Tesla Roadster

    Tesla Roadster 2.5 (Tesla).

    by: David Kiley | AOL Autos

    Shares of Tesla Motors, maker of the exotic electric sports car, soared more than 40 percent from its initial public stock offering price of $17 on June 29 as if the company’s lithium-ion batteries were booster rockets on the new TSLA NASDAQ stock ticker symbol. But after day-traders ran the stock up to above $30 the next day, it started its descent back to earth, closing at $19.18 on Friday.
    The market had hardly seen a stock this hyped and loved by day-traders since the likes of Google, though some might instead compare Tesla’s IPO to eToys or the infamous Pets.com. America loves the car business, and investors haven’t been able to buy into a car company on the ground floor since Ford Motor Co. went public in 1956.

    Another chance might be coming soon with the new GM’s much-anticipated IPO, perhaps before the end of the year. This would set the stage for an interesting battle, with the markets deciding which company -- Tesla or the one Tesla CEO Elon Musk frequently criticizes -- is the better investment for the 21st century.

    The big question this week is whether the early buyers of Tesla stock are romantics who see Musk as a 21st Century Preston Tucker? (Or the idealized version of the maverick automotive entrepreneur played by Jeff Bridges in the 1988 film Tucker: The Man And His Dream.) Is there something in the company’s actual business model that makes Tesla look like a better buy than, say, staking a position in Apple, taking advantage of a recent decline in Ford shares, or even waiting for GM?

    Tesla IPO
    Would you purchase stock in Tesla Motors?

    “It’s a very risky investment, there is no question about it,” says Joseph Phillippi of Short Hills, NJ, based AutoTrends, who spent most of his career on Wall Street as an auto analyst. “The automotive industry is a very complex thing, and a business that will suck capital like no other. They have yet to prove they know how to sort it all out.”

    There is no question that the hype and lure of the auto business drew star-struck investors. "Tesla brought in people who wouldn't normally invest, a lot of inexperienced IPO buyers,” said Francis Gaskins of IPOdesktop. Just how many of the buyers were institutions versus individuals is very closely guarded information at the banks who handled the IPO for the upstart automaker.

    A browse of the prospectus Tesla put out ahead of its offerings shows pretty clearly what the company believes are the speed bumps to realizing success and profit. First is that its future is heavily dependent on the timely launch of the “Model S,” a four-door electric sedan it says will be ready in 2012. The U.S. Department of Energy decided to lend Tesla $465 million for the Model S, of which the company has already drawn down $45 million. According to Tesla, the goal is to eventually sell 20,000 Model S sedans per year at between $57,000 and $85,000 each. The more you spend, the greater the range of the car you get: The base model will go about 160 miles on a charge while the top-of-the-line should be able to do 300.

    But Tesla, by its own admission, is behind on development. It has but one prototype. Car companies typically need several prototypes in order to undergo crash testing, a process that can easily take more than six months. Tesla also does not have its network of suppliers lined up, a process that can take more than a year. According to Jim Hall of Group 2953 Analytics in Birmingham, MI, there are molds needed to make certain body parts that can take 24 months to get right and validated. “I just don’t see that they have the time or enough money to do what they say they are going to do,” says Hall, who believes Tesla’s endgame is not to build cars on its own but rather to sell the company and brand to another, bigger car company.
    To take some eyes off the likely delays associated with the Model S, Tesla this week announced upgrades to the existing Roadster including a new front fascia, rear diffuser, improved seat comfort and internal finishes, sound dampening and a large touch-screen navigation system. "Although development of the Model S is our main focus, this shows that we still care a great deal about improving the Tesla Roadster," said Tesla CEO Elon Musk in a statement. "These improvements are a direct result of customer feedback and come only a year after release of Roadster 2.0, showing an exceptionally rapid pace of innovation. Where feasible, we will also offer existing customers the ability to purchase the upgrades now available in version 2.5."

    Per the agreement with Lotus, the Roadster will only be built through 2011 and poten tially into early 2012. Tesla’s Model S, set to debut “in 2012,” could leave a gap of many months to a year if a new contract with Lotus isn’t signed to backfill more Roadster sales. In any event, Lotus and Tesla won’t be hitched forever: the recent SEC filing revealed that the next-generation Roadster will be built in-house by Tesla, meaning the company is going to have to parallel path its Model S development alongside building an all-new Roadster. That’s difficult to do for a company the size of Tesla.

