Will Tesla make Money in 2012?
If you are an automotive enthusiast, environmentalist, techie, or just keep up with pop culture you have most likely have heard of Tesla. The car that made the company famous was the Tesla Roadster, a $100,000+ electric sports car that can accelerate to 0-60 mph in 4.2 seconds and has an estimated range of 200 miles a single charge.
Even though Tesla has had some big backers, including Hollywood elite and celebrities, it has been on a rocky road. Here is a list of some trials and tribulations the company has had: firing of one of its founders (Martin Eberhard), nearly going bankrupt, not being able to deliver Tesla Roadsters to customers on time, raising prices on waiting customers to raise cash, its CEO (Elon Musk) becoming known for throwing mass tantrums then mass firings, and probably some other stories I am forgetting.
Any automotive analysts, journalist, engineer, enthusiasts is most likely aware it is not east to start a car company. Such notable failures include DeLorean and Tucker. More recently another electric car startup, Aptera, had to close its door due to insufficient financing. It had interesting ideas about what cars in the future would look like, but it could not pull together money to fund plans for building a 4-door electric sedan.
Tesla almost suffered the same fate during the financial crisis. Elon Musk, Tesla's CEO and Co-Founder, had to wire his last $3 million to keep the company afloat. Musk amassed quite a large fortune selling another one of his startup companies, PayPal, to Ebay netting $180 million. This money vaporized quickly between the realities of trying to fund Tesla and running his space exploration company, SpaceX.
Musk was brash, cantankerous, and probably in over his head if he truly thought building cars would be easy. Tesla and him have learned that the hard way though, and it seems they are on track to truly make a difference in the automotive world.
While Tesla might have a lot of critics, it is hard to ignore the fortitude and guts Musk and the Co-Founders had, to go where no car companies wanted to go, electric cars. Bob Lutz even admitted that Tesla gave him the inspiration to convince GM to build the Volt. Many other automakers probably speed up development of EV programs and batteries, after seeing what this Silicon Valley upstart was going to achieve with their Roadster.
I have great respect for Tesla and the people who run it and Elon Musk. In the long run, I truly hope they are successful and I can write and review lots of Tesla vehicles in the future. They have a true underdog story reminiscent of David and Goliath, which is part of the appeal of Tesla.
However, it is still hard ignore the fact they have been unprofitable. The publicly traded company [TSLA] currently trades in the $28-29 range, which many financial analysts think is high.
Tesla with their new Model S, might actually make a profit in 2012 though. It was recently announced the prices they quoted on 6000 or so waiting customers will not change. Unlike what the company was forced to do on the Tesla Roadster. The Model S is Tesla 4-door luxury sedan that might could really change start to change the market.
While the Tesla Roadster is really cool and lots of people want them, 2-seater cars are just impractical. For getting around town, transporting kids, dogs, groceries, 4-door sedans are ideal.
The business scenario for building sedans is so strong Tesla will wind down production of the Roadster. (In my opinion a mistake!) Tesla is also planning on building an electric SUV off the Model S platform and hopes to develop a sedan in the $35,000 range. They are thinking with their heads, not what an auto enthusiast wants. This is the right plan.
Musk in the past has made statements about Tesla and the financial situation the company is in, but those claims usually turnout to be false. It seems that 2012 might be the year where Tesla doesn't need to make false claims and that it might turn a profit even if it is small.
I wish Tesla the best in 2012 and hope they keep giving big automakers a run for their money.
Please contact Adam Yamada-Hanff – [email protected] – for comments, questions, or topics. You can also follow him on Twitter @AdamsAutoAdvice
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