The Next Model T? Electric-Car Startup Tesla Files for $178 Million IPO

Tesla Motors will use proceeds from its IPO to begin production of its second model, this sedan called Model S.
Tesla Motors will use proceeds from its IPO to begin production of its second model, this sedan called Model S.

California electric-car startup Tesla Motors is set to become the first U.S. automaker to go public in more than 50 years, since Ford's (F) debut back n 1956. The company Tuesday filed for a $178 million initial public offering, with shares priced between $14 and $16 per share. The offering would include 10 million shares from the company and 1.1 million shares from its stockholders.

Palo Alto, Calif.-based Tesla also plans to sell shares to Toyota (TM) in a $50 million deal it previously inked with the Japanese carmaker. This private placement would take place around the same time as the IPO, says Tesla, whose stock will trade on the Nasdaq under the symbol "TSLA." Overall, Tesla expects $185 million in net proceeds from the sale of 10 million shares (at $15 per share) and the private placement with Toyota, according to the filing with the U.S. Securities and Exchange Commission.

Tesla Motors has done a good job of attracting public attention. It's got a fast, sleek electric sports car; a high-profile chief executive, PayPal co-founder and SpaceX founder Elon Musk, who recently appeared in a cameo on Iron Man 2; and it's successfully styled itself as the "little engine that could" in a race against major automakers to produce fuel-efficient cars. The company posted a net loss of $29.5 million and a revenue of $20.8 million during the first quarter of 2010.

Making History

The IPO will give Tesla the much-needed capital to grow, particularly as it prepares to begin production of its second car, the Model S, in 2012. The company, along with other automakers hoping to lure consumers with all-electric or gasoline-electric hybrid vehicles, are not likely to see the new market take off for years.

The U.S. market for all-electric and hybrid cars, including the so-called "neighborhood vehicles" that aren't allowed on highways, is likely to grow from about 4,000 to 5,000 units in 2009 to about 500,000 units in in 2016, according to Stephen Spivey, an automotive and transportation analyst at Frost & Sullivan. "If you look at the electric vehicle market, you are looking at vehicles that are beyond the reach of most consumers," he says. "Is this is a right time for an IPO? Probably not, if you are trying to make money today. It takes a lot of capital to get these ventures off the ground."

Tesla, founded in 2003, started shipping its first model, the sporty Roadster, in 2008. With a price tag of $109,000, the Roadster is hardly meant for the masses. But Tesla used the Roadster to hone the engineering of more affordable designs. The company's second model, the Model S, is expected to cost about half the price of the Roadster at $49,900, after a $7,500 federal tax credit.

Tesla has scored $465 million in loans from the U.S. Department of Energy to engineer and assemble the Model S and to build a related powertrain factory at company headquarters in Palo Alto. Last month, Tesla said it would spend $42 million to buy a defunct Toyota assembly plant in Fremont, Calif., to assemble the Model S. The two companies also have talked about working together to develop electric cars, but they hadn't yet signed any agreements as of Tesla's SEC filing in May.

Other Consumer Options

Major automakers such as General Motors, Nissan and Ford plan to roll out different types of electric cars in the coming year. GM's Chevy Volt, a still unpriced plug-in hybrid, is expected to roll into showrooms later this year. Meanwhile, Nissan's all-electric LEAF will have a suggested retail price of $32,780, not including any government incentives.

Tesla isn't the only startup company in the electric-car market, either. Coda Automotive in Santa Monica, Calif., plans to introduce its first electric car later this year. The company hasn't specified the sticker price, but previously estimated it would be in the low $30,000 range, including the federal tax credit.

"As consumers become more accustomed to the technologies, the prices will come down, and I think you will start to see more people at least considering these vehicles," Spivey says.

A key factor keeping the electric car market from accelerating quickly is the need for infrastructure and equipment enabling consumers to charge their vehicles at home and on the road. On Tuesday, Campbelll, Calif.-based Coulomb Technologies, which sells charging equipment, says it's teaming up with Siemens Energy to market the equipment and the software to charge cars and bill customers.