    The true value of Tesla is hard to calculate. The company lists $145 million in total actual assets, but that has little to do with Tesla’s appeal to investors. “It is essentially an ‘intellectual property,’ IPO, says Hall. “The company showed a lot of cleverness in taking an existing car chassis from [British boutique car builder] Lotus and integrating their electric drivetrain.” But it doesn’t have hard assets or even brand value yet to support the market value of the IPO. Tesla has a lot of possibilities that will be extremely hard to make happen in a very difficult economic environment."

    CEO Musk has done an excellent marketing job of building up the Tesla brand in a short period of time, despite selling just a little over 1,000 electric roadsters at six-figure prices across 23 countries. “There are other electric car companies out there like Think, Fisker and Coda, but they haven’t captured the imagination of Hollywood or Silicon Valley yet,” says Los Angeles-based marketing consultant Dennis Keene. “Musk emanates the idea that he is out to change the world, and he is a good salesman.”

    Stardust around Tesla has been supplied by early investors like Google founders Sergey Brin and Larry Page. Musk himself is the founder of PayPal. Tonight Show host Jay Leno, actor George Clooney and former vice president and Nobel laureate Al Gore have been boosters.

    AutoTrends’s Phillippi, who saw Tesla’s investor “road show,” says Musk did a good job of contrasting his business plan against “Old Detroit.”
    Not to take it lying down, General Motors pulled together a hasty “business update” for investors on the same day as Tesla’s IPO. On July 1, GM CEO Ed Whitacre Jr. appeared to the world via an Internet webcast from Austin, Texas, announcing that the Texas capitol would become one of the markets for the Chevy Volt launch later this year. GM kicked off a Volt drive between Austin and New York City that will conclude on July 4, a journey of exactly 1,776 miles to commemorate the nation’s birthday.
    Musk’s case to investors for the IPO was assisted by both German automaker Daimler and Japanese titan Toyota taking minority stakes in Tesla in the last year, boosting the company’s credibility. It is a testament to Musk’s salesmanship that Toyota CEO Akio Toyoda, according to industry sources, pledged a $50 million investment after just 45 minutes with the South African-born chief executive.
    Still, Musk has had to contend with a spate of troubling publicity, including stories related to his own cash problems and a messy divorce. Just about every news article leading up to the IPO pointed out that Tesla has never made money, cumulatively losing $290 million since its beginnings in 2004.
    To make Tesla into a going concern that will continue to attract investor interest, Musk will have to keep up a steady flow of positive publicity and show progress on the Model S. Perhaps his biggest rival from here, though, is the established auto industry he so frequently bashes. "GM, Nissan, and Ford have EV’s coming and awfully big marketing budgets," notes Keene.

    GM is scheduled to launch the plug-in hybrid Volt by December. Nissan starts delivering the Leaf electric to customers in the fourth quarter. Ford will begin selling an electric version of its soon-to-be redesigned Focus. BMW has been testing a Mini EV in advance of launching its own electric that could get wider distribution before the Model S is even due to hit the market. Audi is similarly road testing an electric version of its R8 sports car in Germany. With the market for EV’s unknown, especially in the U.S., that's a lot of competition for a potentially small pie.

    The established automakers have made plenty of mistakes. GM and Chrysler filed for bankruptcy in 2009. Ford has posted almost a decade of annual losses before seeming to come out of it this year. Toyota is in the midst of a string of ugly recalls of both of its Toyota and Lexus brand cars and trucks.
    But all these companies will have an advantage over Musk in the EV wars. While Tesla struggles to cobble together a network of some 50 company-owned stores around the world to sell and service its cars, the established companies have a vast network of dealers and service departments. And if their initial EV vehicles don’t sell well, they can all afford to keep selling them while their “old fashioned” internal combustion engine models rake in the cash. Musk doesn't have that luxury or diversity of business.

    There just isn’t a lot that Tesla can do that is better or more efficient in electric vehicle development than what Detroit, German and Japan can produce. The main reason those companies haven’t put EVs on the road yet is that they haven’t seen a viable market for them while gasoline has remained below $3.00 per gallon throughout the U.S.
    Musk hasn’t proven yet that he knows what is at the heart of every company selling a consumer product, let alone something as expensive and complicated as an automobile: Knowing what the public wants and when they want it. A little over 1,000 vehicles in seven years spread across wealthy actors, hedge-fund managers and oil barons is a long way from selling 20,000-plus cars a year. At those sales volumes, Tesla, if it reaches its goal, will lose the very exclusivity that appealed to many of those well-heeled buyers who also browse around Bentley and Mercedes-Benz showrooms.
    Musk gives the impression he is out to change the world. But he better keep his eye on his business plan first, or watch his share price sink below its first-day offering price.

