Is Tesla Motors a Buy?

A year after going public, Tesla Motors (Nasdaq: TSLA) has seen some ups and downs as a public company. The company had a wildly successful IPO that quickly zipped to nearly $36 per share and had the electric-vehicle industry buzzing.

But for most of 2011, shares have bounced around between $24 and $30, not really making a solid move one way or the other. With the Tesla IPO fever having passed, is it finally time for long-term investors to jump in?

Where Tesla stands now
Tesla Motors has always been about technology. The company's vehicles have a longer range than competitors and charge (relatively) quickly. That's why Toyota (NYSE: TM) has contracted with Tesla to build an all-electric Rav4. And it's the development service business that is helping growing Tesla's revenue.

Financially, Tesla is on shaky but improving ground. Second-quarter revenue more than doubled to $58 million, gross margins exceeded 30%, and deposits are strong for the Roadster and Model S. But the company still had a $0.60-per-share loss, losses are expected to mount through 2012, and no one knows whether the current stockpile of $319 million in cash will hold the company over.

Not giving up without a fight
Then there are those pesky competitors who don't appear to be rolling over. They may have even figured out how to make cars people want to buy! Who would have thought?

General Motors (NYSE: GM) is a fringe competitor to Tesla but if you believe fellow Fool John Rosevear, GM may have its act together now, and that's trouble. The company just signed a deal with A123 Systems (Nasdaq: AONE) for future electric vehicles. That implies that GM will make some sort of continued move into the space.

The 2012 Ford (NYSE: F) Focus Electric will also be a reasonably strong competitor to the Model S when it's released along with Nissan and Fisker, which may be Tesla's biggest competitor when it releases the Karma.

Tesla is betting the farm
One of my biggest hesitations is the risk in Tesla's business plan. Elan Musk is basically betting the company's future on the Model S by phasing out the Roadster. Any slip-up in production, design, or marketing, and it could blow up in investors' faces.

I like where Tesla is positioned in the industry, growing sales and building a development business, but I wouldn't bet the farm on Tesla the way Musk is. A small step into the water is all I could make until we see whether Tesla can become a world-class manufacturer. If it can't, it will get run over by the competition.

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