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Tesla will start repaying federal loans early

7:09 AM, Oct 4, 2012   |    comments
Motor Trend has given its Car of the Year award to Tesla for its Model S electric sedan. Image provided by Tesla Motors
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Reacting to reports that electric-car production is lagging and that the company could face a cash crunch, Tesla Motors CEO Elon Musk today issued a statement via his blog to dispel both notions. He even added that Tesla will start paying off its Energy Department loan early.

It will pay $14.5 million towards its March 15 payment next year in addition to the $15 million is has already put in for this year's Dec. 15 due date. Tesla has a $465 million loan from taxpayers, a program that became controversial after solar panel maker Solyndra failed.

Tesla makes the Model S, a luxury sedan with range up to 265 miles before it needs to be recharged and a starting price of about $57,000. The California-based company is being closely watched because of its breakthrough technology and its large loan from the U.S. Energy Department.

Musk says Tesla's financing round is complete and that Tesla will become cash positive by the end of next month. He says Tesla might have come off as overly pessimistic in its corporate filing and in trying to adhere to rules in talking with investors.

With the global supply chain susceptible to interruption due to natural calamities, Musk wrote that his management team felt they needed to raise more capital to protect the company. He noted a supplier recently had a flooded factory that delayed Tesla's production.

He says that while Tesla had "reduced vehicle delivery guidance" for the rest of the last half of the fiscal year, being in the "steepest portion of our production ramp" makes it look like the company is farther behind in making cars than it actually is.

In the last week of September, Tesla made about 100 cars. That compares to about 25 cars in the first week of September when production slowed due to supply constraints.

Tesla made 359 cars last last quarter.

"While we are indeed a few weeks later than we would like, this is perhaps not a terrible outcome for a product as advanced and complex as the Model S, particularly given that Tesla is doing manufacturing of full vehicles for the first time with a new team and new suppliers," he writes.

As for repaying the loan, Musk says the company has never asked for any delays and has made its payments on time. The Energy Department has asked if Tesla would be willing to repay its loan early if it has excess cash.

"We will be initiating an advance payment today to prefund the principal payment that is due in March, 2013," Musk says."We have a duty at Tesla, having accepted this loan as a portion of our capital, to repay it at the earliest opportunity. We will do exactly that."

USA Today

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