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    1 - 20 of 119 Comments
    jrsr111 Jul 26, 2010 8:58 PM
    I was a GM automotive engineer as well as an aerospace engineer connected with the Apollo program. More recently I have been and am an investment professional. None of this makes me an expert on Tesla, BUT, it is my opinion that this is MUCH like the Tucker automobile. These cars cost $100,000 and the battery pack replacements cost $33,000. GOOD GRIEF! How many of those are you going to sell, so folks can go 100 miles and stay overnight to recharge??? I see Tesla as a giant scam.
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    mirror2way Jul 06, 2010 6:16 PM
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    mirror2way Jul 06, 2010 6:12 PM
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    mirror2way Jul 06, 2010 6:07 PM
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    mirror2way Jul 06, 2010 6:04 PM
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    mrbjaw Jul 06, 2010 6:27 AM
    Electric cars have been around for years, all the way back to the 1900's, Henry Ford's wife even had one. The are Not New, and they never did get any driving range. They would make good "city" cars where you're only going less then 100 miles a day. And like with any "alterative fuel cars, you're just transferring the pollutants from one place to another. If they want to build a "green car" they need to invest more time in developing hydrogen power cars. Almost all of the working of the car stays the same, Hydrogen is "made" from water (********** works best), can be "made" on site at gas stations, and burns clean.
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    fire350669 Jul 06, 2010 6:05 AM
    Where is the $450 million dollar loan the federal govenment gave Tesla only a years ago. When will he pay it back. This is only a smaoke show .
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    fire350669 Jul 06, 2010 6:02 AM
    Thermal nuclear is the way to go with electric cars. A small unit no bigger then a toater should do the trick. It would be a removalble power plant so as top be able to switch it to your new car when the old one falls apart.
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    alfredschrader Jul 06, 2010 5:47 AM
    There were only 50 Tucker cars made. If you own one, it's worth millions. The thing that will make electric cars work is something I invented called Farad Technology. I have this in my garage lab. Is worth billions....Alfred-
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    dstone1683 Jul 06, 2010 3:48 AM
    All electric vehicles simply are not practical and cost effective for the vast majority of Americans. Whether they have a range of 40 mile or 270 miles, the "recharge time" is simply an impractical aspect of these vehicles. Even for the vehicles with the higher range of 200 + miles, a 3.5 hr re-charge time is not compatible with our life styles. Hybrids are the only practical solution; and even then, the costs of the batteries is something like $10K once the arranty is expired. That makes those cars basically throw-away vehicles once the warranty has exspired and the batteries fail. (Who is going to invest $19K in an older vehicle?) Unfortunately, Tesla is more than a high risks; it is aparently doomed to eventual failure because of the impracticalities of the all electric car that requires over 3.5 hours to recharge. Hybrids are the only practical solution; but the cost of batteries must be substantially reduced to make it truly practical. And even then, the ppollution caused by the electric power plants and the production of batteries still adds to the pollution from automobiles; it just diverts those pollutants to the power plants and battery factories. There is STILL a long ways to go to get a practical, energy efficient and pollution free vehicles.
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    ponderz Jul 06, 2010 3:11 AM
    Musk may be a biz wiz but personally he is a LOSER. He left his family of FIVE children under the age of 2 1/2 years old (twin toddlers and triplet babies) and his wife who had helped him launch his companies to hang out with druggy 22 year old "models" (without any actual model credits). He leaves people waiting nine hours to see him -- all to prove to his weak ego that he is special. He treats the people who work for him like dogs. He is not a real leader and so his company, soon or later, will fail. But by then he will have cashed out like usual, and be onto the next "fun thing". Not a real man in my book. A boy with lots of toys and no discipline to live a life of purpose and substance. Michelle in Europe
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    goldfangaz49 Jul 06, 2010 3:00 AM
    I still don't see where this idea is totally American, we are loosing money, and they are still make **** that sale to the few, for astronomical prices, when do people learn or do they give a dam and last but not least, are we living in a system that is lying to us about America's financial situation?
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    xanadu4024 Jul 06, 2010 1:47 AM
