Shares of Tesla Motors (NASDAQ:TSLA) got a nice lift recently after the high-profile electric-car company announced impressive Model 3 pre-order numbers.
In this clip from the Motley Fool Money radio show, Chris Hill, Simon Erickson, Jason Moser, and Andy Cross talk about how the Model 3 could easily become the most popular car in America -- if Tesla can actually deliver as many vehicles as it's promising. They also look at the significant number of shares sold short on the company, and explain why they're not planning on making their own short plays anytime in the foreseeable future.
A transcript follows the video.
This podcast was recorded on April 8, 2016.
Chris Hill: Shares of Tesla Motors on the rise this week, in the wake of the company unveiling the new Model 3. Tesla accepted more than 300,000 pre-orders at $1,000 a pop. Pretty nice to have some additional working capital.
Simon Erickson: Chris, do you know what the best-selling car in the United States was last year?
Hill: It was Ford, right? The F-150.
Erickson: For a vehicle, yes. The best-selling car was actually the Toyota Camry. Sold 361,000 units. Tesla has 300,000 pre-orders for the Model 3 already. And they've collected, of course, working capital up front for the reservations. So, this is phenomenal. And Elon Musk is saying the Gigafactory has the supply output to supply 500,000 vehicles every year. So, we're already in the conversation of best-selling vehicle, potentially, in America, and we haven't even gotten there. We don't even expect the Model 3 to come out until the end of 2017, possibly 2018 already.
Hill: Do you know what the key difference is, though, there? It's that Toyota actually built and delivered all those cars. To this point, Tesla Motors does not have a great track record of producing a lot of cars quickly.
Erickson: And they only sold 51,000 last year. This is an amazing ramp up, if they're able to pull it off. Of course, we've talked on the MDP podcast just a couple days ago about how you can never bet against Elon Musk! He always sets the bar really high, and people laugh at him at first, and then he delivers. I think this is going to be another phenomenal improvement for Tesla.
Andy Cross: Well, you can bet against him, it's probably just not a smart thing to do, long term at least.
Jason Moser: It won't work out very well for you. But, I think one thing to remember, too, is that this is one of those businesses that a lot of people root for. I mean, we want to see something like this happen. Current energy policy, we don't want to be driving gas-guzzlers forever. So, this is a really easy company to root for. And hey, let them set the bar high, because someone has to do it. It may not work out, necessarily, in the time frame they set. But I have really no doubt in my mind that it will happen. I think this is just the first of many steps forward for many new options when it comes to transportation.
Cross: It's interesting, there are 32 million shares sold short of Tesla. So, clearly, many of us want them to succeed, but there are definitely many people out there who are betting against them.
Hill: I'm on the sidelines. I'm not saying it will necessarily succeed, but not in a million years would you get me to bet against Elon Musk, because I think that, among other things, people who look at this company and try to value it the way they value a Ford Motor or Toyota are just not thinking about it the right way at all.
Erickson: Right. We're not even talking about solar system battery backup, or if they're selling batteries to other vehicles. We're just talking about the Model 3 here. And to put some numbers behind it, really quickly, Chris -- if they do sell 500,000 cars, say at an average price of $40,000 a car, that's $20 billion of revenue, more than five times what Tesla's doing today.
Cross: And this cash gives some breathing room from having to go out and raise more money, too.