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Tesla’s Straubel Keeps Motors Rolling as Stock Surges 57%

*from www.bloomberg.com, May 14, 2013 (To view original article click here.)

Take Away #1: Elon Musk and JB Straubel’s shared belief that consumer electronics advances could be applied to more earthly modes of transport is the cornerstone of Tesla Motors Inc. (TSLA).

Key Facts and Figures:

  • Fresh off the sale of PayPal and starting another business, commercial rocket service Space Exploration Technologies Corp., Elon Musk met kindred spirit JB Straubel.
  • Straubel’s first company, Volacom Inc. designed unmanned electric aircraft.
  • Straubel sold the assets to Boeing Co. and was working with it in late 2003 when he, a Stanford graduate himself, attended a Stanford University speech by Musk on his startup SpaceX.
  • Then, over lunch in Los Angeles, the two moved from ideas on aerospace to electric vehicles.
  • “The whole thing really grew out of an idea of how to leverage commercial advances that were happening in lithium-ion batteries,” said Straubel in a recent interview.
  • The two have very different personalities as Straubel is a soft-spoken, publicity-shy engineer, while Musk is famously voluble and frenetic.
  • However, they quickly found a shared passion for the idea that lithium-ion battery cells used in consumer electronics could be rigged up to power a car.

Take Away #2: Straubel’s work on the company’s powertrain has made him Musk’s semi-secret weapon.

Key Facts and Figures:

  • In 2004, Straubel joined Musk and three other men to turn Tesla from a concept into a startup with a goal of bringing a new type of electric car to market.
  • With some of Musk’s proceeds from the $1.3 billion sale of PayPal to eBay Inc. (EBAY), Straubel put a crew together in his garage wiring up thousands of cells.
  • Since then, while other companies, from startups to giants, have struggled with electric batteries, Straubel, as CTO, has kept Tesla running.

Take Away #3: Tesla rose 14% yesterday to a record close of $87.80.

Key Facts and Figures:

  • Last week Tesla reported its first quarterly profit.
  • Tesla shares have surged 57% through yesterday since announcing its profit on May 8.
  • The shares today declined 0.5% to $87.33 at 12:51 p.m. New York time.
  • The company named for inventor Nikola Tesla has delivered more than 10,000 Model S sedans and Roadsters since 2008 and stands tall among recent U.S. auto startups, with most failing.

Take Away #4: After years of skepticism about Palo Alto, California based Tesla’s visibility – starting from the unveiling of its Roadster in July 2006, the stock soared after that first profit report.

Key Facts and Figures:

  • The next day, a Consumer Reports magazine review of the Model S, which starts at $69,900, ranked it with the best vehicles it has ever tested.
  • “While we certainly expected and hoped we’d get the company into the black,” Straubel, whose name is Jeffrey but is known by his first two initials, JB, said, “There’ve been plenty of times we we’re scared as hell.”
  • Tesla has a 2013 target of 21,000 Model S deliveries.
  • If it achieves that target, that would surpass combined global volume for Italian luxury marques Ferrari SpA, Automobili Lamborghini SpA and Maserati SpA, which together sold 15,701 cars in 2012.
  • The success up to this point would not have happened without Straubel’s patented powertrain that has underpinned Musk’s goal: electric cars that are appealing for more than the battery pack.

Take Away #5: While designing the pack and motor wasn’t the company’s sole challenge at the outset “it was the problem we had to solve first,” said Straubel.

Key Facts and Figures:

  • Batteries with large lithium-ion cells were linked to fires in January on Boeing’s 787 Dreamliner, halting production.
  • In 2011, General Motors Co. (GM)’s Chevrolet Volt caught fire three weeks after a U.S. crash test.
  • Afterward, GM strengthened the plug-in hybrid car’s battery pack to prevent cells from igniting if damaged in an accident.
  • Defective batteries in Fisker Automotive Inc.’s plug-in Karma sedan made by A123 Systems Inc. led to a March 2012 recall, after owners and Consumer Reports said the cars were prone to unexpected shutdowns.
  • The battery maker filed for bankruptcy in October.
  • Model S has had no recalls since delivery began in June 2012, Musk and Straubel said in interviews this month.
  • “We started out very, very conservative on safety, because we had to; there were no guidelines,” Straubel said.

Take Away #6: The company’s approach has been criticized as too expensive and complex.

