Tesla Motors Gears Up for Its Big Moment

Tesla Motors (Nasdaq: TSLA  ) is set to report fourth-quarter and 2011 earnings after the market closes Wednesday. Are any surprises likely?

Probably not. Analysts are expecting somewhat wider losses (around $0.63 a share), according to Bloomberg, but that's no surprise. With production of the Roadster ended, and production of the Model S not yet started, Tesla's revenue is likely to be thin for a couple of quarters. More importantly, as Tesla gears up for what may be the most important summer in its history, all signs so far have indicated that the company is on track.

But for investors, watching those signs carefully will be critical.

Managing expectations carefully
Tesla drew some scrutiny recently after Fisker Automotive, a start-up builder of luxury hybrid cars that some have seen as a Tesla rival, fell on hard times after the Energy Department cut off the company's access to a line of credit.

The Energy Department's move came after Fisker missed a series of deadlines in its plan to build a plug-in hybrid at a former General Motors (NYSE: GM  ) plant in Delaware. Tesla also has a government loan -- $465 million worth -- that it is using to put its all-important Model S sedan into production, something that is scheduled to happen by summer.

So is Tesla's line of credit at risk? Not at all, CEO Elon Musk told The Wall Street Journal: Tesla's plan to put the Model S into production and deliver the first customer vehicles in July is on schedule.

Musk's remarks reiterated his statement in January that he was "highly confident" that the Model S would roll out on schedule. Tesla expects to draw down the remaining balance of that loan over the next few months, Musk told the Journal, as it completes work on the Model S's assembly line in the California factory it acquired from Toyota last year.

It's a safe bet that Musk will reiterate all of that Wednesday, and will confirm once again that the Model S is on track. So what else should shareholders keep an eye on?

Points to ponder as the week unfolds
First and foremost, beyond the obvious data points (like Tesla's cash balance and the state of the Model S rollout) I'll be looking for more information on the company's plans for the Model X, its next new model. The Model X, which Tesla unveiled last week, is a midsized SUV that is expected to launch late in 2013. It's a good-looking vehicle, a swoopy design with lift-up side doors and lots of room for cargo. It will be built on the Model S's platform, but is expected to have slightly less range, a function of its somewhat higher curb weight.

I'll also be listening for any insight into Tesla's plans for marketing the Model S. The company has more than 8,000 preorders for the sedan, enough to account for the first several months of production; if you ordered one today, you could expect delivery in March of next year, Musk said recently. But the big question for Tesla for a while has been, "What then?" Once the early adopters have their cars, how does the company plan to "cross the chasm" and sell to more mainstream buyers?

That has been an open question -- at least from the public's perspective -- for some time. But I was encouraged by remarks Musk made to the Journal, when he said that the Model S isn't really competing with electric cars or hybrids from GM or Ford (NYSE: F  ) . Rather, he said, "Buyers for a Model S are buyers who would have otherwise bought an Audi A6... a Mercedes E class... or a BMW 5 and 7 series."

That's exactly right. Those buyers -- the people who are today driving one of those cars, or perhaps a Lexus or Cadillac -- are the folks that Tesla will have to reach with a convincing value proposition in order to expand sales beyond its core audience. That value proposition will depend on everything from the ease of recharging the all-electric sedan to the quality of its interior fit and finish (an absolutely critical differentiator in this market segment).

What's Tesla's plan for reaching those buyers? We may not find out this quarter, but it's the key to the company's success. Keep a close eye on reports later this week to learn more.

Tesla continues to be an intriguing investment story, but the Fool's analysts have selected a different company that they believe is poised for tremendous growth in the coming year. You can learn more about this great stock in their new special report: "The Motley Fool's Top Stock for 2012." It's completely free for Fool readers.

Fool contributor John Rosevear owns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Tesla Motors, Ford, and General Motors. Motley Fool newsletter services have recommended creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. 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 (8) | Recommend This Article (6)

Comments from our Foolish Readers

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 February 14, 2012, at 5:13 PM, Hawmps wrote:

    I'll say it again... the Model S is dead sexy.

