A Bumpy Road Awaits Tesla

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If there was ever an IPO that could create positive vibes, it's Tesla's. The company, which is rumored to be planning an IPO, is nothing if not a "green" technology play, with its all-electric cars not consuming a single drop of gas. It's a success story for the U.S. auto industry, which can use all the good publicity that it can get. And it's a story that can also make technology enthusiasts and car aficionados smile, with Tesla's lightning-quick, futuristic Roadster looking and performing like it came straight out of The Jetsons.

Tesla is also very much ahead of its time, and it's going to have its work cut out for it competing against auto giants who are keeping one foot planted in the present.

The recharging blues
For Tesla, as with many technology pioneers looking to make it big, the devil lies in the details. While its cars can be recharged by plugging into standard electrical outlets, they can take quite awhile to do so. Using a high-power recharging kit that can be installed in a residential garage, Tesla claims that the Roadster will take roughly four hours to recharge. I'm pretty sure that's a little longer than your average stop at a gas station.

And if you run out of juice away from home, things get even worse. Using Tesla's "Universal Mobile Connector" for connecting to electrical outlets, the amount of time needed to recharge increases anywhere from six hours, if you've got access to the kind of outlet used for dryers and RVs, to a full 48 hours, if you're crazy enough to use a conventional home outlet.

Tesla's upcoming Model S sedan will come equipped with a portable, 440-volt charging kit that can cut down on recharging times significantly -- perhaps to less than 30 minutes for 80% recharging. But right now, there aren't any 440-volt charging stations available to the public. That's going to change over time, but these stations are unlikely to provide a fraction of the convenience that gas stations do for the foreseeable future.

Attack of the plug-in hybrids
The auto giants are well aware of all this, and that's why they're focusing their investments not only on pure electrics but also on plug-in hybrids, which can refuel through both the grid and the gas station. General Motors' much-hyped Volt is expected to go on sale late next year. But Toyota (NYSE: TM  ) has been making waves of its own, with plans to offer a plug-in version of its Prius hybrid in 2011, and Ford Motor (NYSE: F  ) is looking to offer plug-ins starting in 2012. Chrysler has reportedly demoed a plug-in hybrid that allegedly can, like the Roadster, go from 0-60 in less than 4 seconds. That's bad news for Tesla, though maybe good news for A123 Systems (Nasdaq: AONE  ) , which is going to be supplying the batteries for Chrysler's plug-ins.

As it is, Tesla's cars are luxury items targeted at buyers who are wealthy enough to handle their high price tags (the Roadster starts at $101,500, while the Model S is expected to start at a "mere" $49,900). And they likely can't be used as an owner's only car, due to their charging issues. Once plug-in hybrids hit the scene, that niche could have trouble holding up as well.

Throw in the massive costs involved in Tesla's attempt to go mainstream -- $365 million (78% of the Department of Energy's loan) is headed to production and assembly for the Models S -- and you're looking at a potentially dicey investment. Even if it makes for a great feel-good story.

Eric Jhonsa is waiting for his flying car to arrive. According to Back to the Future II, it should be here by 2015. He has no position in any of the companies mentioned. The Motley Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 23, 2009, at 11:58 AM, KenMandu wrote:

    Uh, you could have at least mentioned the pack-leading miles per charge that Tesla has.

  • Report this Comment On December 23, 2009, at 2:27 PM, KillaCycle wrote:

    If you run out of gas on the way home, how long does it take you to get to a gas station, buy a gas can, fill it, and get back to your car?

    You don't fill it up all the way, just enough to get home. Find any outlet anywhere and plug in for a half hour. There are a lot more electrical outlets than there are gas stations

    The cars gives you PLENTY of warning that you are getting low, and you just plug it in like a vacuum cleaner when you park it. It will run 200 miles between charges. Only an idiot would run out on the way back and forth to work.

