Electric car firm hits hard times

Tesla Motors is adopting what it calls "a special forces mentality"

Electric car manufacturer Tesla Motors is adopting what it calls a "special forces" mentality to survive the global financial crisis, announcing yesterday that it is to close its Detroit office, lay off staff and re-focus its operations on its core products.

The silicon valley company, which has enjoyed a burgeoning reputation as the manufacturer of the Roadster electric sports car, said that it will delay production of its "Model S" car by six months to mid-2011 as reports claimed it had failed to raise an expected $100m in fresh funding.

Writing in a statement on the company's website, chief executive Elon Musk said that the firm would focus on its two core product lines – the £63,000 Roadster convertible and powertrain sales to other companies.

"Our goal as a company is to be cash-flow positive within six to nine months, " he said. "To do so, we must continue to ramp up our production rate, improve Roadster contribution margin and reduce operating expenses. At the same time, we must maintain high production quality and excellent customer service."

He added that the company is still "absolutely committed" to the development of the Model S - its next generation vehicle, of which more details will be unveiled next year - but it will scale back development work on the car until a Department Of Energy loan guarantee becomes effective.

"The loan funding can only be drawn down after we receive environmental approval for our new 89-acre consolidated headquarters in the city of San Jose, " he explained. "If all goes reasonably well, we will receive that approval in Q2 next year."

The company is competing in an increasingly competitive market because high fuel costs have prompted Chrylser and General Motors to develop electric vehicles, both of which hope to release a sports model in 2010 that will rival Tesla's Roadster.