    Ok to all the nay sayers GM has a successful electric vehicle based off of the Olds Achieva chassis called EV1, and to say iit worked was mild, nearly every owner wanted to keep them after the lease ran out but GM got them back by court order. Now those cars would in fact run over 220 miles on one charge at home and could be charged over night from a 110 outlet, yes it did take longer but it worked. Now if you people didint know but New York City used to have well over 1000 electric cars back at the turn of the century, thats 1900 folks. the truck were used for delivery and could do considerable work as the electric motor is pure torque. Now couple the new MIT Lithium Ion charge process which allows Li-Ion batteries to charge very fast and efficiently and it can make a great industry. Electric cars could be a great help in/around congested areas, as for heat and cooling the Prius and others are using simple electric compressors to work and by reversing the process you can bet heat. now while electric cars may not be mainstream yet, you have to start somewhere and Tesla's owner put up a lot of collateral to get his loan, it wasnt a signature loan. As for the Roadster it is VERY fast, and as for building a car its not hard as a company called Factory Five has Fox Mustang based(used parts from Mustang chassis/running gear) based Cobra roadsters and also build and sell car kits you can build and drive and have several other designs like one that uses Corvette driveline. Those cars can be gotten pretty reasonable. So a decent car with an electric driveline can sell pretty good. Think of it this way if you live in a 50 mile radius from home an electric car can be useful. Another thing to remember is that regenerative braking, solar film and other things can be used to help longevity. Gm's EV cars added about $100 a month to owners electric bills and with no fuel bought it was very good trade off by owners thoughts. And electric cars wont come back unless something drives the business. Cars used to be fueled by several different fuels back in the beginning. Heck a Model T could be bought with alcohol/Gas carb and it did work, back in the 40s a lot of farm equipment used gas to start and then switched over to kerosene. Europe used steam and ethanol almost exclusively till ww2, the US infrastructure set up gasoline refineries and distribution. Oh and dont for get where the petroleum industry replaced another,,,whale harvesting. Whale oil was used for many things, grease, lamp oil,lube oil, lip stick, etc. Also fact US has a considerable oil/natural gas/coal supply. First thing to get out of US are some of the "regulatory" and environmental groups as France has a great way to deal with nuclear fuel, they have encapsulated it in glass and use it in asphalt. Also one of the nuclear labs developed a way to reclaim the unused fuel. See nuclear reactors use 5% of the fuel then need refueled but with the new tech can re-refine the fuel. Big issue we have now are the smart people arent in charge the radical liberal nut cases that still think every man has to be equal in everything instead of every man having equal chance to make the best of what he can. VCR tech used to be $10k units now they are nearly gone, 35 to 40 yrs later. Diesel engines were first designed to use peanut/corn/vegetable oil as it was unused, kind of like white gas,,, or gasoline,, it used to be dumped in the ditches,,, it was part of the cause of the Great Chicago fire among other things. The Model S reasonably setup, can make a big splash and the service will be minimal. AS for foreign car being better made, thats bull crap. Japanese car builders knew their cars needed to be serviced and got the owners trained to bring it back in for 30k/60k/90k/etc service. American cars from the 70s were not necessarily bad, quite a few a looked great and rode and drove well. Others were made to be ran and then discarded, bad marketing but it was marketing. Now a lot of people are making money restoring and reproducing parts and eve nnew cars like old ones. Honestly if Ford,GM and Chrysler were to be able to sell newer drivelines in older body styles like 67-69 Camaro , 68-69 Chargers, 64-73 Mustang and other bodies, add in ABS, air Bags and other such safety features and you would sell them like hot cakes, think of it, buy a new 57 Chevy Bel Air with late model driveline, and modern suspension and brakes, like aftermarket suppliers are marketing and it would be much different. some say older cars arent as safe yet after seeing the carnage of a late 50s Chrysler with the front end nearly knocked off by mini van, the van is dead player, the old Chrysler got a different frame and a new dog house and such and is back on road looking a gorgeous as ever. Now if everyone got behind inventive people and helped rather than be negative bitches a lot more things would look better. Now lets see you guys also forget that lots of companies get government grants and loans to start up. That is where a lot of the "pork" comes and goes in Washington. to fund all these little programs and studies and such. Does it need toned down, yes but liberal progressive people got a lot of crap funded when the government should never have even looked at it. Back in 1800s after east coast fishing failed the people thought the government should intervene, yet the framers that were still alive said no and it let the industry fail and rebuild. Now should we have let GM and Chrysler fail, thats tough, a lot of the US would have been hurt. see the new plans are just in time supply instead of a warehouse full of parts. Makes it hard to sell tires or make bumper covers, or even nuts and bolts if the businesses are shut down. And dont for get Chrysler came back from a near loss back in late 70s/early 80s. Big issue now is keeping unions out of the electric car industry, well get them out of everything, unions, ungoverned, are anachronisms of Communism and need to be squashed. Now how about everyone who believes in God give an honest prayer to bless the head of and owners of stock in Tesla and to its success and prosperity. And to the non believers how about putting on a positive attitude and see where it goes.
