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Tesla Motors (Nasdaq: TSLA ) has built only a few thousand cars during its short lifetime, but it has already become a big deal: Its Model S sedan, Motor Trend's Car of the Year, has found itself an avid following well beyond the eco-minded gadget geeks who made up most of the audience for electric cars before now.
That's huge. That Tesla has established itself as a credible competitor in a business with enormous barriers to entry -- and done so on a relative shoestring --is arguably an even bigger achievement.
It's easy to be enthusiastic about Tesla's prospects. But there are good, serious reasons to be cautious as well -- enormous challenges still lie ahead for the upstart Silicon Valley automaker. I created a premium research report on Tesla to help investors understand those challenges, and the opportunity presented by the company.
Following is an excerpt from the report, laying out three areas that Tesla investors must watch. We hope you enjoy it.
Area one: Tesla's cash
Tesla CEO Elon Musk recently said that he expects the company to be "cash-flow positive" before the end of 2012. Tesla recently raised almost $200 million from a secondary offering. But development of Tesla's next model, the Model X SUV, will eat into resources, as will any failure to meet the company's ambitious sales goals. As with any start-up, it's essential to keep a close eye on Tesla's remaining cash – and burn rate – going forward.
Area two: Tesla's sales and orders
Can Tesla "cross the chasm" from its early adopter fan base into the mass market? That's one of the central challenges facing the company. Will Tesla be able to sell the Model S to mainstream buyers who own and are basically happy with a car like a Mercedes-Benz or a Lexus? Tesla has made a practice of announcing its order total every quarter, which needs to continue to grow significantly for Tesla to thrive. Watch that number closely.
Area three: The competition
If Tesla's products do gather steam in the marketplace, it won't be long before the big automakers try to eat Tesla's lunch. If and when that happens, two things will bear close watching: How well do the major automakers' entries compete with Tesla's cars, and how will Tesla respond?
Looking for more insight?
That was just a sample of The Motley Fool's new premium report on Tesla Motors. If you're weighing whether the company is a buy or sell, this new report is an essential resource for investors seeking to understand the potential ups and downs of an investment in the electric-car manufacturer. Not only that, but the report also comes with updated quarterly guidance and dives into upcoming catalysts on the horizon. Just click here now to get started.