Don’t Forget: Tesla Is Moving Into A Difficult Financial Period

Tesla Model A Alpha Electronics Version

Electric car maker Tesla’s (s TSLA) latest news is that it plans to raise another $234 million in a combination of a follow-on public offering and a private placement, selling shares to Tesla CEO Elon Musk and Daimler affiliate Blackstar Investco. While it’s good news for Tesla that it will have these new funds to develop its third electric car the Model X, this latest funding underscores how Tesla will be transitioning into a period where the company will be generating a lot less revenue for several months — hence part of the reason it needs to raise more funds now.
Tesla plans to end production of its first car the Roadster in December 2011, and will be selling the remaining Roadster inventory in stock at that time within early 2012. Tesla points out itself in its S-1 (for the follow-on offering), that: “We currently generate a significant percentage of our revenue from the sale of our Tesla Roadsters. . . Prior to the launch of our Model S, we anticipate our automotive sales may decline, potentially significantly . . . We anticipate that we will generate limited revenue from selling electric vehicles in 2012 until the launch of our Model S.”
The Model S is supposed to officially launch in mid-2012, but will likely ramp up into larger volumes towards the end of 2o12, and into 2013. That’s assuming the launch of the Model S is on time — the original Roadster launch was months behind schedule. Tesla notes in its S-1: “The launch of our Model S could be delayed for a number of reasons and any such delays may be significant and would extend the period in which we would generate limited revenues from sales of our electric vehicles.”
At the same time, while I previously thought part of this revenue gap would be overcome by Tesla’s third party power train sales, Tesla also says in its recent S-1 that Tesla doesn’t have any signed agreements for powertrain component sales after 2011. Tesla’s current deal with Toyota for prototypes and development of the RAV-4 EV is supposed to end in 2011 and Toyota hasn’t appeared to have yet awarded Tesla a supply deal for the commercial version of the RAV4 EV.
Tesla also has a deal to build a trial run of 2,100 battery packs and chargers for Daimler’s Smart vehicles, as well as a development and production deal with Daimler for a battery pack and charger for a pilot fleet of its A-Class electric vehicles to be introduced in Europe in 2011. But Tesla notes in its S-1 that “there are no assurances that we will be able to secure future business with Daimler,” as Daimler has indicated it plans “to produce all of its lithium ion batteries by 2012 through Deutsche Accumotive GmbH & Co. KG, an entity affiliated with Daimler, and has announced it has entered into a joint venture with BYD Auto to collaborate on the development of an electric car under a jointly owned new brand for the Chinese market.”
The revenue gap during the beginning of 2012 and mid to late 2012, could be significant and could seriously hinder Tesla’s growth. If you remember Tesla went through a tough funding spot in late 2008 when the recession hit and Musk ended up putting a sizable chunk of his own money into the company. Now Musk is putting another $40.55 million (on top of the rest of his shares) into Tesla via the private placement. Can Musk once again be the rock that gets Tesla through tough financial times, even at this later stage of the company?