Dreaming of Tesla

This article is part of our Rising Stars Portfolios series.

At first glance, Tesla Motors (Nasdaq: TSLA  ) could be a shoo-in dream stock for my socially responsible Rising Stars portfolio. Its blood runs green with environmentally responsible ethos, and it boasts a beautifully designed automobile and a mindset that it calls "more Silicon Valley than Detroit." However, lovely dreams don't always translate well into investment reality.

The company's eco-friendly ethos certainly leaves it well-positioned to ride the growing trend of green transportation. Today's consumers are transitioning from "easy rider" to "easing off the wasteful use of fossil fuels." Baby boomers' obsession with Harley-Davidson hogs and other high-octane vehicles likely won't translate well for younger generations (nor will gigantic gas guzzlers of all makes and models).

Tesla and its high-end, all-electric Roadster aren't alone in the zero-emission automobile market. Buyers have begun to clamor for the next logical step beyond hybrid vehicles like Toyota's (NYSE: TM  ) popular, first-mover Prius. GM's (NYSE: GM  ) Chevy Volt and Nissan's Leaf are the best known (and most readily available) electric vehicles on the market.

Alas for Tesla, while its only current model is a gorgeous piece of automotive machinery, it's also staggeringly expensive. The Roadster 2.5 costs more than $100,000 a pop, including an EV tax credit. Given the current economic environment, it sounds destined for a very niche market for the foreseeable future.

Nissan's Leaf, on the opposite end of the spectrum, is a mere $25,280 after the tax credit; that price point is hardly a daunting hardship or paradigm shift for most Americans shopping for a car.

Last but certainly not least, Tesla has yet to turn a profit. According to its final prospectus for its IPO, since inception, Tesla has generated just $147.6 million in revenue. As of March 2010, it had accumulated a deficit of $290.2 million, plus annual net losses year after year since December 2007. Although investing in young, unprofitable companies is very "Silicon Valley," entering into a nascent market with many well-known rivals could be a huge hurdle to achieving profitability in the near term.

Although the coming Tesla Model S is intended to bring in a larger customer base (and potentially greater profits), it won't be available until 2012.

My bottom line is that Tesla's a great stock for an SRI watch list, but it won't be purchased for my SRI portfolio anytime soon. (My Foolish colleague John Rosevear recently took an in-depth look at Tesla, too, and also came to the conclusion that the idea of this investment is more appealing than the probable reality.) At the moment, there are just too many risks for Tesla shares to be ready for prime-time buying.

General Motors is a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (8)

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  • Report this Comment On December 31, 2010, at 11:27 AM, svenhh wrote:

    TSLA is today where Ballard Power (Fuelcelltech) is today...Ballard had over US $ 11 bio valuation; today: about US $ 130 mio but/and 60 mio cash without debt); Ballard was hyped and is now turning the point....cash flow positive in 2011 ! has many r&d-programmes successfully finished, concentraded the business (fc for busses as an example)..There is an e-mobility hype nobody seeing that fuelcell-technology is ready to enter markets in a big way....BLDP: US $ 1.53. FC is overlooked but that will change. And to produce enough hydrogen should be no problem when the oil-prices increases to US $ 100, 110, 120........

    Too many expectations with TSLA and only few expectations with Ballard. From the contrary-opinion its now the time to buy BLDP and to anticipate the return of the FC.

  • Report this Comment On December 31, 2010, at 5:44 PM, cuzitsthere wrote:

    Tesla definitely has its challenges but it also has interesting potential. It uses a superior lithium ion technology (existing smaller cells provided by Panasonic) over what GM and Nissan are using so they are smaller and carry more punch (distance). This allows for a larger vehicle that goes farther. Yes they cost more than the leaf or volt but is 56k that much? A MB E class or BMW 5 series are in the same price range and you have to gas those up.

    I would be curious what size of PV cell do I have to put up (with the inverter obviously) to charge this car while it sits in the parking lot at work or in my garage. It would be very interesting if some of those cells were integrated into the roof of the car and the car could partially charge while sitting in the sun.....

  • Report this Comment On January 01, 2011, at 6:19 PM, corstrat wrote:

    Have you looked at China based Kandi Technologies (NASDAQ-KNDI)? If anybody needs "Green" its China.

    Both KNDI and TSLA were founded in the same year, Both have about the same cumulative revenues, Though from an operating profit basis, KNDI has always been profitable.

    Over the past 18 months KNDI has exported over 3500 LSEV's to the US. In the past twelve months it has developed, had PRC Nation Wide approval and manufactured two additional Highway Speed Pure EV's, with one which began sales Nov. 27 in Jinhua (pop. 4.5mm) with a Lead Acid battery and proprietary "Quick Battery Change" feature and a 50% subsidy and the second, also with Quick Battery Exchange, but with a lithium battery which is eligible for the full $9000 PRC subsidy, though the car cost less then that now being rolled out in Hangzhou (pop. 10mm).

    BTW, KNDI's patented Battery Quick Change system is now being rolled out in partnership with Government owned State Grid, China's largest utility covering 90% of the Country, with KNDI owning 30% of the JV in exchange for the use of its license.

    TSLA Fully Diluted Market Cap $3 billion

    KNDI Fully Diluted Market Cap $150 mm

  • Report this Comment On January 07, 2011, at 7:19 PM, duckfude wrote:

    Forget about putting solar cells on your Tesla to charge it. Consider that at peak incidence you'd get 200Watts/m^2 with really expensive cells. 1m^2 of cell area would be tough to mount and keep its sexy shape and you'd have to be careful where you parked and at what orientation to get this benefit as well. So say all was perfect, it would take 30 days to charge the 50kWh in the Roadster's pack. The Roadster is known to have about 214 Wh/mile energy use rate. So you basically get about a mile range per hour of charge from 1m^2 of cells. To say it would be more time efficient to walk in this case is accurate. The average person can walk between 3 to 4 miles in one hour.

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