Tesla Raises Funds for Dealerships

Tesla Raises Funds for Dealerships

California electric carmaker Tesla Motors Inc. said it arranged $45 million in new private capital to set up retail sales and service facilities in five cities where real estate is pricey.

Whether the company has enough to fund development of a second car is unclear. Bloomberg reports the $45 million in new capital will also be used to finance the second model -- a four-door sedan. However, trade journal Automotive News, quoting a top Tesla executive, said the company will have to go public to produce the second car.

The second model, the four-door WhiteStar, is due in 2010. Tesla plans a $35 million factory in Albuquerque, New Mexico, to assemble as many as 10,000 of the sport sedans a year, with engineering work being done at a Detroit-area facility. Those cars will sell for $50,000 to $65,000.

The recent financing is in addition to $60 million raised in 2006. Tesla initially was funded by founders of PayPal Inc. and Google Inc. to create a new market for rechargeable electric vehicles.

Tesla told Bloomberg it has 400 orders for its first model, a $92,000 two-seat Roadster convertible, built by engineering partner Lotus Cars in England. The Roadster is powered by 1,000 pounds of lithium-ion batteries. The company claims it goes from zero to 60 miles per hour in about 4 seconds. Roadster deliveries are to begin later this year to celebrity customers including California Governor Arnold Schwarzenegger and actor George Clooney. The company hopes to sell 1,200 a year.

Tesla will sell its vehicles through factory-owned stores rather than franchised dealerships.

"We can't hand over the car to an independent franchiser," Darryl Siry, Tesla's vice president of marketing, told trade journal Automotive News in an interview. "A traditional dealer would spend his time apologizing for the car's shortcomings rather than talking up the benefits. We are going to design our own sales experience from scratch."

"Tesla outlets are to have the atmosphere of an Apple Store rather than a car dealership," he added. "The stores will be deliberately placed away from auto malls."

The first store will open in Santa Monica by November. Other stores will follow in San Francisco, New York, Chicago and Miami. A second group of stores is planned for markets that include San Diego, Seattle, Denver and Boston.

Siry said Tesla has enough capital to build stores in cities with pricey real estate. The company has arranged for $45 million in venture capital. But Tesla must go public to fund development of the sedan and construction of the New Mexico plant, he told Automotive News.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.