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    jcbmarine Jul 06, 2010 1:30 AM
    GM VOLT ha ha ha ha ha ha ha ha ha ha. ........... now thats funny. I served 12 years in the marines got married and divorced twice had 4 kids and have lived in 6 diffrent states and I have seen 25 countries The whole time I kept hearing gm volt gm volt gm volt but havent seen one yet just a piece of plastic on a stage held togather by spit and bailing wire that dosent move for anyone without a good push. I wonder if they will sell as good as the hybrid pickup truck GM made now that was a funny ass joke or how about the hybrid cadilac truch that Hannity couldnt wait to get his hands on GM makes dooshbag cars for dooshbags end of story. Tesla has 1 car and has had it for a wile now it will out perform anything GM will ever build I wish them well they have good intentions and a realy good car I hope they can build more and not go broke.
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    chvy70camaro Jul 06, 2010 1:18 AM
    * not you WilkesGM, you were only quting the idiot below!! sorry about that!!!
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    chvy70camaro Jul 06, 2010 1:15 AM
    WRONG, wilkesgm, pres. nobama bin laden claims more than $14 trillion of that is his FIRST 3 MONTHS!! MORE than our previous 43 presidents COMBINED in his first 3 MONTHS!! And, if the Tea Party people are such dolts, then why are you so worried about/obsessed with them?! what are you afraid of little woman?!
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    demonbo0y Jul 06, 2010 1:14 AM
    Its all bs. Allwe need is a billion dollar cars. Pretty realistic. People have money to burn. get real. An all electric car needs to look like andperform just like a regular car and hopefully costing less. Or else its all bs unless Obama pays for it! S
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    wilkesgm Jul 06, 2010 12:39 AM
    "do tea- party dolts think that ford , GM, and chrysler never had government contracts?"...............Nope. Tea party dolts know that government intervention in the private sector invariably leads to mediocrity. Also, we are now 20 trillion in debt that didn't exist in the Bush administration. So, now we spend even more trillions to develop cars with no way to make the electricity it takes to mass produce them or charge them once they are made. Smart, real smart. These idiots wish to jump off a cliff betting that the technology will magically appear to save them from hitting the bottom - just like Tesla's pipe-dream of a world charged with electricity that would eliminate wires. That didn't work any better than Edison's mindless devotion to DC current. One last thought - the only reason this is such a priority is because the government and special interest groups are rigging the process. If solar, fuel cell or electric was actually viable, they wouldn't need government subsidies. In the mean time, we are broke and the non-tea party idiots don't seem to realize we might go bust trying to be the Jetsons.
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    warriorclass1ret Jul 06, 2010 12:35 AM
    Just great! Our government, that is finacially broke, is giving almost half a billion dollars of our tax dollars, for a car that is going to be owned by the foreign car company, "Toyota," that's had government legislators and bureacrats in their hip pockets for years.
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    wilkesgm Jul 06, 2010 12:28 AM
    "The U.S. Department of Energy decided to lend Tesla $465 million for the Model S"..........That says it all. It's not a private stock sale. It's a government subsidized fib to make the eco-boys in Washington able to pass all kinds of deadly legislation. This kind of half-billion give-away includes a huge incentive to do a "Spruce Goose" - make it look like you are trying to make a car and then lament that you simply couldn't do it , while pocketing as much of that half-billion as possible. I'll bet there aren't any "pay" czars limiting the salaries of these "entrepreneurs". The S in model S stands for scam. Fill up an empty car with gas, it goes now. Drain an electric car and it's sit in the coffee shop while it charges. Plus, all that electricity to charge these things has to come from somewhere and there is no infrastructure on the horizon to use wind or solar to charge even 10% of our electricity needs. What good does it do to have tons of electric cars if you have to use coal to power them? Why not just make a more efficient Stanley Steamer?
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