A sustainable business model where companies actually yield profits typically requires the selling price of the item to be twice the cost of goods sold. Intel is such a company that has yielded gross margins of at least 50% consistently. This implies a “real” required unit selling price of batteries at $2 per watt-hour. Hence if A 123 was to supply Tesla batteries for the roadster and if A 123 were to have a viable profitable business the Tesla battery pack would cost Tesla $104,000. Correspondingly, if Tesla was to have a real business model they would have to charge consumers $208,000 for each battery pack in a roadster. Of course neither A 123 nor Tesla has positive gross margin. But they promise investors they will bring down costs by increasing the volume they produce and bring down costs by the learning rate. I have explained at length in my letter to the US Senate that the learning rate will be painfully slow. What this means is A 123, Tesla, Fisker, and other want to be plugged in vehicle car companies will simply loose the money investors and our government (we the people) gives them.
What did A 123 sell the 21.7 million watt hours of batteries for? They sold them for $19,873,000 or some $2,149,000 below their production cost. How much money is the US Government and the State of Michigan Government going to give A 123 to build a factory in that sate? The answer is a cool $600 million. All this give away to a dead end technology based company that will soon short circuit. Maybe these ignited states should better spend their scarce funds on replacements for their electric chairs. The last electric chair built in the USA was for the State of Florida in 1998. It was made out of oak and replaced the chair used for executions since 1923. Perhaps A 123 could name their lithium battery powered electric chair the "Kill A What".