Tesla Motors was believed to be at the verge of bankruptcy just a few months ago but company CEO Elon Musk says he expects the startup EV maker to be profitable by next month. Musk addressed Tesla’s profitability in a blog refuting a lawsuit by former Tesla CEO Martin Eberhard.
Tesla’s initial estimate had the Roadster pegged at a $65,000 per unit cost. However, Musk, along with the rest of Tesla’s board members, quickly realized in late 2007 that the per unit cost of the Roadster was actually closer to $140,000. This posed a significant problem to the company as they were selling each Roadster for under $100,000.
Musk began an aggressive cost cutting scheme as soon as the problem was discovered, setting the company up for eventual profitability. Tesla ’s per Roadster cost is down to just $80,000, which will push the company into the black next month.
“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 said in the blog.
Musk attributed much of the cost savings to moving battery production to California from Asia. Although Asia is known for its low-cost manufacturing, shipping costs associated with heavy battery packs essentially negated any cost savings. “Avoiding the cost of shipping a half ton pack from Asia also meant significant savings on shipping costs. This is a much bigger deal for a heavy and bulky product than a small consumer electronics device, where outsourcing to Asia makes a lot more sense,” Musk said.
Musk didn’t tackle the subject of costs associated with the company’s forthcoming Model S sedan, but the lessons learned from the Roadster project will likely mean the company’s next car will be profitable from day one.
