If you are somewhat familiar even a little bit about stocks and have an interest in investing, you probably have heard about the recent boom of Tesla Motors (NASDAQ: TSLA) stock. Recently, the stock went as high as $110 a share; this was a 103% increase over a one month period and a 247% increase over a 3 month period.
So you may be thinking, what caused this sudden increase and growth? Tesla stock first jumped 31% on May 8th when it announced its First Quarter sales to be $562 Million and recorded first quarterly profit in its 10-year history of $15 million. In a letter to shareholders, CEO Elon Musk mentioned that Tesla delivered 4,900 electric vehicles as well as other important figures. One of them being that their gross margin doubled from 2012 to 17 percent. This was made possible due to better use of raw materials, smarter inventory management, and a reduction in the hours required to build each car by 40 percent over the quarter.
In the first quarter of the year, Tesla delivered more than 4,750 Model S vehicles in the US which when compared to the more traditional luxury car brands such as BMW 7-series and Mercedes S Class, is much higher. BMW sold 2,338 7-Series models in the first quarter while Mercedes sold 3,077 S-Class models. The demand for their most popular model, Model S, is projected to be around 20,000 units per year in North America and in Europe, the current order rate is 200 per week. In order to meet these demands, they have added some changes to their manufacturing process which should drive margins higher.
Some of these changes include:
(1) a reduction in temp workers since the beginning of the year
(2) increased efficiencies and reduced scrappage both at supplier and in-house production sites
(3) a streamlining of operations leading to a further reduction in full time employee man-hours from 60-70hrs/week previously to 40-50 hrs/week currently
(4) a significant improvement in logistics costs.
Currently their body assembly and finished assembly are still running on a 2 shift basis so the main goal of the production team right now is to get production levels of 20,000 on a single shift across most processes.
With the Tesla Model S being a luxury car and priced at $62,400, I feel that its affordable and much better then other cars. Do you see Tesla continuing to be as successful as they are now and do you think their stock price will continue to go up as it is now? As I mentioned earlier, they out sold Mercedes and BMW luxury models, do you think that will continue to happen in the future as well? What would you rather have, Tesla or other traditional luxury car models?
11 thoughts on “Tesla: Creating a revolution in the luxury car industry”
I’ve been following Tesla pretty closely and am willing to bet that Tesla is going to be the biggest brand in the mass-market car industry within the next 15 years or so. A lot of people are saying that their stock is in a bubble that is soon to burst, but they don’t really have a basis for this. The electric car is going to be the new standard. I’d much rather own a Tesla than gas-guzzling boats like BMW’s 7-series and Mercedes’ S-Class.
I didn’t know much about Telsa until resently. i was lucky model s was driving in front of me this afternoon and it looks really good. The exterior design is definitely luxurious and it is definitely comparable to BMW 7 series or Mercedes Benz S series. While the model S is growing it will take time to build the reputation of BMW and Mercedes Benz.
In my opinion, Tesla will continue to be successful because of their innovative, energy-efficient product line and upscale appeal. When electric vehicles made their debut in the 1990’s the country wasn’t ready for this platform. Now it seems like electric vehicle charging stations are popping up everywhere- especially on the west coast. Tesla and Toyota formed a “strategic partnership” in 2010 when Toyota agreed to purchase $50M in Tesla stock. This partnership will strengthen both brands. In all reality, only time can tell!
In my opinion Tesla is still going to be successful because of the effective strategic decisions such as low cost logistics, less inputs being used i.e. labor, direct material, the unbeatable price for a great car like Tesla and overall is a much better car for our environment. The changes in the production process such as reduction of man hours from 60-70 hrs/week to 40-50 hrs/week means less labor cost by reducing the overtime hours. Reduction of scrappage and low cost logistics is more money saved and inputs will cost less. These will lead to a higher productivity based on the multi-factor productivity formula: Productivity= Output/(Labor+Material+Energy+Capital+Misc). The labor, the direct materials and other miscellaneous will cost less. So for the same level of output, the productivity will be higher now compared to the time before the changes. 20,000 cars per shift will cost less now. That’s why the price $62,400 is an affordable price for a luxury and environmental friendly car like Tesla. So just buy changing key variables in operations and productivity a company can be successful in the market and beat the competitors.
Tesla is a revolutionary company that was able to successfully reinvent the electric car; an idea that fell out of popularity after the cheaper internal combustion engine debuted in the twentieth century. I believe that their triumph in the face of such a large and difficult industry to enter has paved the road for their success in the automotive industry, and I think that in the near future they will continue to see a growth in sales and their stock price. While I do understand that the Tesla has outsold other luxury brands like Mercedes-Benz and BMW, I think that comparing these companies is not fair as they are of a different caliber and Tesla’s vehicles have only been on the road for about 5 years in comparison to BMW and Mercedes that began manufacturing cars in the early twentieth century. I respect Tesla’s success in recent years but I am weary of their future as their company as these larger companies have begun to understand consumers’ changing preferences to electric cars. I think we will be able to gauge the future of Tesla much better when BMW’s I-series (their electric line) becomes more accessible to the public.
Even thought Tesla has gone through financial issues, today they are one of the strongest auto makers in the world. Tesla announced their new and biggest project a couple of months ago. They will be building a battery factory in Nevada that will not only help decrease the cost of their cars but help the state of Nevada by creating jobs. I think that Tesla will continue to deliver more cars than the 7-series and S class but their stock price is likely to take a dip soon. They have a very ambitious goal of delivering 500,000 cars annually by 2020 and are taking a large risk with the battery factory. It will be very hard to deliver 500,000 cars a year at their current scale of car production and their idea of using batteries to store energy produced by solar panels doesn’t currently have a large enough market.
I believe Tesla will continue to be successful. I believe that one of the many reasons that differentiate them from other car manufacturers, especially in the united states, is that the cars are manufacture here. I believe that there is a trend of people wanted to support american made product because it helps the economy and it also provides jobs. I think that is not a bad idea that we are moving from cars that need gasoline to electric cars but I guess time will tell.
I like that Tesla is attempting to create a luxury-brand model that will be (relatively) manageable for the average consumer to obtain. Before learning about Tesla in my consumer behavior marketing class, the only thing I knew about the company was that it had numerous battery problems that would cause cars to become inflamed. However, given the growing ecological conscientiousness of new consumers, I would prefer a Tesla to other luxury brand cars, given that the company fixes the whole car-on-fire problem.
Recently I’ve start to become very interested in Tesla and how they function as a company. I always looked at the electric cars as something i would never drive because of how stupid they looked, but Tesla has really changed my opinion. Their cars look like some of the other well known luxury vehicles and they have started to get peoples attention. I think in the near future most cars companies will follow Tesla’s model and come out with similar vehicles.
I believe Tesla to continue being successful. I am a big fan of environment friendly products and recently have been looking more into Tesla. I believe that their stock price will continue to rise as more and more people become interested in the company. Tesla has revamped the idea of what an electric car looks like and in a couple of years will come out with a more affordable model ($35,000)that would target a larger group of people who have a certain amount of money they can spend, but would also like to save in the long run with an electric car like Tesla. If I could afford a Tesla as of right now, I would definitely be driving one.
I also believe that Tesla is going to be successful. Their CEO Elon Musk is very passionate about providing an electric powered car. Once Tesla is able to ship out cheaper versions of their car their brand will grow even more. It is interesting to see how they plan out their operations over the next couple years. Right now, there are several states that are competing to have Tesla chose them as a spot for their battery plant. This is a very crucial time for the company and they have to choose a place that is logistically sound.