Tesla aims for 100,000 cars a year by 2015

That figure is sure to keep bullish investors happy, and means that the automaker is seeing no ease in demand for the Model S.

By MSN Money Partner Aug 1, 2014 12:26PM
File photo of a Tesla Model S outside the Tesla factory in Fremont, Calif. (© Paul Sakuma/AP)
 By Ashlee Vance, Businessweek

"Processed ore from mines will enter by railcar on one side and finished battery packs will exit on the other."

That's Elon Musk writing to the shareholders of Tesla Motors (TSLA) on Thursday in a letter (PDF) detailing the company's second quarter results and its construction of a new battery plant.

As expected, the plant will be built in conjunction with Panasonic; part of the facility's foundation has already gone up in Nevada, but the company is still looking at other states as site possibilities.

Tesla will oversee the construction of the factory and run it, while Panasonic will invest in the machinery and supply its lithium-ion battery cells.

Musk sees this factory -- and eventually several more like it -- as being key to the delivery of an electric car for the masses. Tesla and Panasonic plan to make more efficient batteries using changes to the underlying chemistry of the products and to bring down their costs and up their supply by creating giant plants.

Musk is the only car executive who would be talking about ore in this day and age. The large car makers abandoned Henry Ford's raw materials in/cars out model decades ago in favor of becoming integrators of parts made by other companies. Tesla has gone the other direction whenever practical. It's negotiating deals directly with the ore suppliers and is happy to do so.

"I just don’t think outsourcing reduces costs," Musk said during the conference call with analysts. "It is almost always the case that when we in-sourced something it got cheaper."

Tesla's second quarter results and forecast for the year head were good enough to kick the company's shares up some 4 percent in Friday trading. It reported revenue of $769 million in the second quarter, up from $405 million in the same period last year. The company's net loss expanded to $62 million from $31 million, as Tesla spends on building its network of charging stations and service centers and on the development of its upcoming Model X SUV.

Of course, investors are far more interested in what's ahead than what's happening right now. And, on that note, Musk predicted that Tesla should be capable of delivering more than 100,000 cars per year by the end of 2015. He expects about half of those to be the existing Model S sedan and the other half to be the Model X, which starts shipping early next year.

The 100,000 figure is sure to keep bullish investors happy. It means that Tesla is seeing no let up in demand for the Model S and that the company must have strong pre-orders for the Model X.

A number of Tesla watchers have expected demand for the Model S -- now two years on the market -- to cool with there being only so many people in the world that can pay $100,000 for a car. The desire to buy the all-electric vehicles, though, still seems strong, and Tesla has picked up sales by expanding to Europe and China.

During the call with analysts, Musk noted another way that he expects Tesla to differ from traditional car companies in the months ahead. It has brought in Formula One mechanics to teach Tesla service people how to fix cars in record speed.

"Instead of one person per bay and working on a car over several days, a team comes on and attacks (the car)," Musk said. He hopes that Tesla can pick a car up from someone’s office and return it to them before their work day is done. "We want to fix the car and give it back to you without you even knowing it was gone," he said.

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