Will Tesla get its loan? It’s not clear at this point.
Tesla Motors said its long-awaited $450 million loan from the federal government could come as soon as this summer, a crucial factor in its plans to build an electric-car factory in California.
“I am excited to report that the Department of Energy informed Tesla last week that they expect to disburse funds … within four or five months,” Elon Musk, Tesla’s chief executive and chairman, wrote in a newsletter distributed to customers Wednesday.
Tesla, based in San Carlos, stopped short of saying its loan application had been approved. Indeed, an Energy Department spokeswoman said Wednesday that her agency “has made no final decisions for specific applications for the auto-loan program.”
Still, Tesla is optimistic the department will approve its request for money from the $25 billion loan program to retool U.S. factories to make more fuel-efficient cars and trucks, said Diarmuid O’Connell, the company’s director of corporate development. Tesla has asked for $350 million to retrofit a factory to assemble its Model S electric sedan and $100 million for its battery-supply business.
“We have a high degree of confidence,” O’Connell said. For one thing, he said, Tesla has asked for a small amount compared with the Detroit Three automakers, which have requested $5 billion or more each.
Of the 75 companies that requested funds under the program, only 26, including Tesla, were told that their applications were “substantially complete,” he said.
I’d like to see them get it. The technology is impessive, and Musk hasn’t been shy about putting his own money behind the venture. BusinessWeek explains that Tesla needs to convince the government that it has a viable strategy.
Eager to build a sedan, Musk is pinning his hopes on the U.S. Energy Dept. The DOE is offering two kinds of credit lines: one for companies working on alternative energy projects and another for carmakers developing green vehicles. Automakers may apply for both kinds of credit, which they can access as projects hit key milestones.
To qualify for DOE money, Musk needs to prove Tesla is viable. “We’ll be profitable in five months,” he says. He also needs to raise tens of millions of dollars in matching funds. In what some industry watchers deem an act of desperation, Musk aims to ask potential buyers of the new sedan to pay a big chunk of the $50,000 sticker price up front. Yet the car won’t be ready until 2011—and only if the government gives him credit. Musk acknowledges customers would put “their money at risk.” He also has been trying to get Roadster owners and buyers to fork over $12,000 for a future replacement battery—even though the one in their cars is supposed to last well into the next decade.
Tesla is making other changes to get money fast. The company has scrapped plans for a brand-new factory in San Jose, Calif., opting instead to look for an old, idle industrial site where it could build a factory to make Model S cars and batteries. Tesla needs government loans for both projects, and loan applications that intend to use existing facilities get preference from the DOE. So Tesla may get money faster that way, if it gets approved. The company says it is negotiating deals for some industrial property for both sites and may have news soon.
Companies like GM have the advantage of scale, but Tesla’s all-electric sedan could be a sensation.