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Tesla: Maintaining the Momentum

abirk

abirk

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Tesla Motors Inc. (TSLA) designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components. Tesla cars are manufactured in a far different manner than traditional vehicles: They have one standard battery platform on which they can mount varying motors and bodies. This swappable production strategy gives the company an advantage in achieving production efficiencies.

Patents set free
Thus far the biggest hurdle to finding automakers able to share the burden of building out the Supercharger infrastructure has been that no other type of electric vehicle can take a charge near 135kw, which is the power level of Tesla's Supercharger stations.

As the dust settles from Tesla's decision to release its patents to the world, BMW and Nissan (NSANY) are already rumored to be interested in collaborating with Tesla on charging technology. These talks could lead to an alliance that would give Tesla a partner, or two, in the task of expanding its Supercharger network enough to power a mainstream driving audience.

Big Deal in the U.S.

Tesla is rapidly becoming a big deal in the U.S. With the help of the wild success of its fully electric Model S, Tesla is now the largest auto-industry employer in California, edging out Toyota (TM). But Tesla's U.S. manufacturing presence is about to become much bigger, and Texas wants to do whatever it takes to get America's hottest growth company to bring those jobs to the Lone Star State.

Last Tuesday, Texas Gov. Rick Perry showed his enthusiasm for Tesla Chief Executive Officer Elon Musk and his fast-growing electric vehicle start-up when he drove around in the state of California in a Tesla Model S.

Gov. Perry's enthusiasm has merit. After all, Tesla's planned Gigafactory is no small project. The $5 billion project will employ about 6,500 people, Tesla says. Scheduled to begin production in 2017, Tesla says that, by 2020, the factory will produce more lithium-ion batteries annually than the entire world produced in 2013. The factory will enable Tesla to reduce the costs of its batteries by 30%, produce an affordable fully electric car, and sell 500,000 vehicles per year by 2020, Tesla predicts.

Growth Opportunities

The company’s CEO, Elon Musk, announced that the company is working on developing a driverless car. The car is supposed to get ready within three years. It is not alone in developing self-driving vehicle technology. The new Mercedes-Benz S550 offers the most advanced production self-driving car systems, including adaptive cruise control that can handle stop-and-go traffic, and a system called Traffic Assist, which steers the car at low speeds. When the Model S launched last year, it was missing one feature-set commonly found among its luxury competitors: driver assistance features such as adaptive cruise control, blind spot monitoring, or lane departure warning. The company appears to be addressing that lack, according to a recent statement by Musk.

The company plans to sell its first all-electric SUV, the Model X, next year. The Model X will be similarly transformational in rethinking the SUV or crossover. The 10-year-old car maker is currently targeting delivery of just 21,000 luxury sedans this year. Overseas, Tesla just opened a factory in the Netherlands, where eager Dutch, Belgian and French customers are taking delivery of the hotly awaited Model S. Even though the company has yet to price the car in the market, at least 300 prospective customers have plunked down deposits of $5,000 to $42,500 to reserve Tesla in Hong Kong.

Tesla filed an application to trademark the "Model E" name last month. It's widely believed that this will be the name for the next generation of Tesla after the current Model S sedan and next year's Model X crossover. Musk has discussed having a more economically priced car on the market by 2017, which just so happens to be around the time that this driverless technology becomes available. So it's possible this technology would only be in the Model S and Model X, but not the more accessibly priced Model E.

To End

While it's important for Tesla to continue to execute on production to prove to investors that it can consistently execute, shareholders should keep their focus on bigger-picture items that will make or break the manufacturer as a major auto player — items like the Gigafactory, a plant purposed to build more lithium-ion batteries per year than all of the lithium-ion annual production in the world today. It's this factory that will help Tesla make its planned lower-cost electric car and sell it to the masses by 2017.

Entering the vehicle market without the normal constraints and biases that bog down traditional manufacturers has helped this California-based company become a wild success in the car market. All these factors are building the foundation for the company's eventual mass-market affordable car. And each factor helps to secure Tesla's spot among the big automotive companies, and change the auto industry forever.

Meanwhile, the demand for Tesla’s cars remains strong on robust performances and impressive designs of its products. Model S ensures the least possibility of injury to passengers among all major car makes and models in the U.S. The car won a five-star vehicle safety rating from the National Highway Traffic Safety Administration, which is awarded to only 1% of the cars tested.


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