    Also, you don't stand over your cell phone or Ipod waiting for it to charge up. You simply drop it in the charger when you come home. Same thing for the Tesla. It is as easy as rolling up the window.

    Less than $0.03 per mile in electricity to drive an EV, by the way.

  • Report this Comment On December 23, 2009, at 10:17 PM, nutcutter wrote:

    KillaCycle is right. The EV is your daily driver, not a second car. In our family, we've had both an EV (Toyota RAV4 EV) and a gas burner (Honda Insight) and the car that is always used is the EV. We only use the Honda when both of us have to drive at the same time, or if we go on a trip of over 120 miles, a rare occurrence.

    If you have a decent roof for solar, you can buy a 1.5-2.0 kW PV system and it will generate enough energy to drive the about 12,000 miles per year. That small of a system costs about $6K-$9K and will last for a good 50 years. You essentially can buy a source of clean, renewable energy for the rest of your life. If you stay with burning gas, the price will only increase for the rest of your life, and you'll have spent that $9K for gas by the 7th year. And that's if gas averages $3/gallon for the next 7 years, a very doubtful premise.

    Nissan will release it Leaf EV late next year about the time GM's Volt arrives in the showroom. Both are quite viable and will be snapped up as fast as the respective car makers can build them.

    Not a day goes by that we don't have people coming up to us wanting to know about our EV. Once we spend 5 minutes with them, very close to 100% tell us they want one. Even if we're off by 90%, that's still a sizable group. And after the first 50,000 units have been sold, and all the friends, family and neighbors see these cars and hear the owner's description of how good they are, the showrooms will fill up with customers.

    You don't have to take my word for it. Just drive one for yourself.

  • Report this Comment On December 27, 2009, at 6:50 PM, EVPerspective wrote:

    I think that you need to zoom out a bit, Eric, and take a look at the forest.

    The basic technology that drives most automobiles today, the internal combustion engine (ICE), is well over a century old. At their peak, these engines yield a maximium of 35%-40% efficiency, with an average efficiency closer to 20%. Most of the energy in a gallon of fuel is wasted. Where does this lost energy go? It is converted to heat which eventually ends up in the earth's atmosphere. Engineers have added increasingly complex fuel, ignition, exhaust, cooling, and electronic control and diagnostic systems over the years, only marginally increasing the engine's efficiency while adding to its cost and complexity.

    Along with the excessive heat which is released, the ICE also releases a number of polutants into the atmosphere. A perfectly-designed engine should release only carbon dioxide and water, but even today's engines -- after more than a century of development -- are far from perfect. Increasingly complex and expensive emissions controls systems have been added over the years, only marginally reducing the harmful polutants while again increasing cost and complexity.

    Electric motors, on the other hand, can achieve 75%-90%+ efficiency, with very little energy lost in the form of heat. Less heat and virtually no pollutants are released into the atmosphere. An electric powertrain is very simple, primarily consisting of one or more electric motors, a system of electronics for controlling motor operation, a battery, and a charging system. Pound for pound, an electric motor also produces much more torque than an ICE, thus providing superior performance.

    Not only is the internal combustion engine dying, but so is the transportation industry as we know it. Fuel prices, environmental concerns, and global economics have turned the largest automotive companies upside down. More people than ever are now turning to smaller, inexpensive vehicles and mass transit.

    It's true that Electric Vehicles (EVs) currently have their challenges, but engineers, designers, and researchers have made leaps and bounds in only the past couple of years... now that people are finally starting to take EV technology seriously and invest in it heavily. Only a year ago, it was fairly common to hear about EVs with a 40-mile range, and today 100+ is quite common... with Tesla's roadster capable of over 300! Also, more and more cities nationwide and worldwide are stepping up and committing to installing an EV charging infrastructure, and companies like Better Place, Coulomb, and PEP are more than happy to help make it happen.

    It's time that people realize that electrification is coming in a big way, and companies like Tesla are leading the charge.

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