Tesla has lost nearly $1 billion selling high-end electric sports cars to the likes of George Clooney. Now it’s going to attempt to sell them to the rest of us — and try to make money doing so. The company’s first mass-market, five-seat sedan will be delivered Friday. The car, called the Model S, will either propel the company to profitability or leave it sputtering on the fumes of a $465 million government loan.
“The Model S is the going to be the first true mass market product experiment for Tesla, one they cannot afford to fail,” says Jesse Toprak, vice president of market intelligence at car buying site TrueCar.com.
Tesla, the brainchild of PayPal billionaire and SpaceX founder Elon Musk, has always been a moon shot. Analysts and auto industry insiders scoffed at the idea that a new car company could be created from scratch and built in a high-cost state like California. Boardroom turmoil and a string of technical problems repeatedly delayed the launch of the company’s only car, the $109,000 two-seat Tesla Roadster. Tesla survived by creating something so unique that the price tag was almost irrelevant: A beautiful car that could tear up a race track without burning a single drop of gasoline. Celebrities flocked to it, giving Tesla a cache that an established brand like Cadillac could only dream of.
Now Tesla must do something much more difficult. It has to convince more traditional car customers to buy an expensive vehicle with limited range from a small, untested company. The Model S carries a starting price of $49,900 after a federal tax credit — about the same as a Lexus RX hybrid crossover. Models top out at $101,550, or about the same as a hybrid Fisker Karma sports car.
A car that’s half the price of the Roadster lets Tesla break into a bigger market, but those customers will take a hard look at the value they are getting. This isn’t a trophy car to park on Rodeo Drive. It’s a sedan for hauling kids and groceries.