Today we want to look at Tesla Motors (TSLA), the custom electric car company and its 10 – year struggle to profitability. One of the most intriguing studies is how a car manufacturer with a price tag of $100,000 could survive even one or two years. What we find is that like most other innovative breakthroughs there are key players, visionaries if you will who persevere through countless fits and starts and withstand repeated public criticism. What we are talking about is the electric motor car. The idea that you can produce and market an electric car is hard to comprehend. You have the technological obstacles such as distance, recharging and speed. At the same time you have other car giants like General Motors and Nissan as your biggest competitors. In addition we find that they are having limited success with their electric models.
Only a man with the vision, imagination and tenacity could possibly start and persist in this challenge. That man is Elon Musk. He is not a stranger to technology having been one of the key movers in developing PayPal. His vision is that Tesla Motors is not just about building a custom electric car. It is about providing a new and free mode of travel.
The company started with its Roadster with and a high price ticket of about $100,000. That model was discontinued in 2011. The company could have folded its tent and dropped by the wayside. However, Musk has a longer view that Telsa can produce lower priced models and bring the price down to $30,000. Its latest model is the Model S sedan that sells for $57,400 before federal subsidies.
However, unlike Steve Jobs at Apple who simply had to perfect his product then sell it, Musk was just beginning the next chapter. The problem now was how to produce the power train that would carry for long distances. Here Musk and his colleagues developed a proprietary power pack that carries the Model S for 265 miles. The car goes 0-60 mph in less than 4 seconds and has a top speed of 125 mph. Fine so far. But then what happens after 265 miles? He then had to figure out to recharge the vehicle on long trips. This is where his genius meets the highway. He coined the idea of having a transportation highway across America. To do this he build supercharging stations in key test routes between Los Angeles and San Francisco and another route between Washington DC and Boston. Each supercharge station can recharge the Model S for an added 150 miles in 30 minutes. Electricity is provided to the supercharger stations by Solar City.
The vision continues. Musk has agreed to license Telsa’s proprietary battery pack to other car manufacturers like Toyota and Mercedes Benz. He envisions that new charging stations will be standardized and used by all electric car companies, providing a seamless transportation highway across America.
First quarter profits were just released showing Tesla’s first profit in 10 years. Net profits were $11.2 million with revenues of $561.8 million. The company is producing 400 cars a week and has a backlog of orders for another 20,000. The stock went public in June of 2010 with an initial offering of 226 million shares. From 2010 the stock has been backing and filling in the $20 to $35 dollar range. In the past month and a half it shot up from $40 and touched $80 on Friday.
The big question is: Is this another Apple? A few years ago I remember writing a blog about Apple when it was selling at $210 and predicting a $510 price tag. As you saw I was way short of the recent top.