3 Things You May Not Know About Electric-Car Maker Tesla Motors, Inc.

Tesla is still new to the automotive scene. Here are a few items about the electric-car maker you may not be familiar with yet.

Jul 19, 2014 at 2:00PM

Tesla (NASDAQ:TSLA) is still new to the automotive scene. Sure, the stock now boasts a market capitalization about half of General Motors', but it was only two years ago when Tesla was delivering only hundreds of cars per quarter. This year, Tesla is looking to sell 35,000 vehicles on the continued success of its Model S luxury sedan. Even in the U.S., a Tesla Model S remains a rare site in some states.

Model S Hong Kong

Model S. Image source: Tesla Motors.

Consumers and investors are still digesting all the details surrounding this fast-growing company -- many of which are quite surprising. Tesla undoubtedly wants to disrupt the way things have been traditionally done in the automotive industry.

On that note, here are three items regarding Tesla Motors that aren't so well known.

1. Tesla has vowed vehicle service will never serve as a profit center.
Tesla takes a totally different approach to vehicle service than other auto manufacturers. First and foremost, by eliminating the dealer and selling vehicles directly to consumers, customers can deal directly with Tesla when they have problems with their cars. But where Tesla really departs from the rest of the auto industry is in its approach to charging for service.

For dealers, the majority of their profits come from servicing vehicles. But Tesla doesn't see this as an ethical practice. 

I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry...

Tesla Service

Tesla service center. Image source: Tesla Motors.

2. Tesla's retail locations are meant to serve as a place of education, too.
Beyond the obvious reason for Tesla retail locations -- to sell vehicles -- Tesla is also aiming to educate consumers about electric cars and plant seeds for when its more affordable Model III finally goes on sale.

To do this, Tesla is deliberatly locating stores (or gallery locations in the states where direct vehicle sales are illegal) in retail venues with high foot traffic and high visibility. If you spot a Tesla store, it's probably in a mall or on a popular shopping street. 

This allows us to interact with potential customers and have them learn about our cars from Tesla Product Specialists before they have decided which new car to buy. The Product Specialists are also trained to answer questions about electric vehicles in general, not just ours.

Tesla Store Tmf

Tesla retail store. Image source: The Motley Fool.

3. Need service? Get a fully loaded loaner car.
Tesla vehicles need much less service than gasoline cars, Tesla says. The company cites a number of reasons for this benefit.

Model S has at least a thousand fewer moving parts than a traditional car -- no internal combustion engine, no transmission, no mufflers or catalytic converters -- thereby lowering the chances of things breaking down or wearing out. Thanks to regenerative braking, even brake pads will last longer on Model S than on other cars.

With fewer cars to service per cars sold, Tesla is able conduct service far differently from peers. For instance, Tesla is able to offer fully loaded Model S Performance vehicles as a loaner to owners who need to their Tesla serviced. Going a step further, Tesla has implemented a valet service in which the company picks up an owner's car and replaces it so owners don't have to drive to service centers.

These are just three ways in which Tesla is completely disrupting the way we have become accustomed to understanding auto manufacturers. For investors who haven't started looking into this disruptor, it might be time to add this American car company to your watch list.

Warren Buffett's worst automotive nightmare (Hint: It's not Tesla)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.


Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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