Why Tesla Is the Next Apple Stock

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If you haven't yet heard: Motor Trend magazine crowned Tesla Motors (Nasdaq: TSLA  ) Model S sedan the "2013 Car of the Year." That's a remarkable feat, although Tesla enthusiasts, myself included, are anything but surprised.

I test-drove the Model S with my mom last month in Ft. Lauderdale, Florida. After an exhilarating 30-minutes behind the wheel, she bought one on the spot. I could run through the impressive specs, like zero to 60mph in 4.3 seconds but, until you experience Tesla's Model S for yourself, no amount of colorful adjectives will do it justice.

The academy award of autos
This is the first time in its 64-year history that Motor Trend has awarded Car of the Year to an electric vehicle. The fact that it was a unanimous vote is also a first.

To land this coveted spot, Tesla's Model S had to beat out established automakers, such as BMW, Lexus, and Ford (NYSE: F  ) .

BMW's 3-series was in the running, with high-marks for its ride-handling balance. Ford's C-Max Hybrid and Ford Fusion were also finalists -- earning numerous accolades in affordability and fuel efficiency. But in the end, it was Tesla's Model S that stole the show. Automobile Magazine's editor-in-chief explains:

It's the performance that won us over. The crazy speed builds silently and then pulls back the edges of your face. It had all of us endangering our licenses.

From one of the most advanced electric powertrains on the planet to an interior adorned with a 17-inch touchscreen display -- think two iPads -- the Model S is a game changer. But with innovation comes disruption, which, in Tesla's case, isn't going over well with traditional auto dealers.

The Apple approach to selling cars
With the help of George Blankenship, Tesla is changing the rules of retail. If that name sounds familiar, it's likely because Mr. Blankenship, along with Steve Jobs, were the masterminds behind Apple (Nasdaq: AAPL  ) retail stores. Today, Blankenship is leaning on his six-year history as Apple's real estate chief to help reinvent the car-buying experience.

Tesla is opening mall stores around the U.S. to showcase display models of its upcoming gas-free cars. However, not everyone is happy about the company's revolutionary retail strategy. Last month, auto dealer groups in New York and Massachusetts sued Tesla for violating so-called state franchise laws. But the fun didn't end there. Tesla CEO Elon Musk fired back in a blog post saying:

Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business.

By taking the road less traveled, Tesla will be able to better educate the public about the game-changing technology behind its all-electric cars. One important stipulation is the fact that Tesla's new retail stores aren't necessarily selling the vehicle but, rather, taking reservations. Making a reservation requires a down payment of $5,000, though it's fully refundable at anytime before the car is delivered to a buyer.

Over the long run, I doubt these lawsuits will hold up. More than this, I think that modeling its showrooms after Apple's retail concept is a winning strategy that will eventually pay off for Tesla. Let's be honest: The traditional franchise dealership model is outdated. With its latest achievement in Motor Trend, the attention is shifting back to where it belongs -- on Tesla's innovative technology.

Ready for primetime
If nothing else, winning Motor Trend's Car of the Year proves that Tesla is ready to take on the mass market. The company's Model S topped the charts in all six categories, which included performance, engineering, efficiency, safety, value, and advancement in design. More importantly, now that Tesla's cars have demonstrated they have staying power, I suspect the stock will shortly follow.

If you have money that you can afford to invest for the next three to five years, I encourage you grab a piece of Tesla Motors. The stock may be up more than 10% year-to-date, but I suspect it has a lot more to run as the company approaches profitability. For those with less faith in the EV market, perhaps a stock like Ford is more your style.

Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. But Ford's stock seems stuck in neutral. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.


Read/Post Comments (8) | Recommend This Article (18)

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 November 16, 2012, at 11:05 AM, spawn44 wrote:

    Apple wasn't even the next Apple until after it was Apple.

  • Report this Comment On November 16, 2012, at 11:13 AM, sheldonross wrote:

    I doubt Tesla is the next Apple, but I am very impressed by it. I think the biggest hurdle will be/still is convincing people that it's an actual usable car.

    I read a lot of automotive related articles, and the vitriol spewed by some is amazing. Some people simply refuse to believe it's as good as it is.

  • Report this Comment On November 16, 2012, at 12:03 PM, vv234 wrote:

    I think there is one very important factor left out from this article: the cost of producing this Tesla's Model S or similar models. I remember it retails for 50k-100k for this model. I do not know the margin but if they can not mass produce such cars at much cheaper cost so that no just rich families can afford it, then the potential of Tesla will be very limited and the cars will stay in the showroom for a long time to come.

  • Report this Comment On November 16, 2012, at 1:56 PM, sheldonross wrote:

    Very limited? Mercedes has sold over 50,000 E-Class cars year to date. BMW is at 42.500 5 series to date. Acura TL 29,000. Audi A6 15,500.

    So there's definitely room in the current market for exactly this car. That's also completely ignoring that fact that they are producing the Model X going on sale next year. And intend to introduce a entry level car at a price point of $30k in 2015.

  • Report this Comment On November 16, 2012, at 3:46 PM, TheRealRacc wrote:

    Mass production will come with time, much like anything else. I don't expect Tesla to take off for quite a while though. Electric is still far from mainstream.

  • Report this Comment On November 16, 2012, at 8:46 PM, wjcoffman wrote:

    "This is the first time in its 64-year history that Motor Trend has awarded Car of the Year to an electric vehicle."

    Ah, statistics. Wonder how many electric vehicles were contenders during the 64-year history of Motor Trend?

  • Report this Comment On November 19, 2012, at 1:42 PM, PSU69 wrote:

    As an engineer who has worked in auto and aircraft segments, I admire their design and their strategy. As a global business exec, I respect their unique segmentation and distribution challenges. Looking forward to driving one.

  • Report this Comment On January 31, 2013, at 12:47 PM, JensenJoe wrote:

    I believe that Tesla very well could be (not Apple but) the next Google. If you read how well the car is constructed you may change your mind.

    The Model S and the Model X has the same frame, with TWO electric engines front and rear on each axle. These cars have a range of almost 300 miles on a single charge, and I also believe that in the future they could incorporate a small generator that would create electric as the wheel turns, and charge the battery as you drive making the car have unlimited milage.

    I worked for the Railroad, and they have used this system for years, a generator (of course much bigger) mounted to the wheels on the front truck, and it turns that generator which creates electric for the batteries that run lights for that passenger car. I believe the same system could be possible for an electric car.

    I know of another energy company that has developed a way to turn any clear glass into a solar panel which also could do the same thing.

    When Tesla Motors finds that these new ideas could work, it could be the solution for the entire car industry, and get us off of oil, clear the air, and stop these horrible storms due to global warming.

    The question would remain, would the Government/oil companies allow it to come to reality, or would they stop it because it would hurt jobs? Anyone who has studied this problem would also know new ideas will create new jobs. We should not shun the future, but embrace it because the payoff is much to great.

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