sales and service and having the distribution channel and dealer network. Those would be the biggest challenges, in addition to manufacturing. So partnering with an existing manufacturer that's already got that distribution makes a lot of sense."
But don't take the partnership plans as a sign that Tesla is for sale.
While he said an initial public offering isn't a sure thing, sales, marketing and service VP Siry added the company would much prefer to remain an independent car company than the alternative: getting bought.
"From an investor standpoint, somebody is going to look at us and say, 'If they are betting the bank on being an independent car company, that's an ambitious goal,'" Siry said. "It's one we are very confident in. [Being purchased] is not our desired outcome."
The blogosphere has been abuzz with Tesla news and speculation after the company told the Financial Times of its plans to raise debt and equity financing -- including an IPO -- to bring its second model, a sedan codenamed White Star, to the market (see Green Cars Cruise Forward, as well as posts in Earth2Tech and VentureBeat).
Siry gave more details at the Piper Jaffray event, saying that the company will set its IPO based on its milestones, ongoing operation costs and the capital it needs for the development of its sedan.
"It's not so much a 'Let's wait for a great IPO time to all become liquid and cash out,'" he said. "For us, an IPO is a logical way to access equity financing that's cheaper. And at a certain point, going to the public markets is just the wise the thing to do from the cost-of-capital standpoint."
That said, he added, market conditions will play a role in determining whether the IPO actually happens.
"Of course, the board is going to have to look at [an IPO] in the context [of] the condition of the markets," Siry said. "The conditions right now aren't very good. But a year from now, we don't know. If you are going in toward the end of this year and the conditions in the marketplace are as bad or worse, then I'm sure the board will reconsider that."
Siry confirmed that the company closed a $40 million bridge loan on Thursday and said that, assuming conditions improve, the company has set it sights on a "large Series E" equity fund raising -- of roughly $75 million to $100 million -- in the late summer, with an IPO early next year.
Tesla already has completed the pre-application process for a loan guarantee from the U.S. Department of Energy, and the amount of equity the company will need to raise will depend on how much debt financing it can get at what price, he said.
The company plans to use its total funding -- which will amount to $250 million, according to the Financial Times -- to set up sales and service centers, Siry said. Expanding from the sales offices it already has announced in Menlo Park, Calif., and Los Angeles, Tesla plans to open one in New York late this year, then expand into Chicago, Seattle, Miami and other locations across the country in the first half of next year, he said.
Siry also divulged more information about the startup's production plans, saying Tesla plans to produce about 1,800 Roadsters for the U.S. market next year and to expand into international markets, such as in Europe and Asia, in 2009 or 2010.
The sedan, which Earth2Tech says will soon be getting a new name, will start in the $50,000 to $70,000 range, with sales of between 10,000 and 20,000 cars starting in 2010, he said. Chairman Elon Musk said earlier this month the company planned to produce 20,000 to 30,000 of the second model annually (see First Tesla Production Roadster Arrives).