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Tesla Motors: achievements and prospects

Tesla Motors is the first American car maker to go public since Ford Motor Company had its IPO in 1956.

On June 29, 2010, the company launched its IPO on NASDAQ. 13,300,000 shares of common stock were issued to the public at a price of US$17.00 per share. The IPO raised US$226 million for the company. Yesterday Tesla closed at $224 per share.

Is Tesla still a worthy investment?

CEO Elon Musk envisions Tesla Motors as an independent automaker, aimed at eventually offering electric cars at prices affordable to the average consumer. From the beginning, Musk consistently maintained that Tesla's long-term strategic goal was to create affordable mass market electric vehicles.

Tesla first gained widespread attention following their production of the Tesla Roadster, the first fully electric sports car. The company's second vehicle is the Model S, a fully electric luxury sedan, which was followed by the Model X, a crossover. Its next vehicle is the Model 3.

Global Model S sales passed the 100,000 unit milestone in December 2015, three and a half years after its introduction. The Model S was the world's best-selling plug-in electric vehicle in 2015. As of June 2016, the Model S ranks as the world's second best-selling plug-in car in history after the Nissan Leaf. As of 30 June 2016, Tesla Motors has sold almost 140k electric cars worldwide since delivery of its first Tesla Roadster in 2008.

Tesla's strategy has been to emulate typical technological-product life cycles and initially enter the automotive market with an expensive, high-end product targeted at affluent buyers. As the company, its products, and consumer acceptance matured, it is moving into larger, more competitive markets at lower price points. The battery and electric drivetrain technology for each model would be developed and paid for through sales of the former models.

Some of Tesla's stated goals are to increase the number and variety of electric vehicles available to mainstream consumers by selling its own vehicles in company-owned showrooms and online, selling powertrain components to other automakers and serving as a catalyst and positive example to other automakers.
Unlike other automakers, Tesla does not use single-purpose, large battery cells, but thousands of small, cylindrical, lithium-ion 18650-like commodity cells used in laptops and other consumer electronics devices.

It uses a version of these cells that is designed to be cheaper to manufacture and lighter than standard cells by removing some safety features. Tesla Motors may have the lowest costs for electric car batteries, estimated at US$200 per kWh.
Beginning with vehicles manufactured in late September 2014, all new Model S are equipped with a camera mounted at the top of the windshield, forward looking radar in the lower grill and ultrasonic sonar sensors in the front and rear bumpers.

This equipment allows vehicles to detect road signs, lane markings, obstacles and other vehicles. In addition to adaptive cruise control and lane departure warning, this system enables semi-autonomous drive and parking capabilities.
At this levels the car can act autonomously but requires the full attention of the driver, who must be prepared to take control at a moment's notice.

Investment outlook

Tesla still has to make a full year profit this side of 2010. Losses are accelerating as delays in production jeopardize volume targets. Although product demand has been demonstrated by strong reservations for the Model 3, raising capital and probable dilution is certainly possible.

Analyst and investors continue to support Tesla as valuations are often based on Tesla’s excellent final products and the company’s potential to disrupt the auto sector. Tesla reaching new heights would surprise no-one. Still unless Tesla manages turn its financial outlook quickly the star that set out to teach the old, boring petrol heads how to make the cars of the future may well end up at the ‘side-lane’ of history.

This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

 

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