While Tesla Motors' (NASDAQ:TSLA) monstrous $30 billion market capitalization (more than half that of both Ford and General Motors) suggests the electric-car maker is well known to the general public, there is actually still much confusion surrounding the company. In fact, some of the most important facts about Tesla are often overlooked.
Of course, we shouldn't be surprised that Tesla is shrouded in mystery. After all, the California-based company has exploded onto the scene in a very short time. Tesla was delivering fewer than 1,000 vehicles per year as recently as 2011. This year, Tesla says it is on track to sell 33,000 vehicles. The soaring stock price, up about 740% since the beginning of 2011, has reflected Tesla's sudden rise.
Furthermore, Tesla doesn't help much in educating the public about its operations; not only does the company still refrain from spending on advertising, it also does almost everything differently than its peers.
So, without further ado, let's lay out some facts.
1. The Model S is a beast
Zero-emission vehicles should no longer be regarded as less capable than their gas-powered peers. While Tesla is so far the only company to introduce a desirable fully electric car with high performance that doesn't make any crucial trade-offs, it just takes one to prove it can be done.
And the performance of Tesla's Model S is no joke. Consumer Reports called the Model S P85D's 691 horsepower "jaw-dropping." This all-wheel drive version of the Model S is actually more efficient than its rear-wheel drive counterpart, boasting faster speeds and more range on a single charge (285 miles compared to the rear-wheel drive P85 at 265 miles). This increase in efficiency goes counter to the usual trade-offs that must be made in traditional autos when upgrading to all-wheel drive.
Not to be overlooked, the least powerful (and least expensive) Model S still comes in solid at 380 horsepower and a zero-to-60 mph time of 5.9 seconds. The range for the entry-level Model S, at 208 miles, is plenty for daily driving and enough to get by using Tesla's rapidly growing Supercharger network.
2. Tesla sells every car it can make
Demand for Tesla's vehicles is growing faster than the company can ramp up supply. Even after delivering the Model S for two years, demand for the car remains mind-boggling. Despite Tesla using no paid advertising and having a paltry retail presence (even in the U.S.), the company said in its Q2 letter to shareholders that average global delivery wait times for the vehicle are increasing faster than production and deliveries. That includes even the most established markets, according to Tesla.
With Tesla recently introducing dual-motor all-wheel-drive versions of the S and announcing that industry-leading semi-autonomous driving features will now come standard on the sedan, this trend looks set to continue.
3. Tesla has a big vision
After add-ons, most buyers spend about $100,000 on a Model S. So while Tesla's only currently available vehicle might be too expensive for many people to even consider buying, the company hopes to change this by late 2016.
CEO Elon Musk made it extremely clear in 2006 that creating an affordable, desirable, fully electric car was Tesla's ultimate mission. In a blog post entitled "The Secret Tesla Motors Master Plan (just between you and me)" in August 2006, Musk detailed the path the company planned to take to eventually build electric cars most people can afford.
"The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model," Musk explained.
At the end of his post, Musk summed up the plan in just four steps:
- Build sports car.
- Use that money to build an affordable car.
- Use that money to build an even more affordable car.
- While doing above, also provide zero emission electric power generation options.
Tesla's Roadster and Model S have already checked off Nos. 1 and 2. And now Tesla has revealed a few details about this "even more affordable car." It will be called the Model 3, be slightly smaller than the Model S, achieve over 200 miles of range, cost roughly $35,000, and go on sale sometime around late 2016 or in 2017.
4. Tesla runs its business differently
Tesla breaks almost every mold of how an auto company should do business. Consider some of these intriguing tidbits:
- Considering the practice unethical, Tesla has vowed to never profit from servicing owner vehicles.
- Tesla doesn't use auto dealers to sell vehicles. Instead, it sells vehicles directly to consumers.
- Tesla's warranty is fantastic. The company has an eight-year, unlimited-mile warranty on the battery and the motor on its 85-kWh Model S. The smaller 65-kWh version has an eight-year, 125,000-mile warranty.
5. "We are ALL IN"
This quote comes directly from the company's corporate values statement. It's the last value listed and the only one emphasized with capital letters. The value encapsulates Tesla's focused approach to business.
As the value implies, Tesla's strategy is to bet the house on fully electric vehicles. To put the size of the bet in perspective, consider the $5 billion Gigafactory it is building to bring economies of scale to battery production. The factory could truly either make or break the company. With the factory intended to go live by 2016, when the Model 3 is ready, it is expected to produce battery packs for up to 500,000 vehicles annually by 2020 -- a huge jump from the 33,000 vehicles Tesla plans to sell this year.
But such an approach brings with it a wild risk-reward profile. If Tesla can pull off a lower-cost, desirable car and make full use of this factory, it could carve out a permanent spot for itself among bigger auto manufacturers. On the other hand, if Tesla fails here, the factory could make things very difficult for the automaker, or even be its demise.
Increasing the stakes, the success of Tesla's lower-cost car is largely already priced into the stock. Not executing expertly on the Gigafactory, therefore, would likely cause shares to plummet. But given Tesla's and Elon Musk's track record so far, there is certainly good reason to believe this innovative automaker can pull it off.
Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and 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.
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