Tesla slashes production costs, eyes July profit

LOS ANGELES, CALIFORNIA - Electric car start-up Tesla Motors Inc has slashed production costs for its flagship Roadster sports car by 43 percent to about $80,000 per vehicle as of June, its chief executive said.

Tesla, one of the biggest players in the burgeoning electric car sector, could be profitable as soon as next month, helped by demand for its premium-priced Roadster Sport, CEO Elon Musk said in a blogpost on the company's web site.

"Combined with a steady production volume of 20 to 30 per week in the third quarter this year and a good take-up rate of the higher priced Roadster Sport, we expect to cross over into profitability next month," Musk wrote.

Tesla had said earlier this year that it expected to be profitable by the middle of 2009.

In his blog post, Musk said the Roadster's production costs had dropped to $80,000 from about $140,000 in 2007, the year before it began delivering the Roadster. The vehicle sells for more than $100,000.

Most of Musk's lengthy blog post, however, was devoted to shooting down the merits of a lawsuit filed by former Tesla CEO Martin Eberhard, who was removed from the company's top spot in 2007 and later forced out as Tesla faced cost overruns and production delays.

In his May complaint, Eberhard said Musk had sought to take credit for the idea behind Tesla and had defamed him in media interviews after orchestrating Eberhard's ouster.

In his blog post, Musk said Eberhard was only fired after the company learned that the cost of the Roadster would be about $140,000, more than twice what Eberhard had promised. Musk also said Eberhard had tried to hide the true production cost from the board of directors.

"It would have been forgivable if Eberhard had simply been in over his head and didn't know how bad it was," Musk wrote. "However, here we had a situation where he was in possession of materially negative information, yet failed to inform the board and implied to the management team that they would lose their jobs if the information was discovered by the board."

Musk, who made billions founding eBay Inc's PayPal online payment service before starting Tesla, also said the company would soon be responding to the lawsuit in court. Tesla unveiled in March its newest product, the $49,900 Model S four-door family sedan, which it said was the first highway-ready electric vehicle within the price range of most car buyers.

Last month, German luxury car maker Daimler AG paid about $50 million for a 10 percent stake in Tesla, expanding its presence in the growing market for low- and no-emissions cars.

California, with its strict emissions regulations, is a hotspot for the evolving electric vehicle market. Tesla is vying with a coterie of start-ups, including Coda Automotive, that are developing automobiles for a wider American consumer market.


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