If you've been waiting to buy Tesla Motors
Tesla's offering, the first by an American carmaker since Ford's
Tesla hasn't been coy about what it plans to do with the money. It'll fund the development and production of the Model S, a four-door sedan that is the company's first attempt at a mainstream, mass-market model -- one that will hopefully lead the money-losing firm to profitability.
At $17 per share, Tesla -- which was reportedly close to bankruptcy not long ago -- is valued at about $1.33 billion. That's a lot of money. But what do those new shareholders really own?
The next Amazon? Or the next Pets.com?
Let's stipulate this right up front: As things look now, electric cars are (probably) the future of the automobile. After a couple of decades of dithering around with fuel cells, hydrogen-powered internal combustion, and other approaches to a low-carbon, low-oil future, most of the auto industry's heavy hitters have focused on cars with electric drivetrains powered by lithium-ion batteries, with or without ancillary gasoline engines. Investor excitement around electric cars generally is probably deserved.
But that was true -- generally -- of investor excitement around the Internet in 1998. So here's the question: Is Tesla the future of electric cars?
Groundbreaking technology ... but the ground has already been broken
Tesla's first model, the much-hyped (with some justification) Roadster sports car, was an impressive product -- the first really nice, usable, fun electric car. But technologically, it's nothing special, at least when viewed from a 2010 vantage point. It's essentially a whole bunch of laptop computer batteries (6,831 to be precise), an electric motor, and a special single-speed transmission built by BorgWarner
Now, that's not a bad thing. The Roadster is a well-finished car that's exceedingly fun to drive, has decent range, and is backed by kid-glove customer service. But technology -- and the auto industry -- have moved on a long way since the Roadster was unveiled in 2006. Heavy-hitter auto suppliers like Johnson Controls
And now come the heavy hitters
More to the point, Nissan and Ford are expected to launch mainstream all-electric models by early next year. These cars, which will be bristling with advanced technologies, will sport familiar badges and mass-market price tags (under $30,000 after tax breaks), and they'll be sold and serviced via extensive dealer networks that are already familiar to consumers. Toyota, General Motors, and others are expected to follow with all-electric models and advanced "plug-in" hybrids like the Chevy Volt and upcoming plug-in Toyota Prius.
Contrast that with the Model S, which will be considerably more expensive (about $50,000 after tax breaks) while using technology similar to the Roadster's. Tesla has already announced that the Model S will feature laptop-type battery cells from Panasonic. But unlike the Roadster, which is largely built by outside suppliers, the Model S will be built by Tesla itself, a company with zero experience in ground-up mass production of cars, notwithstanding possible help from Toyota.
The daunting road to success
Tesla says that it needs to sell 20,000 Model S autos a year to make this thing work. But the Model S and Tesla -- a start-up that has yet to book a profitable quarter, and that has sold about a thousand cars ever -- are going up against companies with vast R&D resources and brands that are global household names. And they're doing it with a significant cost/price disadvantage, no experience in this kind of manufacturing, and with no disruptive new technology. In other words, there's no real first-mover advantage.
How do they win? For that matter, how do they survive? For investors, where's the upside?
I can't come up with a convincing answer to those questions. If you can, buy the stock.
Read more Foolish coverage of the global auto industry:
Fool contributor John Rosevear could see himself buying a Model S, but is less inclined to own Tesla's stock. He owns shares of Ford. Microsoft is a Motley Fool Inside Value pick. BorgWarner and Ford are Motley Fool Stock Advisor selections. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has an electrifying disclosure policy.