Tesla Motors Driving the EV Automotive Market

Fri, 2013-06-14 09:21

California-based electric car company Tesla Motors has certainly made its presence known in the auto industry this year. The company’s completely electric Model S sedan was released in June 2012 and has impressed not only clean energy proponents but luxury and performance auto critics as well. The car won the coveted distinction of 2012 Motor Trend Car of the Year, which is a fairly astonishing achievement considering the typical bugs and reliability issues that have plagued most pioneering alternative-fuel vehicles. The review the Model S received from Consumer Reports was even more interesting; with 99 points, the Model S fell just short of a perfect review and tied the record for best score ever recorded by a car.

The success of the Model S can also be seen in Tesla’s accounting books. The daringly innovative company was on the brink of bankruptcy prior to the release of their first model, the Roadster, in 2010 when the Department of Energy rescued the company with a $465 million loan. However, last month Tesla announced that the company had fully repaid its loan to the DOE and recorded its first ever profits. Another impressive achievement was that Tesla outsold luxury car giants Mercedes, Audi, and BMW in the first fiscal quarter of 2013. This news is incredibly vindicating for Tesla, which has been continually criticized by many who believe that a luxury electric vehicle company will never be successful.

Tesla Model S

However, there is certainly evidence to support criticisms of Tesla’s recent success. As Alex Taylor III of Fortune magazine points out, “The number of people shopping for Porches and higher-priced Mercedes and BMWs is thin and essentially finite, and Tesla may have already gotten its share.” Taylor III also goes on to inquire how Tesla plans to be successful when other larger car companies like Chevrolet and Nissan are currently “struggling” with their electrical vehicle sales by pointedly asking, “Are you really that much better?”

Personally, I agree that there are definitely significant reasons to doubt that Tesla will be able to continue to produce the same profits and success that the company had earlier this year. However, the odds have never really been in Tesla’s favor. Last month was the first time the company has even been profitable, yet somehow it was able to create one of the most highly reviewed cars ever—and it’s electric.

The greater challenge for Tesla is to make these cars more affordable. Currently, the Model S is priced somewhere around $90,000, which simply isn’t realistic for almost all American car budgets. While affordability may involve sacrificing much of the sleek luxury sports car appeal that the company is known for, the price is worth paying if Tesla truly hopes to have a significant impact on the front of sustainable transportation in America.

By Peter J. Bock & Nolan Canter


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