3 Reasons Why Tesla Is an Industry Game Changer


Model S. Source: Tesla Motors.

The comparisons between automotive stocks and Tesla Motors' (NASDAQ: TSLA  ) lofty valuation continue. But Tesla CEO Elon Musk insists that the company is an automotive tech company -- not just an automotive company. Though the claim is odd, Musk is right that Tesla, and the other automotive players, aren't necessarily driven by the same underlying dynamics. And this is the primary reason so many bears shorting Tesla's stock continue to miss the point. Particularly, Tesla has three unique factors driving the company forward that other automotive companies can't count on.

Exclusive Superchargers
Tesla's charging stations aren't the typical electric vehicle charging station. On average, Tesla's Superchargers are about 16 times faster than most public charging stations. In fact, Model S owners can get a 50% battery charge in just 20 minutes at a Supercharging station.


Source: Tesla Motors.

Then there's Tesla's aggressive expansion of Superchargers to cover 98% of the U.S. population by 2015. Internationally, Tesla just began opening Superchargers in Europe, and already has 90% of the population covered in Norway.

The combination of faster charging speeds, convenient coverage, and exclusivity, not only sets the foundation for Tesla's planned mass-market car, but it also gives the company a temporary competitive advantage. In a way, it hedges the company's ambitious aspirations.

A swappable production strategy
This point is rarely brought up in both bullish and bearish Tesla investment theses, but it's crucial to the company's business model. Tesla cars are manufactured in a far different manner than traditional vehicles. They have one standard battery platform on which they can mount varying motors and bodies. Even more, Tesla's motor is a paltry one-foot in diameter. This swappable production strategy could very well give the company an advantage in achieving production efficiencies.


Tesla battery platform. Source: Tesla Motors.

"When we designed the Model S, we created a platform. So it's not just a single car; we created something on which we could build many cars, and we are able to leverage that and bring a car to market fast," Musk explained at the Model X unveiling. 

Musk has expressed aspirations to eventually achieve gross profit margins that rival Porsche. Before Volkswagen acquired the luxury sports-car maker, Porsche was reporting a gross profit margin of about 50%. Already, Musk says the company should hit its 25% gross profit margin target, excluding zero-emission vehicle credits, by the fourth quarter of 2013.

Capital infusion
Thanks to investor optimism for the stock, Tesla's $20-billion valuation has infused the company with capital to aggressively invest in Superchargers, production, and international expansion. The valuation itself is a strategic asset to the company. Its $20-billion valuation means that management has even more cash than they had planned for to make necessary investments, or even ramp up production and expansion more rapidly.

Securing the future
All three of these factors are building the foundation for the company's eventual mass-market affordable car. And each factor helps to secure Tesla's spot among the big automotive companies -- and change the auto industry forever.

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  • Report this Comment On August 31, 2013, at 9:37 PM, MartyTheCanuck wrote:

    Daniel

    How does the 20 billion valuation help Tesla, or give it more cash ? If they want to raise more cash, it is better with a higher share price, that means less dilution for the amount of money they want to raise. But otherwise it doesn't make a difference on Tesla's balance sheet, unless I miss something.

  • Report this Comment On August 31, 2013, at 10:09 PM, TMFDanielSparks wrote:

    @MartyTheCanuck

    Thanks for the comment. I guess I could have been more specific. You bring up a great point.

    It's not directly the share price valuation that infuses the company with capital. But it's because of the valuation they are able to raise more capital.

    This article here is a good example:

    http://blogs.wsj.com/corporate-intelligence/2013/05/15/tesla...

    Tesla sold an additional 3.1 million shares and because the price had appreciated so much the company was able to get far more for the same amount of shares than it would a few months earlier.

    Even more, the value of the shares will help the company secure better credit, lower rates on borrowed money, etc. Creditors realize that if the company decided to sell more shares then it could return cash to creditors far easier than when shares were trading at $30.

    Last, managers are likely more confident in using leverage as the share price soars since they have a more valuable level of liquidity in the case they decided to sell more shares.

    Does that make sense? Sorry for not being more specific. And I'm glad you were able to point that out to the readers.

    Fool on!

  • Report this Comment On September 01, 2013, at 12:24 AM, rotorhead1871 wrote:

    if you think the large car companies are not paying attention..you are nuts, when tesla delivers a million cars...they will be a force.....they are going the right way with the infrastructure as a battery car is a toy with out convenient FAST charging....

  • Report this Comment On September 01, 2013, at 1:02 AM, CrazyDocAl wrote:

    Tesla is not a game changer. Simply put if, and so far they are not, EV cars actually do take off and sales are in the hundreds of thousands the large mfgs will just swamp Tesla out of the market.

    The fact is Tesla's sales model is very flawed. They need a dealer network. Most people want a dealership. They like walking into one and having real people to talk to in person. When they don't understand something they want it shown to them. When something is wrong they want it fixed now.

    Those very same dealership will be outfitted with charging stations. Charging stations that will be installed in weeks by companies that can spend a billion without dealing with trying to raise capital.

    This is the same thing that has gone on for the better part of a century in the automotive world. One company comes out with a new concept and as soon as it's a hit every other maker rushes a competitive model to the market.

