Energy
Can Tesla Survive?
(Page 2 of 2)
- Thursday, February 16, 2012
- By Kevin Bullis
Tesla can still survive even if it doesn't sell enough vehicles to become profitable. If it can sell a significant number of the Model S and Model X, this will further establish Tesla as a valuable brand, and could eventually make it an attractive target for acquisition. "Tesla could be an excellent electric vehicle brand for a major automaker," Bragman says.
Some experts think Tesla could also have a future as a supplier to other automakers. Unlike Fisker Automotive, another small automaker that's attempting to break into the electric vehicle market, Tesla developed its own motor, controls, and battery pack technology for its electric vehicles. That gives it valuable intellectual property and expertise and, as a result, it has developed similar technologies for electric vehicles made by Daimler and Toyota. In his shareholder letter this week, CEO Elon Musk said that the company has produced more batteries for these automakers than it has for its own Roadsters.
That arrangement might not last forever, though. If electric cars fail to sell in large numbers, and automakers abandon them, Tesla would have few options left. If, on the other hand, electric vehicles do become popular, major automakers may want to develop the core technology themselves. Just as GM, for example, likes to design its own engines, deeming those a core technology, it's also decided to develop and build the battery packs for the Chevrolet Volt.
Paradoxically, a modest success for electric cars could also be good for Tesla. Recent changes in manufacturing make it easier for automakers to produce electric cars at volumes that are too low to justify developing their own technology in-house.
"The industry is getting very good at making profits on lower volumes of vehicles for niche applications," says Jay Baron, CEO of the Center for Automotive Research. In part, this is because factories are using more robots, and robots that can perform more functions, so they can be quickly reprogrammed to make different vehicles. Some automakers have announced that they will offer three versions of a car—one gasoline-powered, one hybrid, and another electric. With flexible manufacturing, they can switch between these according to demand. Baron says Tesla may have a future in selling technology for these niche vehicles.
In this scenario, it would be cheaper for a company like Toyota to buy the batteries and motors from Tesla rather than developing them itself. And Tesla could make significant revenue by making relatively small volumes of its battery packs for several automakers, since it can adopt its technology for many different kinds of cars.
How Tesla fares this year with its Model S and its projects with Toyota and Daimler will give a clearer idea of the company's future. But even if Tesla can't stay afloat, it will have played a central role in the technological shift that's now reshaping the auto industry.
"It's arguable how much influence they had over the development of electric vehicles," Baron says. "But there's no doubt they created a lot of excitement around them."
Updated 2/16/2012, 12:25 pm
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yotab
56 Comments
- 460 Days Ago
- 02/16/2012
Signed a new Agreement with Diamler
Tesla has just signed a new agreement with Diamler to provide them with Battery packs and Power-trains. They have sold out with 8,000
Model S bookings for 2012, and in 1 day received $40 Million worth of Model X Sales. Lots of 40-50K plus vehicles are sold every year, heck even some Minivans go for that much so I don't think Tesla will have any issues surviving.
A lot of folks who swore off EVs have been swayed by the Model X and are now showing interest in the brand.
Good point on the ease of manufacturing, instead of building a thousand different engine parts, you only have a battery pack and twin electric motors, the rest if just a bunch of electronics and that is cheap stuff, motor controllers, processors etc which are extremely reliable.
Spicoli
166 Comments
- 460 Days Ago
- 02/16/2012
Re: Signed a new Agreement with Diamler
Just look at the financials. Their net losses are greater than their total revenue. That might be okay for a startup, but this is a 9 year old company. At some point investors are going to give up and there won't be new money to dump into the hole.
eugah
1 Comment
- 460 Days Ago
- 02/16/2012
Re: Signed a new Agreement with Diamler
7 years of ramp up to profitability for a company creating an entirely new niche in the industrial manufacturing space does not strike me as too long.
The stock market doesn't think so. TSLA share price is back to it IPO level.
Spicoli
166 Comments
- 460 Days Ago
- 02/16/2012
Re: Signed a new Agreement with Diamler
7 years? It's been 9 years and they're still not even close to breaking even. They're spending all their revenue twice over. The primary value appears to be some drive train component patents and not niche vehicles.
Spicoli
166 Comments
- 460 Days Ago
- 02/16/2012
They've only managed to lose huge amounts of money over the life of the company, so I don't think competition is the problem. I'm not even sure what they offer if they put it up for sale. I guess they have a few patents someone might want.
agedthinker
1 Comment
- 460 Days Ago
- 02/16/2012
Tesla will survive if it does the things a corporate needs to to survive. It has to focus on its niche and work to establish it in true ernest. www.sci-burr.com has seen plenty companies come and go but the survivors go on to conquer.
Spicoli
166 Comments
- 460 Days Ago
- 02/16/2012
I think it's the opposite. They need to unfocus on the niche and start making things people want to buy. You can keep the vehicles for marketing but focus on boring but profitable products.
aunderdown
78 Comments
- 460 Days Ago
- 02/16/2012
Multiple Survival Possibilities
Tesla began its electric vehicle development at a time when the major automakers saw their opportunities elsewhere. Now that the electric vehicle market looks promising, Tesla should be able to reap the rewards of its foresight and perseverance. Well, at least we hope so. What were the names of those pioneering personal computer companies ... Altair, Commodore? Hopefully Tesla will be nimble enough to position itself to catch the electric vehicle wave coming toward the auto industry; and keep its balance.
As the article suggests, long-term survival as a stand-alone company may be unrealistc. But there are several scenarios in which Tesla survives through association with one or more of the larger automobile companies. Outright acquisition is one of them. Joint ventures and strategic partnerships are also possible. Tesla could supply components or subsystems, license its technology, develop and supply new technology under contract, etc. Rather than outright acquisition, a major automaker could take a significant equity stake in Tesla as part of a joint strategy.
The established auto makers have mega-marketing and manufacturing/assembly muscle so it's an inefficient use of investor funds for Tesla to build its own capabilities for these functions.
I also think the Tesla brand has real value. It resonates well with high-end buyers and technophiles. It doesn't have to go head-to-head with established automobile brands; since it could, as the article suggests, become a product line of a major company. Also, the Tesla brand could be used on Tesla-supplied components in other automakers' vehicles, communicating to customers that they are buying cutting edge technology.
oldschooljohn
1 Comment
- 460 Days Ago
- 02/16/2012
How can they expect to sell 20,000 vehicles per year at a price point that Porsche can only sell 7,000? Teslas brand equity is almost non existent in comparison.
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devassocx
112 Comments
Tesla can survive
as long as Elon Musk has money to fund it.
As far as ever being profitable, I think that is
a very tough call.
Reply
R Sweeney
72 Comments
Re: Tesla can survive
Surely we can steal another 1/2 billion from our children to prop up this rich boy toy producer.
Reply