Tesla's Sexy, Electric Model S: Well Timed?

In what sounds like a cruel paradox, forecasters at Cambridge Energy Research Associates are predicting that today’s record low oil prices are short-circuiting investment in new supply, which could mean a dramatic escalation at the pumps when the economy recovers.

The rising chorus gives new urgency to efforts that will wean the U.S. off its dangerous dependence on imported oil. And it made the announcement of Tesla’s new Model S more timely than it might otherwise appear.

With hybrids in a slump and all new car sales off dramatically, now would not seem to be the optimal time to launch a sporty and relatively expensive ($57,400) battery-powered sedan like the Model S. But the four-door, five-passenger car is far more practical and affordable than Tesla’s existing model, the $109,000 two-seat Roadster. And it is eligible for a $7,500 tax credit that will reduce its price to $49,900.

But first Tesla has to actually build it, and that’s a financial story, too. There are 1,000 people on the waiting list for the Roadster, and only 300 who have actually taken delivery of it. Tesla says it will need up to $350 million to launch the Model S, and it’s raising capital with $40,000 deposits on the first 2,000 cars. (Customers willing to wait longer pay only $5,000.) Other carmakers, including Aptera, put deposit money in escrow.

And Tesla is also seeking major federal loans, most notably $450 million from the Department of Energy’s $25 billion fund for electric vehicle manufacturing. That fund, authorized in 2007, has yet to make any loans (but will soon, DOE says). Tesla is seeking a second loan guarantee, for $250 million, from a clean energy fund authorized by Congress in 2005.

If all goes well, Tesla says the very aerodynamic Model S could be in production in two years. The sedan will reportedly get 300 miles on a single charge of its lithium-ion batteries. If true, this will be a significant breakthrough in EV range.