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August 14, 2012

Elon Musk: Next Six Months Crucial to Tesla's future

Technology Review - Elon Musk is considered one of today’s most audacious technology entrepreneurs. But even he recognizes that Tesla Motors is entering a challenging period for the electric vehicle company.

Tesla began production of its second car, the Model S sedan in June. This month, the company said that it would meet its target of delivering 5,000 Model S vehicles this year.

Aol Energy - Elon said "The challenge Tesla faces over the next several months, which is a very difficult one, is to scale up production and achieve enough of a gross margin on the product that we get to a situation where we're cash flow positive. If we aren't able to do that we will join the graveyard of all the other car company startups of the last 90 years."

Musk said that if margins improve, Tesla would begin making "a couple of 100,000 units" of its 3rd generation car with a $30,000 sticker price and 20%-25% lighter than the Model S.

"We can show that it's technologically possible to other manufacturers. If Tesla doesn't make it I hope we have nonetheless served that purpose. I don't want to sound dour but it's definitely going to be a tough six months."



Competition for plug-ins is heating up. The major automakers, including Ford, General Motors, Nissan, and Toyota, have all released plug-in vehicles which, although more expensive than comparable gasoline cars, have a lower price than the Model S. Tesla is also meeting competition from hybrids and EVs in the luxury category as well.

Musk last week said the company can’t afford to make many mistakes over the next six months.

"We can show that it's technologically possible to other manufacturers. If Tesla doesn't make it I hope we have nonetheless served that purpose. I don't want to sound dour but it's definitely going to be a tough six months," he said, according to AOL Energy.

If sales of the Model S and Tesla's Model X SUV don’t materialize as hoped, Tesla does have other sources of revenue. It currently supplies electric powertrains to other automakers, including Toyota for its RAV4 Electric. It is also working with SolarCity, another company Musk has invested in, to supply batteries to back up WalMart’s solar panels at 90 stories. Tesla could also become an electric brand within a larger automaker.

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