    Tesla is a nice small car company. It's stock is an emotional one. It's being bought by people who want their product to succeed and those who are in it for the rush. They will jump as soon as they feel that it's peaked and is about to fall. Even Musk has said the stock is overvalued.

  • Report this Comment On September 01, 2013, at 3:08 AM, jasminethecat wrote:

    @CrazyDocAl - you say Tesla is not a game changer, yet you describe a scenario which completely changes the automotive game whereby dealerships will copy Tesla and their charging infrastructure. And you assume those chargers will be free?!? That's really amusing, thinking of the Big 3 giving away electricity (or anything else). More likely they would sponsor oil companies as partners, and have them continue to charge fuel/recharging prices based on investor speculation with price fixing as it works today. Why build anything when they could let BP, Exxon/Mobil or Shell do it for them, in already convenient corner locations which sell lotto tickets and snacks.

    Traditional car dealers are clearly threatened in states like NC, where they tried to pass a law prohibiting the sale of Tesla cars due to there not being a Tesla dealer network in the state. Dealers are scared, and they should be.

    You also assume too much of what people want in the car buying experience. I think a lot of people are smarter than you give them credit for, and most people DREAD having to negotiate for a new car with "car salesmen", myself included.

    Tesla does seem like a nice, small car company. At least you got that right.

  • Report this Comment On September 01, 2013, at 6:29 AM, fpl1954 wrote:

    Tesla's platform is great for controlling quality and cost with multiple models, but it's lousy if you want to make replaceable batteries.

    Unless you pull in, detach the body, and drop it on a new chassis..........boy wouldn't that be difficult to price. Imagine every time you do so you have to pay or be paid for the tires, state of battery, etc.

    Or perhaps Tesla could retain ownership of all chassis and standardize the swap. Kind of like a Uhaul trailer.

  • Report this Comment On September 01, 2013, at 7:05 AM, thegreentreefrog wrote:

    Tesla has taken the real joy out of driving! America's love affair with the automobile is about FREEDOM , Freedom to go places see and do things anytime any where, Tesla has but a 300 mile restriction on that, not a lot of FUN! Be home by dark to recharge dear. Great for senior citizens

  • Report this Comment On September 01, 2013, at 7:06 AM, thegreentreefrog wrote:

    TESLA S, Weighs 4,731Lbs THE ELECTRIC PIG!

  • Report this Comment On September 01, 2013, at 8:42 AM, Grandpastu wrote:

    Remember the Tucker and how the auto companies killed it?

  • Report this Comment On September 01, 2013, at 10:28 AM, HunterofWarrior7 wrote:

    Tesla is the future. Like any vision, some of us can see the future and some of us can't. Tesla is:

    1. Made in USA

    2. Better quality control than any other vehicle today

    3. Safer than any other vehicle, including huge SUVs

    4. The only innovation in the auto industry

    5. The cost per mile to drive is cheaper than any other vehicle by far ($0.47 to drive 40 miles here in California; no oil changes, no air filters, etc)

    6. It offers hope; the hope that the USA can create, innovate and compete at an international level.

    I'm sure you get it. Tesla is more than an automobile company at this point. Some of us will forever be stuck in the past, and some of us will embrace the future, unfettered by obstacles, always keeping our eye on the ball.

  • Report this Comment On September 01, 2013, at 3:20 PM, peteroo wrote:

    The Model S (MS) is a significant and compelling new automobile; it is quiet, smooth, insanely quick, an interior display that is easy to use as an iPad, and is manufactured in the U.S. that competes head on with the best luxury automakers in the world. A very impressive new car from a very impressive new company, from a very impressive genius. The car, the company, the man – the game is changing.

    The simple problem with Big ICE (manufacturers of internal combustion engines) is they have so much invested in powertrains, chassis, components, etc. and they prioritize the need to maximize return on investment. Every year Big ICE spends hundreds and hundreds of millions of dollars making their cars more: powerful, cleaner emissions, improve fuel economy, safer. All commendable goals but still using 20th Century technology to lead us into the 21st century. Hybrids are only a small (and expensive) step forward. By the way, a tank of premium gasoline for your BMW/Audi/Mercedes/Lexus … costs $75 a charge for the MS - $15!

    CrazyDocAl. A mighty oak tree starts with a single acorn. Tesla offers everything the conventional manufacturer-dealer network provides (including real people), except they book their sales online. I have three questions, have you visited a Tesla showroom, have you driven a MS, and on what knowledge do you base your profound opinions?

  • Report this Comment On September 01, 2013, at 9:46 PM, AjitC wrote:

    The author is right. The combination of a supercharger + service + sales network in markets like US/Canada, Europe, China will drive demand. Various models like Model S, X + GenIII will drive demand at different price points and segments. Price points between $35k to $120k that in the future will include 500 mile battery option, AWD, etc.

    Tesla has access to capital now. They could sell bonds, convertibles or even stock to finance any kind of expansion with minimal dilution. They do not have to at this point. It all the key tech and manufacturing processes in place that will enable economies of scale.

    Tesla will disrupt the ICE auto market.

