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Op-Ed: How Tesla became a sensation

By Jenna Cyprus     Jun 7, 2013 in Technology
Many Americans don’t know much about Tesla, but that’s about to change. The company’s profile has been increasing in recent months, and has become the latest electric car sensation.
Many Americans don’t know much about Tesla, but that’s about to change. The company’s profile has been increasing in recent months, although shares dropped 0.7 percent in early May 2013.
However, this is a small loss in the bigger electrical car war, considering shares overall are up by 132 percent in the second quarter. This was the first time Tesla posted a positive quarter.
The skyrocketing share value since the beginning of April has caught the attention of investors. The California manufacturer has only one car model, but the reviews have been nothing but positive. Tesla’s Model S is a family-friendly sedan. Consumer Reports issued a fantastic review in the spring of 2013. Given the incredible spike in shares, it’s easy to see why Tesla has become the latest electric car sensation.
Tesla defies all odds
Prior to the incredible share spike, few investors would assert that a company that makes only one product — particularly a car — might be on the brink of a massive breakthrough. However, by raking in $11 million in the first quarter of 2013, the firm showed that assumption might just have some validity.
Not only does Tesla have only one vehicle, and a plug-in model at that, but the company also employs only American workers while, to some degree, the competition continues to outsource. Toyota is catching up, promising to assemble cars only in the US, but Tesla beat them to that punch.
The downside is that the Tesla Model S doesn’t come cheap: it starts with a $70,000 price tag and climbs into six figures for more luxurious options. As far as plug-in vehicles go, the range is acceptable at up to 300 miles on a single charge. Battery size plays a role, and many drivers choose to upgrade to get more miles out of their charge.
According to experts, it’s the best electric car on the market, but it comes with a price tag that reflects that reputation.
Is Tesla going to crash?
The biggest complaint against Tesla is that it’s out of most people’s price range, and there’s no telling whether electric cars will have staying power against hybrids. The CEO of Tesla, Elon Musk, reports that designs for a more affordable Tesla are in the works, but they’re not going to be feasible for a few more years.
This means Tesla will have to continue to be profitable until it can create a model that’s accessible for more buyers. At the moment Tesla is keeping pace with the competition, though: they’ve sold more vehicles in the first quarter than the Chevy Volt and Nissan Leaf.
Tesla is hoping that profits will continue to grow and is projecting a 25-percent increase by the end of 2013. Investors believe in Tesla, and Musk estimates his firm will sell 21,000 vehicles this year. Confidence in the company is high, but the results could go either way. Musk is more concerned about quality than quantity, which is a big reason the Tesla comes with such a high price tag.
Tesla’s competition
More plug-ins are on the way, such as the Cadillac ELR by GM. This will also be a luxury model, but it starts at around $60,000. It will be interesting to see whether a $10,000 difference in starting price will be enough to sway consumers toward GM’s alternative.
Tesla has identified a way to make money off the competition, too, however. The company sells zero-emission credits to its competitors, which is required of California manufacturers that deal with more than 60,000 vehicles annually.
Tesla isn’t anywhere near that 60,000 mark, but the competition certainly is. By selling those credits, Tesla raked in $68 million during 2013’s first quarter, which accounted for 12 percent of total revenue. While that’s an impressive sum, it’s nowhere near the majority, and most investors believe the bulk of Tesla’s success is in their product.
Right now, Tesla has no limits and it might be a great time to invest.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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