While the idea and the technology are great, the next time a person uses Tesla Motors as an example of the new auto makers that will replace the “lumbering Big Three” they should be reminded of just how badly Tesla screwed up in its early days. In an email to customers after raising the price on reserved vehicles, CEO Elon Musk basically stated that their early financial controls were a mess and key parts and suppliers were poorly selected or designed. He wrote:
When the initial base price, for cars after the Signature 100 series, of $92k was approved by the board a few years ago, it was based on an estimated vehicle cost of roughly $65k provided by management at the time. This turned out to be wrong by a very large margin.
An audit by one of the Series D investors in the summer of 2007 found that the true cost was closer to $140k, which was obviously an extremely alarming discovery and ultimately led to a near complete change in the makeup of the senior management team. Over the past 18 months, observers will note that Tesla has transformed from having a senior team with very little automotive experience to one with deep automotive bench strength. We now have executives with world class track records running everything from design to engineering to production to finance.
To bring the cost of the car down, we have reengineered the entire drivetrain, which is now at version 1.5 and will be at version 2 by June. The body supplier was also switched out from a little company that was charging us nutty money and had a max production of three per week to Sotira, who supplies high paint quality body panels to Lotus, Aston Martin and others. In the process, we had to pay several million dollars for a whole new set of body tooling, as the old tooling had been made incorrectly. The old HVAC system was unreliable and cost almost as much as a new compact car, so also had to be replaced. The wiring harness, seats, navigation system and instrument panel also had to be modified or replaced.
After reengineering and retooling virtually the entire Roadster and completely restructuring our supply chain, we are now finally coming to the point where the variable cost of the car (to be clear, this excludes fixed cost allocation) is between $90k to $100k. With a lot of additional effort by the Tesla team and the help of our suppliers, we should be at or below $80k by this summer. There is some variability here due to exchange rate shifts. Although we gain an automatic currency hedge by selling in both Europe and the US, we are still vulnerable to the Yen, which is very strong right now.
(via AutoblogGreen)