  • Report this Comment On September 02, 2013, at 12:08 AM, teslaisthefuture wrote:

    unless you have actually rode in or driven a Tesla, you are talking out your gaspipe.

    and to the guy who says you can't go more than 300 miles...

    how many miles can you go before you have to put more gas in your car ?

    once there are more charging stations, there will be more electric vehicles...

    bank on it.

    too bad the US govt is controlled by oil

    when the govt orders electric vehicles like they order outdated military vehicles we don't need, this discussion will be over

    the naysayers are the same dopes that said the wright brothers wouldn't get off the ground

    but even i think the electric vehicle is a dinosaur as i'd like to see a mag-lev transportation grid.

    now that's the future

  • Report this Comment On September 02, 2013, at 2:26 PM, damilkman wrote:

    I can drive from Sault Ste Marie Michigan to Toledo Ohio on one tank in my truck loaded down with family and vacation. Not as good as my old Honda Accord. But my Honda could not carry a cupid yard of dirt either.

    My problem is I am never going to wait 20 minutes to recharge much less to acquire half a charge. Neither will I go more than 5 minutes out of the way to recharge/refuel.

    If TSLA has a car for maybe 20K I would consider it as a second vehicle. That would be worthwhile for handling the day to day commutes or little trips. In that case recharging overnight is fine.

    The other option I suppose for vacations is use Enterprise. Then I might be willing to spend a little more. Certainly at 70K I am not even going to remotely consider it.

  • Report this Comment On September 03, 2013, at 5:27 PM, vinnybernese wrote:

    Tesla's success, and the likely emergence of EV competitors that will accompany it, will drive demand for battery components such as lithium. Anyone have any thoughts on how and whether to invest in any of that, e.g. in specific lithium producers?

  • Report this Comment On September 03, 2013, at 5:49 PM, Pscartelli wrote:

    John D Rockefeller tried to scare people away saying this electricity will start fires in homes because at that time Rockefeller controlled kerosene for the entire country ,sounds all too familiar .

  • Report this Comment On September 03, 2013, at 6:53 PM, SoMch2Knw wrote:

    Tesla has a great product, no doubt. Tucker's vehicle changed the Big 3s attitude.

    I think his name was Keyser. He tried to compete with nothing more than a bankroll; it proved insufficient and I can't remember his name (reference David Halberstram's The Reckoning -- great read, btw)

    So, why is Tesla trading at $20 Billion? Because that is a drop in the bucket if any of the majors wanted to buy it. If Tesla *proves* to have THE next generation automobile... it will be swallowed by the majors.

    Good investment? if its product *cannot* be replicated investors will be rewarded! Otherwise, the majors will role out the concepts already sitting in their design rooms and undercut Tesla's pricing power, possibly allowing to have some of THE luxury / sportscar share of the EV market.

  • Report this Comment On September 03, 2013, at 6:54 PM, akaluna wrote:

    Hats off to all those Fools who offered up such great insight on both sides of this issue. I wish I had something to add but most of the key points have been covered. The only emphasis I would make is on Damilkman's comments. I think that waiting 20 minutes to charge is a deal breaker for a lot of otherwise buyers. In a way if the first mass produced EV's were all like the Tesla would we now be excited about a company coming out with a Hybrid that charges itself?

  • Report this Comment On September 03, 2013, at 6:55 PM, 18RC wrote:

    Tesla is not a game changer. It's a car that caters to wealthy Silicon Valley computer geeks and 6 figure government employees. Even the brochure for the car is written in computerese synthetic language. So just figuring out charging procedures, for example, is infuriatingly difficult for normal people who don't have a degree in computer science.

  • Report this Comment On September 03, 2013, at 7:04 PM, cmalek wrote:

    @CrazyDocAl:

    " They like walking into one and having real people to talk to in person."

    I guess that's why car salesmen are one of the least trusted groups of people around. Only politicians have a lower trust rating.

    " When they don't understand something they want it shown to them. "

    The day a car salesman explains something to me truthfully I will have a heart attack from the shock. In all my years of buying cars, I have met very few salesmen who actually answered my questions. All I got was obfuscation, prevarication and plain old horse puckey. These people are paid to SELL cars, not to tell the truth about them.

  • Report this Comment On September 03, 2013, at 7:57 PM, AuntMarge wrote:

    Does Tesla address the problem of success? Specifically the demand on the power grid that widespread EV use will bring? I attended a presentation two years ago by Better Place, an Israeli EV company (now coming out of bankruptcy). My impression was that Better Place viewed itself as primarily a software company. They developed an interface with the power grid to address the problem of widespread acceptance and use of EVs. Better Place’s system allowed the charging of batteries during microsecond lulls in demand (as I understood it). And you didn’t have to wait for a charge. Better Place owns the batteries, and their stations quickly switch out your spent battery for a recharged one. The concept was very compelling. Does Tesla view widespread adoption of their EVs as an issue for the power grid, and if so, what is their solution?

  • Report this Comment On September 03, 2013, at 8:00 PM, Asswease1 wrote:

    We tend to forget that there was a time when there wasn't a gas station on every corner. It took some time to develop the infrastructure to support cars powered by ICE's. Did that keep people from buying the Model T? Hell no, they made more than 15 Million of them.