Key Facts and Figures:

  • Tesla’s battery uses thousands of small cells, unlike those in competing plug-in models that are designed using hundreds of larger lithium-ion cells.
  • “Its high-cost model doesn’t easily lend itself to a lower-cost vehicle,” said K. Gopal Duleep of consulting firm HD Systems Inc.
  • That makes it difficult to move form high-priced cars such as the Model S and the Model X crossover due next year to selling more mass-market vehicles priced below $40,000, Duleep said.
  • Musk wants to have a vehicle in that price range within a few years.
  • In its favor, Tesla’s in-house-designed motor and the power electronics that control how the system works are “state of the art,” Duleep said.
  • That’s Straubel’s work.

Take Away #7: From initially using “commodity” cells, Tesla now makes its packs with customized cells that cost 50% less than those in the Roadster, Straubel said.

Key Facts and Figures:

  • His first Tesla pack was a 990-pound battery with 6,831-laptop-style lithium cells for the $109,000 Roadster.
  • That allowed the car to travel as far as 245 miles per charge and speed from 0-60 mph in 3.7 seconds.
  • Now with the new packs, along with improved durability and performance, “the cost point that we’ve been able to build a pack at using this cell size is also really compelling,” Straubel said.
  • As the company seeks further cost reductions, it has avoided pack-related recalls, fires or failures that have affected competitors large and small.
  • “This is one of our major core competencies,” Straubel said. “It’s not by far the only one, but it’s the one that’s been with us the longest.”

Take Away #8: The Model S is Tesla’s first fully developed car, mating its own design, lightweight frame, in-car electronics and navigation system to the company’s battery and motor that give the car as much as 265 miles of range per charge.

Key Facts and Figures:

  • Along with its design, speedy acceleration, quiet ride and interior materials, Model S features Web-based navigation, data and entertainment features designed in-house.
  • Musk and Straubel say that’s what sets it apart from luxury rivals.
  • Owners “after living in the car for a couple of days don’t think much about the battery pack, and how many cells are in it,” Straubel said.
  • “You think way more about how responsive is the touchscreen? How well is Google Maps rendering?” Straubel said.

Take Away #9: Straubel “knows the pulse of this technology,” said Greg Bernas, a chief engineer for Toyota Motor Corp., who worked with him during the development of Toyota’s RAV4 EV that uses a Tesla battery pack and motor.

Key Facts and Figures:

  • Toyota President Akio Toyoda and Musk had said in May 2010 the companies would work together, building on Toyota’s plan to buy a $50 million stake in Tesla.

Take Away #10: Tesla delivered 4,900 units of Model S in the first three months of 2013.

Key Facts and Figures:

  • That made it North America’s top-seller of rechargeable vehicles, topping GM’s Chevrolet plug-in Volt and Nissan Motor Co.’s battery-powered Leaf.

Take Away #11: Tesla’s potential rivals haven’t fared as well and Tesla had its own dire experiences, including a delay in the start of Roadster production in 2007 on quality concerns.

Key Facts and Figures:

  • In 2008, cost overruns, dwindling funds and recession led the company to cut a quarter of its workforce.
  • Daimler AG (DAI), maker of Mercedes-Benz luxury cars, came along in 2009 with a contract to make battery packs, and invested $50 million.
  • Then Tesla won a $465 million Energy Department loan to build the Model S that helped keep the company going, as did investments from Toyota and Panasonic Corp.

Take Away #12: Tesla’s 2010 IPO, the first by a U.S. carmaker in 54 years, raised $226 million, 27 percent more than it originally sought.

Key Facts and Figures:

  • The company’s market capitalization has swelled to almost $10 billion, a development Straubel didn’t anticipate.
  • “Five years ago, the consensus certainly was not that we’d get to $55 a share,” he said May 2, before the latest jump.
  • By yesterday, Tesla is worth more than Fiat SpA (F), the majority owner of Chrysler Group LLC, and almost as much as Mazda Motor Corp.

Take Away #13: Tesla’s focus has broadened from its electric powertrain to how well Model S compares with luxury cars from Mercedes-Benz, BMW and Audi, Musk and Straubel said.

Key Facts and Figures:

  • “Now Tesla has really quite deep experience in vehicle design, in lightweight chassis and infotainment,” Straubel said. “That’s what I’m really proud of.”

*To view original article from www.bloomberg.com click here.

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