  • Report this Comment On February 14, 2012, at 7:50 PM, maxEV wrote:

    Well thought out article. For a company that people are just getting to know, with pre-sales of over an estimated 9400 (not 8000) cars, Tesla is doing a pretty good job at pre-selling its cars. Often when I mention to someone that I bought a Tesla, the response I often get, its "what's a Tesla?"

    John, you ponder how Tesla Motors will be able to sell cars beyond what they've already taken as pre-orders, and I think the answer is obvious. Once the car is out there in thousands on the road, people will see it, and say, "what kind of car is that... it's beautiful". At that point I expect Tesla car sales to increase as will consumer awareness of the Model S. Awareness of the brand "Tesla Motors", the automotive innovator will start spreading like wildfire.

    The big big difference here is that unlike other electric or electric plug-in hybrids like the Prius the Nissan Leaf, the Toyota RAV4-EV or the Mitsubishi MiEV, Tesla's cars have more style. If one drives by, you'll turn your head and notice. People who buy other EV's or hybrid-only-models of cars do so because of their interest in reducing their vehicle cost of ownership especially in regards to fuel costs. The Tesla Model S is different. It's a car that people are attracted to because of its style, that just happens to be electric. When potential buyers start figuring out the numbers (see Teslanomics: http://teslarumors.com/Teslanomics.html) and discover that the cost of ownership of a Tesla Model S is about the same as some cars that cost $20 to $35, then they'll become more enamored with the idea of having a sexy EV that costs $57k (49k after federal tax credit) that at the end of 5 years costs the same as that $20k to $35k car they were considering purchasing instead.

    The last car I bought, I bought because it caught my eye on the road. The same was the case of 2 other cars I owned earlier. I expect the same with the Model S. As people see it, they will want it. The Tesla Model S will sell itself.

    See http://teslarumors.com for more info on Tesla Motors cars

  • Report this Comment On February 14, 2012, at 8:26 PM, TMFMarlowe wrote:

    @maxEV: Lots of cars are well-styled, including several of the Model S's competitors. Great styling helps -- just ask Kia -- but it won't sell the car by itself. There's a leap to be made, and I'm still unclear on Tesla's strategy for making it.

    That said, they sure do seem to be executing well on their plan, and I'm sure they have a plan for making that leap, too. We'll see.

    Thanks for reading.

    John Rosevear

  • Report this Comment On February 14, 2012, at 8:38 PM, maxEV wrote:

    Just correcting a typo, mean $20k and $35k in the following paragraph:

    and discover that the cost of ownership of a Tesla Model S is about the same as some cars that cost $20k to $35k, then they'll become more enamored with the idea of having a sexy EV that costs $57k (49k after federal tax credit) that at the end of 5 years costs the same as that $20k to $35k car they were considering purchasing instead.

    Thanks.

  • Report this Comment On February 14, 2012, at 8:39 PM, maxEV wrote:

    @TMFMarlowe AKA John Rosevear

    I'm curious John. Which other EVs do you consider well-styled other than the Model S?

    Thanks.

  • Report this Comment On February 14, 2012, at 9:18 PM, TMFMarlowe wrote:

    I don't consider "EVs" to be the Model S's competitors. I've made that point over and over, and Musk himself made it recently too. Its competitors are things like the mid-range Audis, all of which look pretty good, the BMW 5 and 6, maybe the smaller Jags, cars of that ilk.

    John Rosevear

  • Report this Comment On February 14, 2012, at 11:38 PM, rapnjoe wrote:

    Remember the Halo effect Apple had , Tesla in the years to come could also have a Halo effect, I hear you can order a remote control toy version of a Tesla Roadster or pick one up at a Tesla store in the Malls and once the kids that get these grow up will want a real Tesla when they become driving age.

    Just a little Humor now on a real note I believe another key to Tesla's success is Educating the publics perception of EV's which is where all those stores will come in to play.

  • Report this Comment On February 15, 2012, at 7:27 AM, TMFMarlowe wrote:

    @rapnjoe: Agreed -- they have to sell the viability of the technology as much as they have to sell the cars, or themselves as a company. Big challenge.

    Thanks for reading.

    John Rosevear

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