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Tesla Motors CEO: Model S is cheaper than it looks

In a missive to customers, Tesla Motors CEO Elon Musk argues that the $56,400 price of the Model S electric sedan is equivalent to $35,000 with $4-per-gallon gasoline.

After wowing the auto press with the sleek design of Tesla Motors' all-electric Model S, company CEO Elon Musk is now making an economic argument to consumers--and, perhaps, the U.S. government--for buying the luxury sedan.

Tesla Motors CEO Elon Musk Corinne Schulze/CNET

After months of anticipation, Tesla on Thursday took the covers off the Model S, an electric sedan priced at $56,400 but that qualifies for a $7,500 federal tax credit.

In a newsletter to customers on Friday, Musk, who is also product architect at Tesla, touted the many benefits of electric vehicles over gasoline cars, including price.

"The ownership cost of Model S, if you were to lease and then account for the much lower cost of electricity versus gasoline at a likely future cost of $4 per gallon, is similar to a gasoline car with a sticker price of about $35,000," he wrote.

Because they have fewer moving parts and don't require oil changes, electric vehicles should also have lower maintenance costs. "Model S costs roughly $5 to drive 230 miles--a bargain, even if gasoline were $1 per gallon," Musk wrote.

He also indicated that Tesla believes that it is close to receiving $350 million in loans from the U.S. Department of Energy to build a plant in California that would manufacture the Model S. Production is slated to begin in late 2011, with deliveries starting in 2012, according the Web site launched to take orders for the car.

The Department of Energy has revamped its process for approving loans to approve them quicker. Even with a streamlined process, though, some observers worry that it will be very challenging for the Energy Department to dispense loans as quickly as many loan applicants hope.

The Model S show car was made at the Tesla Design Studio in Hawthorne, California at the rocket factory of SpaceX, where Musk is CEO. The powertrain was made in San Carlos, California, where Tesla is based.

Cost is often cited as one of the biggest barriers to electric vehicles, particularly the batteries.

Musk said the Model S will have three battery options providing a range of either 160, 230, or 300 miles per charge, but it did not disclose the prices. He said the "floor-mounted" battery pack is designed so that it can be changed in battery-swapping stations.

"Tesla is relentlessly driving down the cost of electric-vehicle technology, and this is just the first of many mainstream cars we're developing," Musk wrote.