Big-ticket Tesla has eye on mainstream with 2016 electrics

It's a small-volume producer of $100,000 electric sports cars today. But Tesla Motors Inc. plans to move into mainstream U.S. auto sales over the next six years.

Tesla intends to use $465 million in low-interest loans from the U.S. Department of Energy to support a two-step move from exotic sports cars to lower-priced family vehicles.

In 2011, the California company will begin producing its Model S electric family sedans priced at around $49,900. Five years later, it plans to introduce a more mass-market electric vehicle for less than $30,000, the company says.

The proposed Model S will have room for four adults and rear-facing seating for two children in its cargo area. Tesla thinks it can sell about 20,000 a year.

$109,000 to below $30,000

Plans for a vehicle below $30,000 mark a dramatic departure for a Silicon Valley startup that few in the industry have taken seriously. Until now, Tesla wasn't much of a threat.

Its sole product is a two-seat sports car, the Tesla Roadster, that sells for $109,000. The Roadster went on sale in the United States last fall, and so far, Tesla has sold just 700.

But things are changing rapidly.

This summer, the Department of Energy committed to lending Tesla $465 million. The company intends to spend $100 million of that to build a powertrain plant in the San Francisco Bay Area. The remaining $365 million will help open an assembly plant in Southern California to produce the higher-volume Model S, Tesla spokeswoman Rachel Konrad says.

The new factories will begin to enable Tesla to reduce its high production costs.

The battery pack that runs the current two-seater weighs about 1,000 pounds. To compensate, Tesla uses lightweight carbon-fiber body panels. Because the car is so low-volume, Tesla does not produce its own panels but pays a premium to import them from Sotira, a French company.

The new assembly plant will allow Tesla to use aluminum body panels, Konrad says.

Tesla also will try to reduce the manufacturing cost of its lithium ion battery packs. The packs currently represent about $30,000 of the car's $109,000 retail price. Konrad says the cost of the batteries has been declining 8 to 10 percent a year.

240 miles on a charge

The Tesla sports car runs 240 miles on a charge. In contrast, the electric vehicles being developed by Nissan Motor Co. and Mitsubishi Motors Corp. promise about 100 miles on a full charge. General Motors Co.'s plug-in Chevrolet Volt will go 40 miles on a charge, and then the motor will kick in to recharge the battery pack.

Konrad says the 2011 Model S will come with three interchangeable battery options. One will provide a 160-mile range on a charge; one, a 230-mile range; and a third, a 300-mile range.

Tesla plans to let owners swap out batteries as needed. Konrad says a family that bought the car with a low-range battery could rent the long-range battery when extended driving range might be needed.

By Lindsay Chappell- Automotive News