While Toyota has blanketed the U.S. with milquetoast hybrid Priuses, and the Chevy Volt and Nissan Leaf are uninspiring ��appliances,�� Tesla (TSLA) has done something different. It has built electric cars that are thrilling to drive. And from its headquarters in Silicon Valley, it's been acting like a high-tech company! And why not, considering that co-founder and current CEO Elon Musk made his fortune by selling PayPal to eBay for $1.5 billion?!
Musk looms large in the story because he used much of his own money to bankroll the project, supplemented in time by money from private investors��as well as $465 million from the U.S. Department of Energy.
Last year��s IPO was just the latest chapter of financing, and possibly the last. From the beginning, the goal of the company has been to create and sell affordable mass-market vehicles that would have a material impact on oil consumption. But Tesla hasn't yet targeted the mass market!
Its first step was to build and sell two-seat electric sports cars costing $109,000. It's sold more than 2,000 of these Roadsters (in 30 countries) and will stop after 2,500.
The revenues from that effort are driving work on the company's next car, the Model S, a sedan that sells for $57,400.
Tesla has already taken reservations for more than 6,000, and will begin deliveries in mid-2012. It also expects to offer an SUV (Model X) based on the same platform, and begin deliveries of those in 2014.
And the profits from those cars will fund development of a mass-market car, priced around $30,000, which will compete with the likes of the Toyota Camry, Honda Accord and Ford Taurus.
This strategy mimics the way successful Silicon Valley companies launch products; hit the rich early adopters! first, then drive costs down to serve the mass market.
Furthermore, Tesla has boosted its cash flow by inking major deals with Daimler and Toyota for its proprietary powertrain systems ... which tells me these components are the best!
Not only does Tesla have revolutionary technology, it also (unlike most car companies) has little debt and a young, bright work force, and no retirees with costly pensions!
The company's revenues were $15 million in 2008, $112 million in 2009 and $117 million in 2010. 2012 could bring in $550 million, as the Model S hits the streets.
And Musk promises a profit in 2013! TSLA came public in June 2010 at 17, peaked at 36 in November 2010, and has been consolidating that gain since then, restrained in part by the weak broad market.
More recently, the story of fires in the batteries of (intentionally) crashed Chevy Volts may have held the stock down.
But that��s short-term, and I interpret it as a buying opportunity. Long-term, I rate Tesla as one of the stars of the present-day automotive revolution and a high-potential long-term investment.
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