In my past couple blog posts, I’ve written about the electric car market and inventor Nikola Tesla , but I’d be remiss if I didn’t take a moment to talk about Telsa Motors and the very big waves the company has been making lately.
Tesla is having a very, very good May so far. Stock prices raised eyebrows on Wall Street, the company turned its first profit, and its first quarter sales have exceeded those of luxury competitors Mercedes-Benz, BMW and Audi.
The cars are not only seen as high-tech and cool, but increasingly they’re also viewed as being a smart buy. Personal finance guru Clark Howard owns a Tesla car (he switched from a Nissan Leaf), and Consumer Reports gave the Tesla Model S a near-perfect score, calling it one of the finest cars made since 2007. To be widely accepted by prospective car buyers, electric cars must be seen as practical and reliable to justify their price tags.
So while stock prices might go up and down, the embrace of a magazine like Consumer Reports could be invaluable to Tesla — even more meaningful to the accolades given by Automobile Magazine and Motor Trend in 2012.
By Consumer Reports’ math, owning a Tesla is like traveling back to the days when you could buy gas for $1.20 per gallon. The company itself, on its website, touts their vehicle’s reasonable cost of ownership. Still, the vehicles themselves remain undeniably expensive (the Model S has a base price of about $62,000), and consumers that don’t live in areas with plentiful charging stations still have justifiable concerns about range — even if the cars can take you more than 200 miles per charge, handily beating out other plug-ins that are limited to 75 to 80 miles per charge.
Elon Musk, Telsa’s founder and probably the closest thing the planet has to a real-life Tony Stark (the alter ego of Iron Man), is a tech guy first and foremost. Not only did his space travel company SpaceX become the first privately funded company to send a cargo payload to the International Space Station, but Musk’s renewable energy company SolarCity is also projecting growth. Going further back, he became a multimillionaire by selling his start-up company PayPal to online auction site EBay for $1.5 billion.
Given that Musk has sold his ideas at top dollar before, there have been rumblings that he might sell off Tesla to a cash-rich, tech-savvy company looking to get into the electric vehicle industry — perhaps even Apple, Inc. Musk, however, says he began Tesla with the goal of mass-marketing an electric car that is affordable. He adds that he will not step away from Tesla until this goal is reached.
What could be limiting factors in Tesla’s rise? The loss of government subsidies is one and manufacturing capacity is another. Tesla benefits from manufacturing credits (state and federal) that give breaks to manufacturers of vehicles that produce zero emissions. Should these subsidies and tax breaks be cut or eliminated, Tesla’s bottom line would suffer, and the now-soaring stock prices that were fueled by said profitability would likely fall as well.
Furthermore, there’s the potential problem of production constraints. According to reports, Tesla is capable of rolling out about 400 cars per week. At this rate, demand is likely to outstrip supply. Now, this might actually be good for a company that markets its products as “cool” and “exclusive,” but I don’t think Musk has any interest in building EVs just for the super-rich. To succeed in his goal of making the “Model T of electric cars,” he’ll have to boost his production capacity at some point.
I remember when the Prius had a similar problem. People wanted them, but weren’t able to buy them. There were waiting lists for the first couple generations of Prius hybrids, and I think the same thing happened with the Honda Insight. Then again, Tesla is a different kind of company than Toyota or Honda. Everything operates on a much smaller scale.
There is one more thing that could cause trouble for Tesla and other electric vehicle makers in the long term. What if the EV charging infrastructure simply doesn’t materialize? Range anxiety remains a problem for people who are the target audience for buying this sort of vehicle, and it is a real problem. As is always the problem in the electricity delivery industry — somebody’s got to pay for it.
For the time being, though, there are apparently a lot of people who are willing to pay for an electric car — enough for one company to beat the odds and stand out in a field that has seen so many recent bankruptcies and disappointing sales figures. That alone makes what is happening at Tesla Motors pretty big news, and for the moment at least the electric vehicle market’s lone success story.
Lead image: Tesla Model S via Shuttersock