Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Tesla (NASDAQ: TSLA) cars are hands down the coolest electric cars ever produced. The company is run by a visionary CEO and has succeeded where every other major car company has failed: it makes cool, fun and sexy electric cars. I don’t want to take anything away from Toyota (NYSE: TM) but the Prius, though fuel efficient, is not the sexiest of cars.
What the auto industry has been lacking is a fully-electric car with a wow factor. Tesla has filled that void over the last couple years and has been generating a lot of buzz along the way. It is great to give Tesla a pat on the back and respect what it’s doing, but it’s another thing to look at the company from an investing perspective.
The Cold Hard Facts
Tesla is not profitable, has had a delay with it most recent Model S sedan; that’s why it is now issuing shares to cover potential government loans coming to term. This could give an investor cold feet, but with any growth company there are risks before the rewards. The Fool has been very positive about the prospects of Tesla and I agree completely the company has a chance to change the automotive landscape in the U.S.
As important as quality is to a car, there is also a definite need for the car to be cool and sexy. Regardless if it’s a sedan, a SUV, or a sports car, they need to grab the attention of consumers. Why did GM (NYSE: GM) almost go bankrupt? The problem at its very core was that the company stopped making appealing cars. GM was stuck on numbers and sales figures, and focused on selling loads of its cars to rental car agencies, bloating GM’s sales figures. If the company is to succeed, it must again produce quality cars that grab a consumer’s attention.
What Tesla is doing is grabbing headlines, making quality electric cars, and making them cool. I love the way the company has rolled its brand out, beginning with a roadster that had everyone talking. If it had released a compact economy car that looked good it would not have generated half as much publicity as the roadster did. As Tesla rolls cars out it will start to release various models, building on the wave of previous releases.
The company might not be profitable now but don’t underestimate the potential reach of its customer base. Tesla has customers in every developed country in the world, and has very little direct competition in the cool electric car market. Once products are rolling and economies of scale are reached Tesla will be a forced to be reckoned with.
A Telling Story
The most telling story that has emerged in Tesla’s short history was the way it dealt with a recent mishap. Tesla had a miscommunication with its customers who had purchased Model S sedans. Basically a feature which originally was thought to be free would cost $2,000 for an upgrade. The base model, which runs for $60,000, would have the capability to run on the fast-charge network but customers would have to shell out that extra $2,000 to get it. A slew of emails to the company followed as customers were dismayed, but this is where Tesla differed from other companies. Tesla had a top executive, George Blankenship, respond directly to the emails, followed by Tesla apologizing to customers and offering the upgrade for free. A company that can manage public perceptions and create quality products that consumers love is a company to bet on in my books. Although it will have some hills to climb moving forward, Tesla’s potential is hard to ignore.
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mooseelz owns shares of Tesla Motors. The Motley Fool owns shares of Tesla Motors. Motley Fool newsletter services recommend General Motors Company and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.