Tesla's Bailout

Although most of the focus of the federal auto industry aid package has no doubt been on Detroit’s big three, others have their hands out, too. Namely, electric carmaker, Tesla. We’ve recently reported some of the hardships Tesla has been enduring, but the problems may be even more severe than previously believed. Not only is the company delivering its 600 pre-ordered Roadsters to customers at a snail’s pace, but its next major initiative, the Model S, hangs in the balance.

To that end, Tesla has applied for a $350 million government loan from funds that the Department of Energy has set aside to subsidize the development and production of green vehicles and technology. This is from the same $25 billion pool of money which GM, Chrysler and Ford are looking to draw their lifelines in the midst of the recent economic fallout.

Tesla is saying that without the loan, the company will not be able to proceed with its next generation of all-electric cars, starting with the plug-in Model S sedan. “We can’t move forward with that without a major amount of capital,” Tesla CEO Elon Musk told the Detroit Free Press. “If we don’t get any government funding, then what we need to do is we need to wait until the capital markets recover, which could be a year or two years from now.”

Some experts, citing cash flow problems, believe that Tesla will not be able to keep its doors open for that long. A recent cash injection from venture capitalists and revenues from the Tesla Roadster are presumably not enough for the company to turn the corner. “Without the government assistance, Tesla will remain a boutique car dealer for the rich and could have trouble staying in business,” Ed Kim, director of industry analysis for AutoPacific Inc. in Tustin, California, told Bloomberg News.

If approved, the majority of the low-interest government loan would be used to develop the $60,000 model S. Some of the monies would be put toward building a $250 million San-Jose-based manufacturing plant where the model S would be assembled. Tesla has reported that it could produce as many as 20,000 model S’ by 2011. Without funding, the company says 2013 would be the earliest this target could be met.

Or perhaps, not at all.