Floating Tesla, scuttling roadster

In one of the auto industry's worst kept secrets, Californian EV pioneer Tesla Motors is set to go public to raise the money it needs to get its volume Model S to market. But there's a much bigger surprise in its IPO application form: the company is pulling its Roadster off the market in 2011.

Although a full public announcement has yet to be made, Tesla Motors has issued a preparatory announcement in filing the requisite registration statement with the Securities and Exchange Commission for the proposed public offering.

The statement gives no concrete stock issue date, saying only it would take place "as soon as practicable." Company spokespeople have yet to provide any further hint, or indeed to comment publicly at all.

They're silent, too, on the future of the Roadster and its smarter brother, the Roadster Sport. But in the statement, they spell it out: "Prior to the launch of our Model S, we anticipate... sales may decline, potentially significantly as we do not plan to sell our current generation Tesla Roadster after 2011 due to planned tooling changes at a supplier for the Tesla Roadster, and we do not currently plan to begin selling our next generation Tesla Roadster until at least one year after the launch of the Model S, which is not expected to be in production until 2012." The supplier, most likely, is Lotus, the Elise-based Roadster being built at that company's facility in Norfolk. The earliest we'll see a next-generation Roadster is 2013.

That leaves the company in a hole for a period. No product on the market in 2011 equals no revenues, making the IPO essential to its survival. The aim of the float is to raise US$100 million to top up the US$465 million Department of Energy loan secured in late January to get the company's second product, the Model S sedan, in production. Indeed access to loan funds is contingent on the company placing half the cash raised from the IPO into readying the new model's mechanicals and setting up production facilities. Although it hasn't yet been made official, it's most likely the company will set up on an old film production lot in the Los Angeles suburb of Downey.

As Tesla's first pitch downmarket into the volume consumer sector, the Model S is seen as crucial to its future viability and growth. The company aims to get the medium sized all-electric four-door to market for about half the US$109,000 price of its Roadster. By the end of 2009, after about two years on sale, it had sold 937 Roadsters worldwide. In reaching that point, according to the registration statement, revenues of US$108.2 million were overshadowed by losses of $236.4 million accumulated to the end of September 2009. 

As the statement shows, however, its year-on-year loss trajectory shows the company is not without promise. Net losses of $30.0 million by year's end 2006 expand to $78.2 million for 2007 and further to $82.8 million for 2008 before apparently contracting to $31.5 million for the first three quarters of 2009. The company even managed to post a profit in July -- its first foray into the black in the six years it has existed. A US$50 million injection from a 10 percent buy-in by Daimler in May helped boost both its cash reserves and market perceptions.

Nevertheless, the Model S can't arrive soon enough. Tesla has had the early-adopter EV market virtually to itself to date, and loads of media coverage with it. But 2010 will see the first serious threats to its momentum arriving in showrooms -- in cars such as GM's Chev Volt PHEV and Nissan's all-electric Leaf.

Even though their arrival in price-sensitive mid-level markets will generate plenty of sticker-shock, they will still be well below the Roadster, which fails to come in under six figures, even with the US$7,500 federal EV tax credit.