Tesla CEO to investors: We're like Google or Apple

CEO Elon Musk says the company's combination of electric car technology and tech-savvy Silicon Valley culture position it well for growth after its planned IPO.

Martin LaMonica Former Staff writer, CNET News
Martin LaMonica is a senior writer covering green tech and cutting-edge technologies. He joined CNET in 2002 to cover enterprise IT and Web development and was previously executive editor of IT publication InfoWorld.
Martin LaMonica
3 min read

Tesla's Motors' prospects for becoming a 21st-century auto powerhouse have as much to do with its Silicon Valley culture as with its technology, CEO Elon Musk told investors.

During a video recording prepared in advance of Tesla's initial public offering, which could come as early as next week, Musk touted the combination of the company's auto industry and Silicon Valley roots as a key competitive advantage.

"We're closer to an Apple or a Google than we are to a GM or a Ford," Musk said, adding that Tesla doesn't suffer from a slow, bureaucratic culture. "There will not be anybody that will bring technology to market faster than Tesla."

The forthcoming Model S electric sedans will be as high-tech as they come, equipped with a 17-inch touch-screen computer and a design inspired by slick consumer electronics, he said. "The best way to add value to a product is to make it really good-looking and appealing."

Telsa CEO Musk shows prospective investors how the Model S will be a platform for other electric vehicles.
Telsa CEO Musk shows prospective investors how the Model S will be a platform for other electric vehicles. Screen capture by Martin LaMonica

Telsa Motors plans to raise an estimated $178 million by going public, with a valuation of over $1.4 billion, according to reports. It's a sign of how electric transportation has shaken up the auto business and created an opportunity for young companies to crack into the auto industry with new technology.

In describing the company's advantages, Musk said that Tesla--which he referred to at one point as a "technology velociraptor"--has leading electric-vehicle technology, including battery packs, power electronics, motors, and system software.

Its business model is efficient and promises high margins because the company will sell and service its cars through its own retail operations and direct sales, rather than relying on the more costly franchise model, said Musk and CFO Deepak Ahuja, who joined Tesla two years ago from Ford.

The Model S, which Tesla plans to start making in 2011 for delivery in 2012, will be a technology platform for other cars, including SUV crossover, van, and cabriolet designs. Its third-generation vehicles will be a "mass market" car, which can be produced at the large plant in Fremont, Calif., that Tesla purchased from Toyota.

Of the many green-technology companies launched in the past several years, Tesla is certainly the best-known because of its high-performance Roadster sports car, which helped reshape the image of electric cars. Unlike other product categories in green tech such as the smart grid, electric vehicles have real cachet with consumers, which positions Tesla well for an enthusiastic reception with retail investors.

As a business, though, Tesla does not have a lot of room for error. The company's revenues today come from low-volume sales of its $109,000 Roadster sports car (126 sold in the first quarter this year) and deals to supply electric powertrain agreements to other auto manufacturers. Over the next two years, it needs to transition to revenues from the Model S and other electric vehicles to become profitable.

Musk said the company is confident it can execute on delivery of the Model S, which will have a base price of $49,900 before extras and government rebates for buying a cleaner car. Tesla will be using only about 20 percent of the Fremont facility but the facility and technology platform will allow the company to scale up rapidly, he said.

"It gives us the foundation at a low capital cost to the high-volume vehicles down the road--our third-generation vehicles," he said.