Lotus to end production of Tesla Roadster in 2011

In its filing for an initial public offering on Friday, Tesla Motors announced plans to discontinue the Tesla Roadster after 2011.

Referring to Lotus’s plans to produce the next Lotus Elise and Exige, the statement from Tesla said, “we do not plan to sell our current generation Tesla Roadster after 2011 due to planned tooling changes at a supplier for the Tesla Roadster”.

Most assembly of the Roadster is carried out by the Lotus factory in Hethel. Final assembly for U.S.-bound cars then takes place at a facility in Menlo Park, California. For European deliveries, the full vehicle is assembled on-line at the Lotus facility and pre-delivery inspection occurs at a nearby Tesla facility in Wymondham, England.

The timing means that Tesla may have no new cars to sell for a period until the upcoming Model S sedan is produced in 2012.

In the filing, Tesla details its arrangement with Lotus:

We are dependent upon our relationship with Lotus for the manufacturing of the Tesla Roadster.

In July 2005, we entered into a supply agreement with Lotus pursuant to which Lotus agreed to assist with the design and manufacture of our Tesla Roadster. Although we complete the final assembly of our Tesla Roadster in our Menlo Park facility for vehicles destined for the United States market, currently we are dependent upon Lotus to complete the initial portion of the assembly process of the Tesla Roadster for us in Hethel, England and we expect to be so until we discontinue sales of our current generation Tesla Roadster. We currently do not intend to sell our current generation Tesla Roadster after 2011 to accommodate planned tooling changes. We anticipate that our next generation Tesla Roadster, which we only plan to launch after we begin production of the Model S, will be manufactured in our own facilities.

Pursuant to the supply agreement with Lotus, we are obligated to purchase a minimum of 1,700 partially assembled or fully assembled vehicles over the three year term of the agreement, which will expire in March 2011. The partially assembled vehicles do not contain our electric powertrain and are referred to as “gliders.” If we are unable to meet this volume requirement, we are still responsible for payment to Lotus of the lesser of (i) the sum of Lotus’ actual incurred costs and an agreed upon profit margin per vehicle up to the minimum volume requirement or (ii) £5,400,000. As of December 31, 2009, we had purchased approximately 1,000 vehicles or gliders under this agreement. We do not currently have a supply agreement with Lotus for the supply of Tesla Roadster vehicles or gliders beyond the 1,700 minimum referenced above. We may be unable to enter into a new supply agreement or extend our existing supply agreement with Lotus on terms and conditions acceptable to us. In such event, we may be required to contract with another third party to replace Lotus which would entail redesign of the Tesla Roadster chassis, adjustments to our supply chain and establishment of a light manufacturing facility. The expense and time required to complete this transition, and to assure that the vehicles and gliders manufactured at that facility comply with all relevant regulatory requirements, may turn out to be higher than anticipated. Entry into any such contract with another third party might also require us to agree to terms with Lotus on which Lotus would license certain intellectual property rights necessary for the manufacture of the Tesla Roadster to such third party. There can be no assurance that we will be able to find a third party to complete partial manufacture of the Tesla Roadster on terms acceptable to us, if at all and, in addition, there can be no assurance that we will be able to enter into an intellectual property rights license with Lotus on terms acceptable to us. Additionally, because we are dependent upon our relationship with Lotus for the manufacturing of the Tesla Roadster, our business depends on Lotus continuing to operate as a viable and solvent entity and to continue to produce the Tesla Roadster vehicles and gliders pursuant to our supply agreement. Any delay or discontinuance by Lotus of delivery of the Tesla Roadster vehicles and gliders or failure by Lotus to produce the vehicles and gliders in accordance with quality standards would have a material adverse effect on our business, prospects, operating results and financial condition.

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  • interesting, I hope they can keep up with the big 3

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