Tesla Motors Inc. started life as a Silicon Valley startup, but the future of the manufacturer of high-end electric cars may be in Los Angeles County.
The company is set to take the wraps off its new all-electric vehicle, a four-door sedan called the Model S, Thursday in Hawthorne. The decision to unveil the car in Los Angeles County instead of at Tesla’s headquarters in San Carlos is a show of respect to the crucial role the L.A. car-buying market plays in the company’s success.
And it’s an acknowledgment that the Model S which Tesla is banking on to become its flagship car of the future was designed at the company’s studios in the shadow of the Hawthorne Municipal Airport just south of the Glen Anderson (105) Freeway.
Meanwhile, Tesla is also eyeing a 78-acre site of a defunct Boeing Co. airplane plant in Long Beach as the possible home of a factory where the company could build the Model S in quantities of up to 20,000 a year, according to knowledgeable sources.
Rachel Konrad, a spokeswoman for Tesla, declined to confirm or deny any prospective sites. But she said Tesla has not finalized a lease anywhere and was evaluating several sites in Northern and Southern California.
It’s unclear what progress Tesla has made, if any, in negotiations for the Long Beach property. A group of investors planned to buy the former manufacturing facility and convert it into a film production studio. But earlier this month, the more than 1 million-square-foot facility fell out of escrow and back on the market.
Tesla originally planned to build the Model S factory in San Jose. But to fund the plant’s construction, Tesla applied for a $350 million federal grant from the U.S. Department of Energy, and the federal government has made it clear that it favors applicants who build on a “brownfield site,” an abandoned industrial facility that may require some cleanup of contamination. That eliminated the original San Jose site.
One argument in favor of an L.A. location for the plant is that it would be close to another company run by Tesla’s chief executive, Elon Musk: Space Exploration Technologies Corp. That Hawthorne company, more commonly known as SpaceX, was founded by Musk in 2002.
Tesla is also searching for a new location for its headquarters, but the L.A. area does not appear to be on its list of possible sites. Konrad said the company is committed to keeping its headquarters in Northern California.
Still, if the Model S plant lands in Los Angeles County, the facility would create several hundred local jobs and tie the future of Tesla more closely to the L.A. area.
Car trouble?
When Tesla started in 2003, few car manufacturers had bigger buzz. Bankrolled by PayPal millionaire Musk, it promised an all-electric vehicle that could keep up with the world’s top autos. The startup’s first model, the Roadster, had the look, speed and starting at $109,000, the price to rival most high-performance makes.
The Roadster quickly became a choice ride of Hollywood celebrities and eco-conscious millionaires, especially in Los Angeles, where about one-third of the 250 Roadsters produced have been sold.
But the company has faced challenges, too. In October, the economic downturn forced Tesla to delay plans to raise $100 million in financing (the company later drew $40 million from investors). Tesla also postponed production of the Model S to 2011 and laid off more than 80 workers, about one-quarter of its staff. Its then-chief executive stepped aside and Musk took over.
Musk declined to comment for this article.
Tesla executives are counting on the Model S to boost the company’s finances and put a shine on its reputation.
Tesla anticipates it will manufacture 20,000 Model S vehicles a year and sell them at a base price of $57,400. That would make it more of a mass-market vehicle than the Roadster; only 1,200 of that model roll off the assembly line annually.
While more than 1,000 people are on the waiting list for the Roadster, eventually the pool of so-called “early adopters” who can afford to buy the car will run out and Tesla will need the Model S and whatever future cars come out of its L.A. design studios to give it appeal to a broader customer base.
But the company will also have to convince consumers to pay almost $60,000 for an all-electric sedan when they could pay about half that for another brand of luxury sedan or a gas-electric hybrid.
“It’s one thing to make a premium $100,000 sports car at low volume; it’s another to compete in a market where other sedans start at the mid-30s,” said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
Design buzz
Tesla’s design studios are tucked away in the back of the main building of SpaceX. A white tent sealed off from the rest of the warehouse where workers weld together rockets, the studios are so top secret that not even SpaceX employees are allowed inside.
For the past seven and a half months, Franz von Holzhausen, Tesla’s chief of design, and his staff of roughly a dozen have labored at the studios around the clock to get the Model S ready for Thursday.
Industry insiders dubbed von Holzhausen the golden boy of Mazda design after he won wide praise for his work on a trio of the company’s concept cars. Von Holzhausen, who came to Tesla in August, said he wanted the design of the Model S to hold its own against luxury sedans from BMW, Audi and Lexus. “It’s going to be very tailored, very refined,” he said in an interview with the Business Journal.
Von Holzhausen also said designing the Model S carried a certain weight because, as the first Tesla-designed vehicle the Roadster was mostly a creation of Lotus Cars in England it would set the tone for any of the company’s models that follow.
“The Model S is really going to be the mainstream definition of the future of the brand,” said von Holzhausen, “so this car still needs to have legs six, seven years from now.”
Tesla expects customers to contact the company with orders for the Model S immediately after it’s unveiled, said Jeremy Snyder, Tesla’s general manager for the southwest region.
Snyder, who runs Tesla’s Santa Monica dealership, said he expected the new model would sell strongly in Los Angeles before branching out to other markets around the country. (Tesla also has a dealership in Menlo Park and plans to open one in Chicago.)
“It’s going to be the most exclusive sedan in America,” he said.
That may be, but exclusivity can’t be its only selling point, Cole said. Especially since Tesla will have to overcome general skepticism about whether all-electric cars are better than plug-in hybrids.
But if the electric car maker can carve itself a larger niche, Cole added, “More power to them.”
