Tesla Taps Into Silicon Valley Brain Power

Tesla Inc. hopes Silicon Valley will provide it with the same creative energy that the industrial Midwest imparted to Detroit auto makers, the electric-vehicle manufacturer’s chief technical officer says.

Electric powertrains are “as much an electrical engineering and software-integration task as (they are) a mechanical engineering and automotive task,” J.B. Straubel tells Ward’s as the California-based startup announces plans to expand its powertrain-manufacturing capacity.

“To have access to the pool of engineers here with a lot of expertise around those disciplines has served us very well,” Straubel says. “That’s a big part of why we have made a strong commitment to stay in the area with our powertrain and (research and development) functions.”

Privately held Tesla, which has delivered nearly 700 highway-capable EVs and last month achieved profitability after just five years of operation, will establish a powertrain manufacturing site on a 23-acre (9.3-ha) parcel in Palo Alto.

The auto maker also will move its headquarters to the northern California facility, which once was home to computer -iant Hewlett Packard Co.

“We’re trying to build a center of excellence around electric powertrain technology here,” Straubel says.

Tesla’s current battery-pack production site is running “100% at capacity.” The auto maker initially will divide its resources 50:50 to support production of its Roadster model and Daimler AG’s planned Smart-brand EV.

“I don’t see the (Palo Alto site) being a focal point of vehicle assembly or vehicle manufacturing any time soon,” Staubel adds, noting Tesla has designs on a separate site for production of its Model S.

Nearly 700 Tesla Roadsters delivered.

The battery-powered sedan is set to launch in 2011 as a ’12 model.

Meanwhile, Tesla – which imports battery cells for its battery packs – is open to domestic sourcing.

“It remains to be seen exactly how cost-competitive the domestic manufacturing will be,” Straubel says, noting U.S. suppliers are in their infancy. “If they can compete, we’ll certainly consider (them).”

Tesla is high on Palo Alto because of its “cultural heritage of invention,” he says. “That’s the kind of culture that we’re very much trying to leverage. There’s a wide pool of great engineering talent that’s local here.”

The fledgling auto maker’s planned investment was aided by a Department of Energy loan program to encourage the development of electric vehicles.

“We would have (invested) in any event,” says Diarmuid O’Connell, Tesla vice president-business development. “This allows us to speed that development.”

The program has authorized Tesla to draw down as much as $465 million in loans which have a repayment schedule of about 10 years. But Tesla is “likely” to repay its debt much sooner, O’Connell tells Ward’s.

The move to Palo Alto affects about 350 employees, some 125 of whom are engineers. However, Straubel expects the site’s total employment to reach 600 when its capacity is fully utilized.

Tesla plans to produce between 1,000 and 1,500 Roadsters annually, while its commitment to Smart calls for enough electric powertrain output to supply 1,000 additional vehicles.

Through July, Tesla recorded earnings of $1 million on revenue of $20 million accumulated on sales of the performance-oriented Roadster 2 variation of its base Roadster.

The 2-seaters sell for more than $100,000 and boast a single-charge range of more than 200 miles (322 km). The Model S is expected to start at $49,900 and provide a range of up to 300 miles (483 km).

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