Watch CBS News

Tesla Gets $465 Million Government Shot in the Arm

It's been a big week for Tesla Motors CEO Elon Musk. And it's only Tuesday. Musk started the week by firing off a detailed rebuttal of sorts -- in a lengthy blog post -- to Martin Eberhard's lawsuit against him. Today, Tesla received $465 million from the Department of Energy to help build its electric Model S sedan as well as manufacture electric powertrains.

Tesla is one of three companies -- Ford Motor Company and Nissan are also on the list -- to receive this first round of low-interest loans issued by the DOE's Advanced Technology Vehicles Manufacturing Loan program, a competitive process that attracted more than 100 applicants and which will eventually issue up to $25 billion in federal loans. To qualify for the loans, companies need to make cars and components in the U.S. that increase fuel economy at least 25 percent above 2005 levels.

Noticeably absent from the money list were the two other major U.S. automakers -- GM and Chrysler. The two companies, which have both received billions in federal bailout money already, are not considered financially viable, one of the crucial requirements of receiving the DOE dollars. BNET Auto blogger Jim Motavalli gives more details on the Nissan and Ford loans.

It's good to see some of the $8 billion in federal loans awarded today, go towards the development of electric cars. Even though the bulk of the funds go to auto giant Ford and to a lesser degree, Nissan, it's a positive sign that some money is making its way to smaller, innovative automakers. The $465 million plus Daimler's recent $50 million investment for a 10 percent stake in Tesla will go a long way in bringing the Model S to market more quickly.

About $365 million of the low-interest will be used to set up a manufacturing facility in California and the remaining $100 million will go towards an electric drive train manufacturing plant, which would include lithium-ion battery pack production. This plant, expected to employ 650 people, will sell its battery packs and electric drivetrains to other automakers. Tesla is finalizing its site selections for the two facilities in California, the company said in a press release issued today.

The Tesla loan is certainly a sign of faith in the Model S, which the DOE noted is expected to be $50,000 cheaper than the Roadster, its first electric car. The Model S has an anticipated base price of $49,900 after a $7,500 federal tax credit, Tesla said in a press release today. The production of the Model S is expected to begin in late 2011 and employ 1,000 people at its facility, the company said.

Earth2Tech aptly points out, Nissan's sufficient head start and ambitious plans to produce electric cars for the mass market. The company will bring its costs down partly by leasing the battery pack, the most expensive part of most electric cars.

The loan almost makes one forget about the impending Musk-Eberhard smackdown. Musk's blog post rebuttal offers a painfully detailed breakdown of the company's problems with co-founder Eberhard, who was ultimately fired by the board several years ago. Musk describes the blog post as "setting the record straight" and goes onto counter claims made in Eberhard's lawsuit.

The post is an entertaining, but is really a distraction for the company. We can all relate to the occasional need to vent. However, as Musk says in the post the company plans to "respond fully in court soon." And he probably should have stopped right there, before going on to give a step-by-step accounting of the company's problems with Eberhard.

The post does detail progress within Tesla in the past 18 months including its relationship with Daimler and their plans to jointly develop an affordable electric vehicle, to be announced later this year.

More details of the loan announcement:

  • Ford will receive $5.9 billion to help the company produce 13 more fuel efficient models. The money will be used to modify factories in in Illinois, Kentucky, Michigan, Missouri and Ohio.
  • Nissan gets $1.6 billion to build an advanced battery manufacturing facility and make changes to its Smyrna, Tenn., factory. The Tennessee factory would be used to build advanced electric cars. The funds that go to Nissan will stay here in the U.S.
Photo of Model S by Tesla Motors
View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.