Electric competition coming for Tesla?

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Tesla is riding high right now, as the Tesla S is a beautiful car and it’s piling up awards. The company is certainly worthy of all the praise directed its way. But, things are changing quickly in the auto business, as technological innovation is progressing rapidly. Thus, things can change quickly for Tesla as well with competition lurking.

GM and Honda made big news this week with an announcement that they’re teaming up to develop a mass-market fuel-cell system for future cars. The system, which is expected to debut in about 2020, chemically “burns” hydrogen to generate electricity without toxic emissions.

That electricity can then be used to power an electric motor: In other words, these will be electric cars, only without the batteries. GM and Honda also pledged to work on storage technologies for all that hydrogen, as well as on infrastructure — places to “get gas” for your future hydrogen-powered ride.

This doesn’t mean that the world is giving up on battery-powered electrics, of course. Batteries remain heavy and expensive, and take a while to recharge, but Tesla Motors has recently made it very clear that a great car can be built around a big heavy battery pack, despite the trade-offs.

But the GM-Honda link-up, along with Toyota’s recent confirmation that it would launch a fuel-cell car next year (a car that seems likely to be aimed directly at the Model S, by the way), is a good reminder that battery-electrics aren’t necessarily the way forward, just one of several possible ways.

That’s something that investors in any car company, including Tesla, should keep in mind.

Of course, this article is aimed at Tesla investors, and the stock issue is separate from the company and its current and future prospects. The stock may be a bit overpriced yet the company’s outlook can be fantastic.

Tesla has proven to be a leader in this space, and I think they can handle the competition. But the competition will be there.

  

Tesla sticking with laptop battery cells

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Tesla will not make any immediate changes to the battery for it’s new sedan.

Large format battery cells will slowly gain a foothold on the automotive EV market in the coming years. Companies such as LG Chem, A123 Systems, and EnerDel have been hard at work developing the large format automotive specific batteries, but Tesla still insists that the laptop format, as used in their Roadster, is the best thing going right now.

According to Tesla, the laptop battery offers proven performance at an affordable price. With mass production of this type of battery ongoing for several decades now, the technology has advanced beyond that of current large format batteries. As Tesla has indicated, the mass economies that surround laptop batteries have increased competition, driven technological advances, and reduced prices making them perfectly suitable for cars.

Tesla recently received a loan from the federal government, and it will be interesting to see how he battery issue plays out over time.

Tesla Motors, an electric-car company in California that sells a high-end roadster, will use some of $465 million in loans now to build a plant in Southern California to make its new Model S sedan. The rest will be used later for a plant in Northern California to make battery packs and electric drivetrains to be used in other carmakers’ vehicles.

  

Will Tesla get a government loan?

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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.

  

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