Tesla Says Just 20,000 Model S Sales Required to Start Posting Profits

Tesla never intended its high-profile Roadster electric sports car to financially carry the business. That's what the Model S is for, and the electric vehicle outlet has pegged the magic number at 20,000 sales in order to post profits.

Next year will be the current generation Roadster’s final year of production. So far, some 1400 examples have been delivered to at least 30 countries in North America, Asia, and Europe. While the Roadster has been both an impressive engineering exercise and brand awareness builder, the publicly traded Silicon Valley firm has yet to start raking in the dough. And that’s exactly why it’s betting big on the Model S, which it believes will put it in the black.

In an interview with Bloomberg, Tesla chief technology officer J.B. Straudel asserts the niche carmaker needs to move 20,000 Model S sedans per year to be profitable, citing lower battery pack costs and a $56,500 entry MSRP as the primary enablers.

Tesla’s 18560 cell battery pack, which is similar to our everyday laptop battery, has the benefits of preexisting R&D from major tech companies (Panasonic has invested $30 million in Tesla) and advanced economies of scale, not to mention enviable energy density. According to Martin Eberhard, Tesla’s co-founder who later left the company and has famously sparred with Tesla CEO Elon Musk since, the 18560-cell packs likely cost $200 per kilowatt-hour, which is 71- to 75-percent cheaper than large-form cell lithium-ion packs at current analyses. Additionally, the cells have already diverged onto a dedicated EV development route and are expected to see further year-over-year price drops from 6 to 8 percent.

The same Bloomberg report also cites Nissan CEO Carlos Ghosn stating Nissan and Renault may need to sell 500,000 electric vehicles per year for their own program to stay in the black without government aid. At $32,780, the Leaf is considerably cheaper than the Model S and has a head start, having already gone on sale in select launch markets.

Scheduled to start production at the NUMMI factory line in Fremont, California, by mid-2012, the Model S plans to offer three battery pack sizes with varying ranges, a 5.6-second 0-60 mph time, seven seats (extra two for children only), and a futuristic design. Tesla has hired the staff, is doing the homework, and we can now only wait to see how well the finished product turns out.

Source: Bloomberg

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