    As the cars are sold, the charging stations will be built. Also, most people can just charge in their own garage. The Tesla has plenty of range for the average driver and it will just get better. Just look at how the range of electric cars has increased in the recent past. I have no doubt the future will amaze all but the fool's (small f).

  • Report this Comment On September 03, 2013, at 8:05 PM, rianjones1983 wrote:

    There are plenty of car companies in the world, there's not really a need for a new car company or another gasoline car company. Elon Musk @ Teslive 2013 @ http://www.earningsimpact.com/Transcript/83311/TSLA/Tesla-Mo...

  • Report this Comment On September 03, 2013, at 8:59 PM, Lindy62 wrote:

    Lots of good opinions both pro and con on some of the issues going forward. I have owned a Prius Plugin for 10 months. Driven 12,000 miles. Get 120 to 130 mpg on trips of 20 to 30 miles. Get about 95 mpg on mixed driving, local and trips of 150 to 200 miles. I fill up about once a month, about 9 to 10 gallons, and typically have gone 900 to 1000 miles between fill ups. I am saving $1250 a year in gas priced at $3.50 per gallon compared to my Honda Accord.

    It only takes about a 1 KW solar array to charge the car so my EV cost is zero thanks to the sun. When the car price comes down a little and people realize what an EV or hybrid EV can do there will be many more sold. I full charge in 2 to 2 1/2 hours with a 115 volt outlet.

    Len Lindenmeyer

  • Report this Comment On September 03, 2013, at 9:07 PM, haywool wrote:

    Like the song says, "Plug it in, plug it in." That takes a computer science degree? FSZT !

    I've read where Tesla is working on a "repair station" that is nothing more than a truck like John Deere sent out to work on one of my tractors last week. Only the Tesla "mobile repair station" can carry a couple of replacement motors, too. No shop work there.

    Remember when that Ford guy started making those freekin' automobile things that could only scare a horse and injure the rider. That's just not safe. Nobody will ever buy one of those #$#%&* things!

    Enough already,

    Rich (long and very profitable TSLA)

  • Report this Comment On September 03, 2013, at 10:54 PM, hearshey wrote:

    Hey, Tesla. How about a shout-out to GM for its Hy-Wire and similar concepts?

    http://www.automotivetrends.com/wp-content/uploads/2010/03/2...

  • Report this Comment On September 03, 2013, at 11:00 PM, sorcerersean wrote:

    I own a Tesla Model S, and I can tell you this was the most pleasant auto buying experience I have ever had. There was no hard sell or checking back with the sales manager every ten minutes. The car was delivered to my home and they didn't try and sell me undercoating as I signed the final papers at my kitchen table.

    The car is the smoothest fastest machine I have ever driven. You feel like the future when you are behind the wheel. If you can plug in your toaster you can figure out how to charge the tesla. The 265 mile range that I get is enough for me to drive a week commuting to work. I pay $7.50 to fully charge it in Indiana, and have fully offset the energy with solar power.

    The few times I have needed service, tesla road rangers come to my house and fix it in my garage. I am waiting for the supercharger network to be fully built out so that I can take it out on the open road. The network will allow a free charge and will do it in 45 minutes or the time it takes to feed and water the family. To the comment about chassis above, Tesla offers a second option for recharging which takes 2 minutes. That will cost about the amount it takes to fill your SUV. It consists of driving over a robot that unscrews your battery from the bottom of the car and replaces it with a new one.

    I don't believe Tesla is just an automobile company, but an engineering company which will leverage its battery technology into all different applications that we can't imagine right now. Mr. Musk named his company after Thomas Alva Edison's chief competitor for a reason. I truly believe you are looking at a baby General Electric.

    P.S. The price does suck. But I got my Tesla money the foolish way. I invested my 39k auto seed money in KMP in 2008 and rode the dividends and share price appreciation to the cost of the car. Delayed gratification never felt so good!

  • Report this Comment On September 03, 2013, at 11:27 PM, carenthusiast2 wrote:

    i would not own tesla stock because the product is not ready for prime time. talk to me when the car can sustain a 300 mi charge using a/c and traveling 70 mph. i doubt the current car could go 150 mi at 70 mph.

    this car is still a toy for rich tree huggers to show off to their like minded friends. it is not yet a practical tool. it is usually a 3rd or 4th car--a rather limited market.

    i'll check back in a few years after this stock tanks to 20% of it's current price. a million cars? dream on!

  • Report this Comment On September 03, 2013, at 11:52 PM, tomd728 wrote:

    And 3 reasons Tesla is a roaring short:

    1.How many people are going to fork over 65-95 K for an auto with a 500 mile range.Once the elitists are absorbed try finding John Q.Public. A lot of money out from "other" buyers for an "around town car".

    2.So many questions on battery availability from supplier to keep up with projected sales.

    3.Infrastructure ? A long way off.This ain't Sweden lad!!!!!

    Good luck....You long ?

