Tesla Says Model S Will Be Profitable As Rumor Flies That "Alpha" Prototype is Finished

By · January 05, 2011

Tesla />

Tesla Motors has been on a bit of a roller coaster recently. With their stock price jumping all over the place and a big push to get the upcoming Model S out the door, supporters and investors are now looking to Tesla to get things done and produce some real results—including becoming a profitable venture, something the company's been lacking since it was founded.

In the past, Tesla's CEO, Elon Musk, has said the only reason Tesla isn't yet profitable is that they are burning cash on development of the Model S. In that vein, J.B. Straubel, Tesla's CTO, said in a recent Bloomberg article that the Model S would be profitable even at a sales volume as low as 20,000 units per year. This was in response to the fact that Carlos Ghosn, CEO of Renault-Nissan, has said they will need 500,000 annual sales of electric cars at current battery prices between the two companies to make EVs profitably.

How can Tesla, a small startup company with nowhere near the global capacity of Renault-Nissan, make EVs profitably at such a low volume? According to Tesla it all comes down to retail sales price and battery technology. Straubel told Bloomberg that Tesla's battery technology (thousands of small lithium-ion batteries made by Panasonic and chained together inside the pack) will allow them to produce their batteries for less than Nissan, and the news organization said that in the past Tesla management has indicated that price could be as low as $200 per kWh—compare that to the roughly $400-$500 per kWh Nissan has targeted in the past. Nissan batteries are what's called Lithium Manganese Prismatic cells—meaning they are large format, about the size of a hardback book—and Nissan has been developing them for decades.

In addition the claimed battery advantage, the Model S, being a luxury vehicle, will cost a whopping $57,500 before federal incentive, whereas the LEAF costs $32,780. Sure, if you are going to sell a car for a $25,000 premium and it really only has $15,000 worth of extra luxury amenities—let's say—it gets easy to make them profitably even with the added battery costs. Even so, Straubel insisted that the batteries are the main reason why the Model S is a better vehicle. It's getting to be a bit strange how Tesla is so focused on dissing the LEAF's batteries. Recently Musk even went to so far as to say that the LEAF's batteries are "primitive."

In other Model S news, it also looks like Tesla has finally built an "alpha" prototype of the Model S. In an article over at VentureBeat it was brought to light that a commenter on an engadget post who said they were part of the Model S development team was bragging about having seen the alpha prototype in action (that comment seems to have since been deleted). If it's true, this would mean that Tesla made good on their promise to deliver a fully functional pre-production prototype by the end of 2010.

New to EVs? Start here

  1. Seven Things To Know About Buying a Plug-In Car
    A few simple tips before you visit the dealership.
  2. Incentives for Plug-in Hybrids and Electric Cars
    Take advantage of credits and rebates to reduce EV costs.
  3. Buying Your First Home EV Charger
    You'll want a home charger. Here's how to buy the right one.