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TheStreet Open House

How Tesla Plans to Revolutionize the Electric Car

This interview was June 12, and all prices and dates reflect then.

PALO ALTO, Calif. (TheStreet) -- Tesla Motors (TSLA) headquarters is a stark contrast to other auto manufacturers. Its design and layout is more like that of a tech startup, than an automotive giant like Ford (F) or General Motors (GM).

Perhaps that's why Tesla, which cites Apple (AAPL) as part of the inspiration for its retail experience, is attempting to turn the car industry on its head, similar to Apple in the smartphone and tablet markets.

I recently had a chance to sit down with Deepak Ahuja, Tesla's CFO, to discuss a wide array of initiatives. These included Tesla's chances of selling more than 20,000 Model S vehicles next year, the state of the electric vehicle market, how the falling oil prices, the company's power train deals, as well as several other topics.

Chris Ciaccia: How achievable is a 20,000 unit run rate by 2013? Is there anything that could prevent this, whether it be macro headwinds, or poor product response by the customer?

Deepak Ahuja, Tesla CFO: As you know from your experience in the automotive industry, a 20,000 unit target that we have set for ourselves is quite modest. It represents 1%, or even less than 1% share of the premium vehicle market in that price range. I think we have set for ourselves, even before we started getting all of these reservations, our target was 20,000 units and we have tried to make it modest in our minds. The reservations we've been continuing to receive, we have over 10,000 at this point without a single test drive.

We feel very confident that the car [Model S] is going to be awesome from every aspect. The functionality, the design, the power train performance, and the fact that it's an electric vehicle. So, I'm pretty confident that we should be able to achieve 20,000 units in sales, and hopefully do better. But at this point, we'll stick with 20,000 units.

Ciaccia: Tesla's vehicles do not have an internal combustion engine and oil prices have dropped from around $110 per barrel to around $85 per barrel. Have you seen any push back from customers perhaps canceling because they don't see the benefit of having an electric vehicle anymore? If oil prices continue to decline, does that materially hurt Tesla's business?

Ahuja: I think there are many ways to look at that issue. Firstly, the car we want to bring to market, we want to make an aspirational car on its own merit, beyond the fact that it's an EV [electric vehicle]. We want people to buy this car because it has amazing innovation, terrific user interface, awesome driving characteristics and dynamics.

We don't want people just to buy this car necessarily because of the savings on a cost of ownership basis. Having said that, we also want to offer a very good value for our customers where the cost of ownership helps them. At present price of gasoline, the savings against some of the competitors can be as much as $2,500, or $2,400 per year, in terms of gasoline, versus the cost of charging. That's very significant. Sure, the price of gasoline may drop short-term, may go up, it's very hard to predict.

We still think the savings are substantial the customer is receiving, and this is in addition to being green, and using less emissions for people who look at all aspects. We don't see a direct correlation coming to the bottom line between the price of gas and flow through into reservations, or cancellations, right away. I think there's a bigger picture, and a bigger story here.

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