    Thank you,

    Tom

  • Report this Comment On September 03, 2013, at 11:57 PM, wishdom wrote:

    I live about 10 miles from the factory. Tesla S's are starting to populate our valley, land of high disposable income. I love the look of the sedan. Now that I have stated my pro's, here is something I've never seen in print. Normal gas powered car owners in California pay 39.5 cents per gallon in state excise tax used for "highways and mass transit." Figure 20 mpg and that runs 2 cents a mile. Hybrid pay less per mile and EV's pay none of it. As the portion of high gas mileage cars increases, the fund available to the state go down. It already has, which is why we had a 3.5 cent increase in July 2013. As the proportion of EV's increases, eventually a different tax structure will include them for highway repair/development. They will not continue to enjoy the free or almost free ride they have now. And the economics which favor them and their sales will shrink.

  • Report this Comment On September 04, 2013, at 1:47 AM, audie116 wrote:

    The electric car is not the answer. No one has ever explained to me why driving an electric car saves on pollution when 75% of our power in the U.S.A. is generated by coal fired plants. Based on that it isn't even a "green" thing to do. We are having brown outs at peak periods of energy use now.....so we are going to add another big drain on the system by going to electric cars??? You don't have to by oil filters and air filters ect but you do have to replace very expensive batteries regularly. None of this makes sense to me. That's not even talking the price point of these electric cars.

  • Report this Comment On September 04, 2013, at 4:47 AM, peterarawak wrote:

    The problem with all electric cars is the batteries and the limited mileage they impose due to the inability of current batteries to hold charge.

    If you discharge a battery below 50% of its capacity consistently you will severely shorten its life and they are very expensive. Having super fast charging stations just exasperates this as boost charging also shortens their life. When the reality of the running cost and inconvenience of short range kicks in the ability to grow sales will stall.

    It's a nice idea but just practical for milk floats or small city cars my advice is sell now before reality kicks in.

  • Report this Comment On September 04, 2013, at 7:36 AM, devoish wrote:

    "the naysayers are the same dopes that said the wright brothers wouldn't get off the ground" - teslaisthefuture

    For some perspective, todays market values the Wright Aviation company - now CurtissWright at 2 billion, one tenth of the value it places on Tesla.

    "No one has ever explained to me why driving an electric car saves on pollution when 75% of our power in the U.S.A. is generated by coal fired plants". - audie116

    Not explained and not listening are two separate things. I think you are guilty of the latter.

    "this car is still a toy for rich tree huggers to show off to their like minded friends. it is not yet a practical tool. it is usually a 3rd or 4th car--a rather limited market." - carenthusiast2

    ".How many people are going to fork over 65-95 K for an auto with a 500 mile range." - tomd728

    That is why is better to compare Tesla to other "elitist" and the author is correct to compare it to Porsche, not GM or Ford.

    Best wishes,

    Steven

  • Report this Comment On September 04, 2013, at 8:37 AM, NickD wrote:

    Natural gas people.

  • Report this Comment On September 04, 2013, at 4:22 PM, damilkman wrote:

    Here are some thoughts. Several years ago I was looking at the Honda CRV. I was instantly turned off when I realized the CRV used the same chassis as the Civic. There may be advantages to chassis standardization from a styling point. But the point why chassis's are different is the buyer has a different requirement.

    In my requirment I had moved to a rural setting. My Honda could not get up the hill in winter and I had no moving capacity when I needed to move something big. I needed a chassis that could handle the higher suspension so I could navigate roads that were rutted out or had ten inches of snow on them. If I had purchased a CRV I would have been in a world of hurt as it was a fake crossover.

    So a single chassis is not always the best solution. It may work out for sedans or subcompacts. But then again it is the same car. I will be curious to see what Musk does to produce a car for the common man. What will be his version of the Model T. I suppose that is what everyone is betting on.

    But that brings up another question. The big profits are in trucks. How do you make big margins selling cars? What do you skimp to drop the price of a modelS by 45-50K and still make a 30% margin? A cardboard body? A range of 75 miles? That is going to be trickier. Hard to tell as none of us have an itemized list of the costs for making a ModelS

  • Report this Comment On September 04, 2013, at 7:28 PM, Crazylegs52 wrote:

    I think some of the things in the string are valid and some lose sight of the benefits of a capitalistic, competitve marketplace.

    I mean, sheesh, Tesla has built a car that is the car of the year, consumer reports best car tested, gets 265 mile range on a single charge, and is American made, and people are griping? They are building out their own proprietary infrastructure for both rapid battery swaps and free plug in charging if so inclined. The sites are powered, at least partially, by solar panels sourced from...that's right, Tesla sister company of sorts, Solar City. I see a BIG MOAT DEVELOPING.

    Tesla, if not alone, at least as a competitive industrial start, is changing the economic marketplace with its approach to dealerLESS car sales, the energy marketplace with the supercharger network, the materials marketplace with use of aluminum and battery technology.

    They are by definition a game changer! Even if they are overvalued. Even if they don't ultimately succeed as the next Apple or GM. They are singlehandedly changing THE DISCUSSION about personal transportation. They are offering a competitive product!

    Is their single car an everyman car? No. It is meant to be a sport luxury car that competes with MB S class, Audi A7, BMW 7 series, Lexus LS. Not a daily driver competition with the Chevy Cruze. To make comparisons is crazy. They will be going after the daily driver crowd soon enough with the Gen III and even the Model X.

    I think once the Model X rolls out, you'll see the market change even more. When everyone realizes they can have a 7 seat, AWD SUV that gets the same 265 miles range for <$10 to charge in some states, it will be adios ICE. The Model X will be $75,000 BUT when competing against other cars that cost $50-60k but are 6-7 TIMES LESS EFFICIENT! People will be clamoring for the Model X.

    Finally, to those who suggest it is not energy efficient to have a Tesla because of the grid issues, I say, why not have solar on your house? Become energy independent? Why pay the utility company when you can pay yourself? I think EV IS the future of the automobile because solar is the most plentiful thing we have with the least effort to obtain. I think you may see deals start to come up between Tesla and Solar City where if you buy a Tesla and install Solar City, you get a better deal. You might even see use of Tesla batteries as augmentation to your home energy storage.

    My 2

    Crazy

  • Report this Comment On September 05, 2013, at 9:47 AM, damilkman wrote:

    To Crazy. The reason for much of the pushback is that the MF writers have often dropped their rules in arguing whether to support this stock. No one is disputing the innovation that Telsa is doing. What is being disputed is whether Tesla is still a good investment at a 20B market cap. What do you think the herd is going to feel like when a pumped up stock loses 90% of its value. Tesla could still be a great company and everyone would be angry. I made the same arguments about Level3 in 1998 when it was sitting at 158. Go to the old boards and read the bitter hate generated and the quote POS to zero was invented. By the way this was before the reverse split. Fool rule number one. A great company in a terrible field is a bad investment.

    Regarding solar. I do not live in Arizona. Every time I do the cost checks I am out tens of thousands out. I have looked into Geothermal, concrete houses, and fuel cell. Unless you are rich or feel strongly about alternative energy it is not worth it.

    You imply the Model X is going to be an everyman car. Not for 75K. I do see one risky possibility. Just like Solar City leases the hardware for 20 years, Tesla would have to lease their car out for some window longer then 3-5 years. Cars go obsolete and are considered beaters after ten. If Tesla makes a car that can be completely retooled lets say with new technology so you are buying into technology, then I would say you have a MOAT that no one else has considered. In that case instead of buying a car, a customer in buying into a new concept. Your requirements have changed. Instead of building a new car have TESLA change it for you.

  • Report this Comment On September 05, 2013, at 10:46 AM, carenthusiast2 wrote:

    Dear crazy

    You are not insane, just poorly informed. 265 mi range? Read the ny times test that showed the charge was gone in half those miles. This is currently an around town car to impress your friends in the Hamptons.

    As for a $70,000 suv, can you spell dud?

  • Report this Comment On September 05, 2013, at 4:54 PM, FoolinSD wrote:

    carenthusiast2,

    Xcuse my poor supelling. Look in the looking glass (giggles). The article you are refering to has been debunked by telemetric readings taken from the demo model S. Get *your* facts straight.

    foolinsd

  • Report this Comment On September 05, 2013, at 6:02 PM, cooter1127 wrote:

    A Few thoughts,

    1. I do not understand how the network of charging stations creates a competitive advantage for Tesla. All it does in my mind is bring it even with ICE vehicles, which already have "charging network" in place and unlike Tesla's that network was built at zero cost to the automaker. It is not like they will have some monopoly in the future to service other electric vehicles, this seems like a necessary cost to make their product marketable not an investment in developing some future moat.

    2. Although they have the ability to easily raise capital it is not like they generate free money or are growing shareholder value. This new capital no matter how easy to obtain will dilute shareholder value either by diluting equity per share or adding debt to the balance sheet. In its current state the company will need to reduce shareholder value to fund growth and that is hardly and advantage compared to established companies that can fund growth with positive operating cash flows.

    3. A swappable production strategy seems like pretty common industry practice, almost all automakers to some extent use interchangeable components across various product lines. Tesla can currently maximize this strategy to the highest degree because they do not have a diversified product line. What happens when they roll out service vehicles or SUV? Will the $90,000 luxury sedan and the $30,000 everyman car have basically the same components? if so either they will be losing money on the cheaper car or losing customers by gouging them for the luxury model, but eventually something has to give and when it does I think their production strategy will look pretty similar to any other automaker.

    I am not saying that Tesla is a bad company or that they make bad products and personally I hope that they can be a game changing company because I think the auto industry is in need of a massive shakeup, but as an investor the only valid argument that I see is that they make good cars that people love and as good as that sounds the creation of customer utility is not a sufficient investment thesis in and of itself. When a buy recommendation takes this level of mental gymnastics I think there is only one logical place to be; on the sidelines.

  • Report this Comment On September 05, 2013, at 6:26 PM, madinga wrote:

    Tesla cars are not affordable...Musk got it right...big electric luxury cars that drive like conventionnal cars...that explains the high margin like Porscshe!

