Why This Electric Car Can Go the Distance

Motley Fool analyst Rex Moore is just back from a visit to the Tesla Motors (Nasdaq: TSLA  ) showroom in Washington, D.C., where he was able to test drive the exciting new Model S sedan. 

On some levels the Model S competes with the Nissan Leaf, Ford (NYSE: F  ) Focus Electric, Honda (NYSE: HMC  ) Fit Electric, and of course hybrids like the Toyota (NYSE: TM  ) Prius and General Motors' (NYSE: GM  ) Chevy Volt. But those vehicles address the "lower end" of the electric and hybrid market. Tesla's roomy sedan, on the other hand, does zero to 60 in 4.4 seconds, is packed with luxury features, and the fit and finish is outstanding. It is, therefore, really competing with luxury vehicles from BMW, Mercedes, and Audi -- as its $50,000-$90,000 price tag would suggest. 

Tesla's stock price recently took a hit when management lowered its revenue forecast because of a slower-than-expected ramp-up for the Model S. Bears also point to other issues, such as how drivers will negotiate long road trips if their cars only have a range of 100 miles-300 miles, depending on the model. 

But because we're in the extreme early phases of the electric car revolution, Rex says that's just short-term noise for long-term investors. As far as any early production problems for the Model S, founder and CEO Elon Musk says he has intentionally slowed down production until a number of minor issues are resolved, such as the fit of certain interior items. After that, Musk says production will ramp up and hit at least 20,000 units in 2013, with a gross margin exceeding 25%. In addressing the range issues, Tesla is taking a cue from Clean Energy Fuels, which is rolling out a nationwide network of refueling stations for natural-gas-powered vehicles. Tesla has already opened up a network of recharging stations between Los Angeles and San Francisco, and you can expect more stations across the country. 

Rex says Tesla -- designed from the ground up as a different kind of automaker -- will have greater success in the electric vehicle space than Ford, General Motors, and the other big names that have long-established and deeply entrenched ways of producing vehicles. This is especially the case with more expensive, higher-margin cars. 

With projections of cash-flow breakeven by the end of the year, Rex says this small, $3 billion company seems very well positioned for investors with a long time horizon -- and he's backing his opinion with a thumbs-up CAPScall.

In part two of this series, Rex chats with Tesla's Will Nicholas about negotiating longer trips with these electric vehicles. 

While electric may be the future, there are still many different ways to play the energy sector, and our analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out our special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

Rex Moore has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford and Tesla Motors. Motley Fool newsletter services recommend Ford, General Motors Company, and Tesla Motors. 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 (0) | Recommend This Article (1)

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2048330, ~/Articles/ArticleHandler.aspx, 10/24/2014 10:53:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement