Can Tesla Turn Brand Strength into Stronger Sales?

Tesla Motors (NASDAQ: TSLA  ) , the electric car company that has been long on media coverage and short on sales, may be poised to grow as customers now have a strongly positive view of the brand.

Consumer Reports released its annual brand perception survey Feb. 5 , which showed Tesla to be a brand on the rise. The company, which sells its basic Model S for around $70,000, saw a 47-point jump in this survey, vaulting it to fifth position with 88 points.

"Tesla had a strong, very public year, with soaring stock prices, magazine awards, and exceptional crash-test performance," said a press release touting the survey. "Innovation, performance, and sleek styling is clearly gaining attention and making a positive impression. By gaining points in several categories, Tesla was able to raise its overall score. This highlights the value of being good at multiple things, rather than rely on a single facet."

The survey, which was conducted among 1,700 randomly selected car owners, didn't simply ask which car brands people liked best. Instead, participants were asked to rank seven aspects of a car-buying decision: design and style, performance, quality, safety, technology and innovation, value and, finally, fuel economy. Then they were asked to name which brand was a leader for each of those aspects. The results were then used to calculate the overall favorite brand.

Is being #5 good, when competitors are #1-4?

All of the companies that ranked ahead of Tesla -- #1 Toyota  (NYSE: TM  ) , #2 Ford (NYSE: F  ) , #3 General Motors (NYSE: GM  ) , and Honda (NYSE: HMC  )  -- make electric or hybrid cars (those with both an electric and gas engine) that outsell Tesla's.

Toyota's hybrid Prius sold more than 234,000 units last year, according to the Los Angeles Times. Ford has not released a breakdown of hybrid sales for 2013, but the company reported that it surpassed its previous full-year hybrid sales record set in 2010 of 35,496 vehicles in just the first five months of 2013.

Tesla, which only sold 17,650 of its all-electric vehicles in 2013, according to a chart from Insideevs.com, still has a long way to go to compete with its rivals.

What about pure electric?

Hybrid cars dramatically outsell purely electric cars (likely due to price and the less-than-100 mile range of pure electrics), but electric car sales did grow in 2013 to over 96,000, compared to total U.S. passenger vehicle sales of 15.53 million, according to Hybridcars.com. Those numbers, however small they are, represent huge growth as sales climbed from 53,172 units in 2012 and 17,813 in 2011. That's admittedly a goldfish in the ocean compared to all car sales, but it's at least up from being plankton.

Who's winning pure electric?

Tesla's 17,650 was good for third place in pure-electric sales behind the Chevrolet Volt (at 23,094) and Nissan Leaf (22,610). Those numbers are especially impressive when you consider that the Tesla Model S starts at $70,000 while the Volt has an MSRP of $34,185 and the Leaf comes in at $28,800 MSRP.

Tesla CEO Elon Musk told CNN the company plans to have a model that costs around $35,000 for sale in "around three years." And though three years is a very long time to wait in car years, the prospects for a cheaper Tesla looks bright if the company maintains its positive brand perception. 

Will perception lead to sales?

Positive brand perception may be indicative of future sales, but it is not a straight line. For example, the public loves Tom Hanks, but, many many more of us are willing to pay to see him as "Forrest Gump" ($329 million U.S. box office) than as "Larry Crowne" ($35 million in U.S. box office).

The public's increasingly positive view of Tesla should help the company – as will a more competitively priced car. But if the market for fully electric vehicles, which despite its growth remains at the relatively small intersection of environmentally aware and high-net-worth – does not grow, gaining market share in a tiny market won't mean much.

For Tesla to compete with Ford or Toyota (or even Subaru), the company needs to capitalize on its brand perception to break out, or at least broaden, that niche.

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Read/Post Comments (10) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On February 09, 2014, at 7:27 PM, 68surfer wrote:

    It would be so refreshing to read an article that actually had the facts straight when writing and comparing electric vehicles. If a car is equipped with a gas motor it is NOT a comparison to a Tesla period. The volt is not a comparison at all when comparing how many ELECTRIC cars where sold. It is a comparison to hybrid or plug in hybrid cars only. Cheers.

  • Report this Comment On February 10, 2014, at 2:19 AM, jeffhre wrote:

    "Hybrid cars dramatically outsell purely electric cars (likely due to price and the less-than-100 mile range of pure electrics)"

    Or likely from electrics having only been sold by major automakers since the 2011 model year. How long does technology like DVD players take to overtake market leaders like VCR?

  • Report this Comment On February 10, 2014, at 7:53 AM, Hudson2 wrote:

    Surfer- Actually that is the point. An Tesla EV is a comparision to gas powered cars, not just EV (which they dominate) and hybrids (which they will dominate). Tesla competes against all cars and has the best product on the market. They destroy gas cars in every way. The long argument against is actually a bad one. 20 minute charge on long trips- Well-its FREE and powered by the SUN and rarely needed. Who doesnt need to stretch the legs anyway when driving for 3 hours. Sales will increase dramatically with the lower priced model. Sales will actually increase dramatically with the two higher priced models as well. Right now they just cannot make enough due to battery supply. (An issue which has been fixed with a short term deal) We should see double the sales this year and further huge increases in the next 20 years. Sales will be further aided by the Giga-Factory capable of producing an additional 400,000 per year. That is still in the works. Time is the only issue as when this will happen is uncertain at the moment. This company will succeed and the stock price will rise & keep rising as fundamentals catch up. 20 billion in Annual Revenue is likely by the end of the decade. They have already grown 760% this year, hence the 400% stock price increase.

  • Report this Comment On February 10, 2014, at 7:57 AM, EdwardInFlorida wrote:

    Like another poster pointed out, putting the Volt in direct comparison with pure electrics is very misleading. And there is no doubt the Tesla brand is going to drive even higher sales in the future as the name is becoming synonymous with the cutting edge in electrically powered passenger vehicles. Tesla fully expects to nearly double it's output this year of 2014 and that would place it as the top seller of pure electrics.

  • Report this Comment On February 10, 2014, at 8:09 AM, Pietrocco wrote:

    The author`s central point is absolutely correct: Tesla is competing, and will be competing "for ever", in a very tough environment.

    It is not as if the Fords, Toyota, etc. of this world are going to sit idle as Tesla sells more and more cars.

    the bigger the addressable market, the fiercer the competition will become.

    Investing on the assumption that Tesla will dominate, or at least be a major player, in the future of electric cars for many years to come is a very risky bet indeed!!

  • Report this Comment On February 10, 2014, at 8:54 AM, AcuraT wrote:

    So EdwardinFlorida, you have inside information that Tesla's list price will be cut in half? If so, I believe you will be correct. Failing that, I don't see how their sales will double in 2014. The car is priced for the top 2.5% (at best) in income in the USA, and not all of them want and desire a battery powered car - not even close. They will keep on buying their Cadillacs, Mercedes, BMWs, Audis, and the like and ignore Tesla as they do now. At their current price point, they are a niche product and nothing more. In the future when (and if) they develop cars below $30,000 list, then this will change - not before.

  • Report this Comment On February 10, 2014, at 9:34 AM, txfilmguy wrote:

    The title of this article displays a stark misunderstanding of TSLA without even having to venture into the article. Tesla doesn't have an issue of weak sales. In fact, they're struggling to fill the orders that have already been placed. They are limited only by the capacity of their facilities to manufacture the cars, and that is growing all the time, expected to double in 2014. Every car they manufacture is sold even before the materials are ordered. As a result, Tesla has the unique position of not even having to advertise, as TV, radio and print exposure could not equate to more sales at this point. Sales are already over their capacity to produce. (This is a good problem to have.)

  • Report this Comment On February 10, 2014, at 9:37 AM, CrazyDocAl wrote:

    No Tesla can't surge in sales. It has nothing to do with how it's powered either. The fact is that they cost too much money. Once you start adding in the options you will pretty much need the 85kw S will be close to $100k.

    For most that's out of the question. For the majority of those who can afford that kind of money they want a vehicle that's not just going to be a commuter car. They don't want the car to be the deciding factor of where they vacation or be told you can leave your $100k car at home and rent a vehicle.

  • Report this Comment On February 10, 2014, at 10:42 AM, nonqual wrote:

    "powered by the SUN "

    That's a hoax, but you swallowed it.

  • Report this Comment On February 10, 2014, at 1:50 PM, gjsuhr wrote:

    Nobody makes a $35,000 electric car with a 250 mile range. If they did, they could likely sell millions per year, as that kind of range makes it a practical vehicle.

    Tesla says they will in around 3 years, but I have my doubts. The big challenge is getting the price of the Li-ion battery cells down, and since Li-ion cells have been in commercial production for 20+ years now, all the easy gains have been made. Is a breakthrough possible...I suppose....but that's like betting on the Cubs to win the World Series, technically it is possible, but that's not where the smart money bets.

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