  • Report this Comment On September 05, 2013, at 6:32 PM, RichardBRiddick wrote:

    Get over all the excitement. Energy is required to power an EV car just like a gas car. It is free now at these charging stations because this whole thing is a novelty. Eventually, EV car owners will have to pay for a fill up, whether it is in their higher electric bill (the more you use the higher the rate you pay!!). When practicality and real world realizations enter the picture, the excitement dies down.

  • Report this Comment On September 05, 2013, at 8:39 PM, NickD wrote:

    Nataral gas.....

  • Report this Comment On September 06, 2013, at 8:24 AM, JBinSeoul wrote:

    Tesla is not a car company, it is a group of lobbyists. Almost HALF of their revenue is Government welfare in the form of carbon credits. Without that, they would be closing down by the end of the month.

    Tesla only exists because of forced transfer payments. I think it is unrealistic to call that a stable income stream.

    And what is that car's range if I turn on an air conditioner? 50 feet?

  • Report this Comment On September 06, 2013, at 8:27 AM, drax7 wrote:

    In JFK words " the torch has been passed to a new generation ."

    Massive disruption is on the way, tesla has a significant lead. One probable outcome is a huge mkt cap.

    If anybody can do it, Elon Musk can.

  • Report this Comment On September 06, 2013, at 3:49 PM, DavidBressler wrote:

    Trying to chase the best investing is a fool's game. Even if they are going to do well, is it investing or gambling if you're just trying to "bet" on a particular product from a company?

    http://elephantspaycheck.com/blueprintbasics/investing-gambl...

    db

  • Report this Comment On September 07, 2013, at 11:38 AM, Sam026 wrote:

    Game Changer, not quite yet! Maybe Daniel you're a little ahead of the game here.

    As with any new product, some long term usage, durability, cost and taxation questions still need answers before it can truly be called a "Game Changer" These are my top three:

    1. How will this type of vehicle do long term in the Northern States' winter weather or in your case a Colorado mountain blizzard?

    A) Will road de-icing chemicals (i.e. salt) effect the vehicles durability? Aluminum corrodes, electricity and salt water don't mix well are just some issues.

    B) Real world range when its cold; really cold like below zero? Heater/defroster blasting, wipers on full rear window de-foggers on and you're stuck in traffic, etc......

    Game changers have to work everywhere, not just the Pacific coast and the high desert.

    2. How repairable is this vehicle design after an accident? Not just a little bumper bender but a "do real damage" (can't be driven) bang up. Even Tesla drivers will get into accidents. Is it also a "Game Changer" for the repair folks or maybe the insurance industry?

    3. How do EVs pay for their share of the roads? As "wishdom" pointed out, generally EVs aren't paying any road tax, as of yet. We all know taxes are coming, Dah! Who, what, when, how and how much?

    IMHO, they are way to many important questions unanswered for Tesla's EV to be called a "Game Changer" at this early stage of the product's life cycle.

  • Report this Comment On September 07, 2013, at 11:58 AM, Skintrade wrote:

    Amazing how much ignorance gets posted on these comment pages. If you know nothing about the car or technology, please don't make poor assumptions. Despite all the awards the car is racking up, the car still remains misunderstood. I am a Model S owner, so let me enlighten some folks on a few things.

    carenthusiast2 - "i doubt the current car could go 150 mi at 70 mph." and JBinSeoul - "And what is that car's range if I turn on an air conditioner? 50 feet? "

    I just took a trip from Houston to San Marcos going 85 mph with the A/C on full blast (100 degrees outside). Car gave me 225 miles of range. I supercharged for free while we shopped at the outlet malls. I top the car off after work, programming the car to draw power after midnight when rates are lower. Do you go to work with a full fuel gauge every morning? You don't have to think about how much gas is left in the tank. That's freedom.

    Supercharger infrastructure - How is this not a competitive advantage when you can travel cross country FOR FREE! Elon Musk is about to make such a trip before the end of the year from LA to NY over 6 days. Imagine years from now if they decided to build 18-wheelers that could supercharge. Superchargers could replace gas stations altogether and change the face of interstate transportation. The ultimate goal would be to have all these supercharger stations be solar powered, like some of them already are in Cali. This network is a game changer and one of the primary reasons why I bought the stock. What other car company is going to invest this much in their electric car program?

    For those who think only the mega-rich buy these cars - I know a guy who works at a local Trader Joe's who just bought one. And the car is outselling lower-priced car makers like Cadillac and Chrysler in California. The car is expensive, but if you add in the energy cost savings over time, it brings the cost down. Nobody here is talking about the safety of the car. How much is your life worth? The Model S is built like a tank that happens to fly like a Porsche 911.

    Battery life - A comment was made that batteries have to be replaced frequently. They have Tesla Roadsters that have racked up 100,000 miles and still have 85% battery life.

    I agree the stock price is not a great value right now. I've paid for half my P85+ with the stock and have taken profits, but keep a fair position still. I don't see alot that can stimulate the stock to $200 in the near term until the Model X comes out, or if they make announcement of major production capacity. Maybe rangebound $140-$170 for awhile.

