Tesla: Creating a revolution in the luxury car industry

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.Source: AutoBlog

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?






Tesla vs The World: Revolutionizing The Car Buying Experience


It’s beginning to look like Tesla Motors’ CEO Elon Musk’s vision of becoming the world’s first mainstream electric car manufacturer is coming to fruition.  “Tesla” has been the top buzz-word in the news covering financial markets for the past few weeks now, and it has not been losing any steam, especially following a 99% rating by Consumer Reports on its Model S.  Tesla stock has already soared by nearly 175% this year.  Due to Tesla’s successes, both investors and consumers are gaining more faith in Tesla and its products.  Along side its stock price, Tesla has also been experiencing increases in sales after winning Motor Trend’s Car of the Year Award, and introducing its own financing program in a partnership with Wells Fargo.

The successes of Telsa Motors is proving to be too much pressure for the conventional car dealership, indicated by a proposed North Carolina bill to ban Tesla Motors galleries in the state.  Unlike car dealerships that make their profits by purchasing their cars at wholesale prices from the manufacturer, and then marking up the prices for the ultimate consumer, Tesla uses a direct-sales method to get their consumers behind the wheel of their machines.  The bill, which has just passed the state Senate, would ban manufacturers from selling their cars without going through a dealer.  Now, if you want to purchase a Tesla car, you can go to their gallery showroom, meet with a representative, choose your configurations, and make the purchase on-site through their website. There are many reasons why these dealers might be pushing for the Governor’s signature on this bill, but I am confident that it has nothing to do with simply playing by the same rules that other dealers are playing by.  Currently, in North Carolina, it is already illegal for an automobile manufacturer to sell their cars without doing so through a dealer, so what would this bill change?  Under current legislation, Tesla still has the criteria of being considered as a car dealership.  The bill would declassify Tesla as a dealer, since it prohibits manufacturers from making sales “using a computer or other communications facilities, hardware, or equipment”.  Tesla is the only manufacturer that uses this as their sole method of selling cars.

Tesla’s products aren’t the only revolutionary aspect of their business.  This buying experience eliminates the need to sit at a dealership for hours, trying to get the price of a car down to a reasonable number, while the salesperson makes multiple runs to the coffee machine, AKA “the manager” during negotiations.  Instead, you go to the showroom, sit in the car, choose your options, and place your order.  Whatever price you pay at the showroom, is the lowest price you’re going to get. No haggling necessary. Is this simply an effort by conventional dealerships to rid Tesla of its competitive advantage, or is it a sign of their hope to have Tesla models in their own lots, and cash in on their growing successes?

Source: http://gma.yahoo.com/teslas-direct-sales-business-model-targteted-n-c-170402561–abc-news-money.html
Image:  http://global.networldalliance.com/new/images/article/tesla_2.jpg



Free “Gas” for life? WHAATTT?!

Elon Musk is a name you should be very familiar with as in my opinion he is the most influential entrepreneur/inventor today. He is best known for creating SpaceX, a private rocket and spaceship successor for NASA, cofounding Tesla Motors which takes aim to revolutionize the auto industry and Paypal the worlds largest internet payment system. Talk about accomplishments!

On September 24th, Elon Musk had unveiled the Tesla Superchargers, a revolutionary charging method for its line of high-end luxury electric sedans- the Model S ($77,400 – $105,400). The Tesla Superchargers will use solar energy to charge the Model S with 100 kilowatts of energy that will be good for about 3 hours of driving at 60 MPH in an impressive 30 minutes. The amazing feature of these Superchargers is that all Model S owners will be able to charge their vehicles for free, FOR LIFE. Musk claims that the energy captured by the solar panels will be more than what the vehicles will require. This allows Tesla to actually make money by pumping the excess energy back into the grid.


Musk had also revealed that this network of superchargers is a reality. At the time of the unveiling there are six locations in California ready for use. Within two years he plans to cover the United States with these stations in all “high traffic corridors across the US.” Long term (2 – 4 years) Musk plans to cover the entire US and southern Canada as well expanding into Europe and Asia.

First thing that came into my mind after seeing the map above is that this is a very aggressive forecasting model. They are targeting to cover the continental US in a very short period of time. On top of that they have future plans to expand into Europe and Asia. With absolutely no data on how many Tesla drivers will actually attempt long distance drives the Tesla team is taking a huge risk in investing so much capital in building this network of superchargers. The second issue they face is either under-use or over-use of the stations.

Lets face it; today these are very expensive cars for most Americans. With the base model starting at $77,400 I don’t see it having much mass appeal and that is needed to make such a huge network be feasible.
On the other hand, as the years go by the technology will surely become less expensive and there could be a Tesla in everyone’s drive way. With an explosion in these vehicles they may not keep up with demand.

As Tesla goes through its product life cycle they can better define their forecasts. From the looks of it they are very optimistic. What are your opinions?

Chime in and check out the press release in the link below:

Tesla Motors Supercharger Event