Tesla’s Future Paid For

Tesla Motors
Tesla Motors

The Model S of Tesla, which was unveiled to the world three years ago, has been enjoying on the success of its predecessor, the Roadster. Because of this, many individual owners to be have plunked down money to be on the list of first adopters of this new technology.

This serves as the bank for Tesla, as it collected nearly $61 million in down payments in 2011 alone, up from just $5 million in 2010. When Tesla started out it used up vast loads of cash because technology development did not come cheap, like many other start up companies. In its first nine years, the clientele of the carmaker includes stars such as George Clooney, Will I. Am of the Black Eyed Peas and others. It also heavily used government grants as well as stock investment to have operating capital.

Now, the down payments made by future Tesla owners have become its source of funds to continue its operations. If this pool of cash were unavailable, the company would have used up $175 million instead of just $114 million to date. The danger though, would be the cash flow suddenly drying up should there be production delays and other issues that face the Model S. There is also greater fiscal scrutiny for the loan grants provided to the company in the wake of the Solyndra bankruptcy last year.

As of the moment, the deposits are also a reflection of the strong demand for the Model S Sedan. Tesla reports that the vehicle would be able to take off from zero to sixty miles per hour in just under six seconds, 5.6 seconds in fact. The waiting list stands at 8,000 individual owners and many are awaiting the first ones to be delivered by the summer of 2012.

There is also another vehicle model that the company has begun receiving orders and down payments. This is the Model X, a cross over vehicle with gull wing doors, expected to be available by 2014. Each down payment on the Model S Sedan is pegged at $5,000 for the full price of $57,000 before application of tax credits. Should there be customized features, then the bill increases accordingly.

The main problem with this kind of financing would be the ability of the future client to withdraw their deposits at any time, as there have been no purchase agreements made available for the Model S. Once production starts though, the company is prompting its client base for the need for official contracts for the purchase scheduled for the middle of 2012.