  • Report this Comment On September 08, 2013, at 5:45 PM, StephenPace wrote:

    @audie116: You state that 75% of US power is generated by coal, but this isn't true. In 2012, only 37% is coal, with that number dropping all the time. Natural gas is 30%. Two things: one, regardless of source, this is domestically produced power. I'd rather use domestic power to drive than send money to people that don't like us very much. Two, even in states with a poor mix of power generation sources, EVs still come out cleaner. It is much better to centralize emissions than have everyone drive around with their own inefficient power plant, and since ICEs get worse with age, we have to maintain annual emissions testing programs for those cars so we can force people to fix them when they pollute too much.

  • Report this Comment On September 09, 2013, at 12:09 PM, kloutlaw wrote:

    Lots of good insight and thoughts from MF community. Thanks.

    Saw the car in the GSP mall in Paramus, NJ.

    I'm no expert, but I was impressed.

    While I can't afford a $70K model, I could afford a $40K model.

    The current stats on the vehicle would get me to most anywhere I'd drive in a day without a problem.

    Charging up a battery while stopping for a restroom or food break would help make road trips even more viable.

    Charging up overnight would be awesome.

    I'm excited for Mr Musk and his group at Tesla.

    I hope they keep getting it right.

  • Report this Comment On September 09, 2013, at 2:22 PM, jeffhre wrote:

    audie116, primarily because 61% of our electricity is not from coal, but from nuclear, renewables and natural gas.

    Secondarily because an EV is 90% efficient vs a 22% efficient gas car (petroleum also requires between 4KW to 6KW of energy to refine into gasoline). Cars on cleaner hydrocarbons like natural gas are about 18% efficient where a combined cycle heat and power thermal plant with co-generation can provide electricity at up to 80% efficiency vs. millions of mobile power plants.

    Tertiarily because 30% of Tesla owners use solar panels to offset their electricity, others either have, or are on contract for, wind and other clean power.

  • Report this Comment On September 09, 2013, at 2:31 PM, jeffhre wrote:

    damilkman,

    I have friends that live in Michigan and they have a solution for you. Summer tires...and winter tires. Cross overs with low clearance may not be for every road, but the right tires allow them to go up steep hills in bad weather.

  • Report this Comment On September 12, 2013, at 9:20 AM, TEQ4 wrote:

    No doubt Tesla is an auto tech company but some claims are stupid. Providing the USA w/ 98% coverage for charge stations by 2015? The US doesn't have 98% Internet coverage yet, far from it really. And creating a single platform for variable car configurations? Ford started this manufacturing fad a long time ago and I bet other car makers have adopted the concept today.

  • Report this Comment On September 12, 2013, at 12:35 PM, Heisenbergo wrote:

    Really dont see why Supercharging stations should be an advantage. Ok, maybe for the customer its an advantage, but if you can only sell a car if you also have to build a charging station that charges for free dont you have higher costs and less income?

    Also now that there arent that many Teslas on the road the supercharging system might work. But have you ever had to queue for gas? Imagine you have 10 cars ahead of you and each one has to charge for 20 min (for HALF a charge)

  • Report this Comment On September 14, 2013, at 9:08 PM, gid wrote:

    Why is it when I read an article on Tesla by Mr. Sparks it sounds like it's straight out of Teslas PR deptartment??

  • Report this Comment On September 23, 2013, at 1:01 PM, 48ozhalfgallons wrote:

    Apparently, I drive for vastly different reasons than those who would purchase a Tesla, the finest of all EV's. I recently returned from an outing in SE central Utah. My old Cherokee with 300k miles and after market traction control took my buddy and me up 30% grades with 14" steps; through 2 foot deep pools of water; 6" deep sand tracks, over a number of seriously off-camber boulders, and across 30" wide cracks while containing a tent, cots, stoves, lanterns, two 60-quart coolers, lots of beer, beans, jerky, and good camera gear. This same vehicle which I purchased back in '87 also manages interstate freeways and small town streets quite well. We split a $140 gas bill for the 700 mile round trip.

    While avoiding the purchase of a Tesla, had I invested an equivalent sum last year when this trip was in the planning stage, and sold before embarking to help offset the gasoline expenditure, I would have needed to find room for the extra quarter million-or-so bucks left over from pulling my money off the table. Had Mr. Musk produced an EV equal to the capabilities of my old Jeep, I could be impressed. 140 MPH capability is meaningless to families and only meaningful to the authorities and drug runners. Anyone can build a sports car or golf cart EV platform for the wealthy to indulge. A highly capable, roomy EV for freeway and serious off-roading is another matter indeed! Plutonium magneto drives are the only concept today which can compete with ICE's when it comes to off-roading. Lets do those and give the greenies something really to ponder. Make those rocks light up!

  • Report this Comment On October 23, 2013, at 5:46 PM, DonRastus wrote:

    Hi, in one of the earlier comments damilkman pointed out they wouldn't drive five minutes out of their way to get a charge. But if the charge stations are located in sensible locations (i.e. restaurant and fast food carparks, shopping malls, hotels, etc), or have coffee shops as part of the facility, then surely it wouldn't be a big deal? Heck, if the Bada Bing had a supercharge station maybe even Tony Soprano would have bought a Tesla.....

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