Few people thought Tesla Motors (TSLA 12.06%) could take on the entrenched auto industry and succeed. But today the company took a big step toward long-term viability by announcing that it would be profitable in the first quarter, on both a GAAP and non-GAAP basis. The news has the stock skyrocketing 17% as of 2:15 p.m. EDT.
As recently as mid-February, Tesla expected to deliver 4,500 Model S vehicles in the first quarter, but it actually exceeded 4,750 units. With the average sales price in excess of $60,000, that translates to more than $15 million in additional revenue for Tesla.
The other note in the company's press release is that all 60 kWh vehicles will be built with Supercharger hardware. The company is building a national network of Superchargers, which can add 150 miles of range to a Model S in just a half hour. Tesla will eat some cost on this, but in the long term it may prove a solid strategic move.
Time to step up, Detroit
Tesla is the biggest maker of electrical vehicles, and the fact that it's dropping its low-mileage version says a lot about the industry. The General Motors Chevy Volt and Nissan Leaf were both flops because they didn't have the range to compete with traditional gas-powered vehicles. Tesla has proved that greater range can make EVs a compelling option for consumers.
Because Tesla is providing drive trains to Toyota (TM 1.07%) and Mercedes, it's reasonable to think that these two companies could leverage Tesla's technology to make successful electric vehicles. So far, they're both just dipping their toes in the water, but the opportunity in the market is growing. There doesn't appear to be a technology that can currently compete with Tesla's range, and it looks like these companies may be stuck with a single supplier for the foreseeable future. That, too, is good for Tesla.
