Tesla Can't Spell Success Without "S"

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Investors in many a small biotech startup will know this feeling. The feeling of an entire company's fate resting on the success or failure of a single product. Tesla Motors (NASDAQ: TSLA) shareholders also know their investment depends on the success of the automaker's first mass produced electric car, the Tesla Model S.

Step 1: No more EV compromises!

The stereotype of an electric vehicle has long been a small, underpowered car designed for the sole purpose of environmental friendliness. Tesla's goal from its founding in 2003 was to shatter this image and it began with the Lotus Elise based Tesla Roadster. After the limited production of 2,500 Roadsters, Tesla proved electric cars and performance can go together.

Step 2: More Teslas

Of course Tesla still had to prove itself as an automaker. To do this, it built an all-electric sedan at half the price of the Roadster. But these cars were to be built on a massive scale and that meant a new production line. Continuing their cooperation with Toyota Motors (NYSE: TM), Tesla purchased the former NUMMI manufacturing plant in Fremont, California to ramp up Model S production. Toyota has also helped to develop another line of sales for Tesla by having Tesla supply parts for the new RAV4 EV.

Step 3: An Amazing Product

Starting at $49,900 after the federal tax credit, the Tesla Model S is fighting for market share with top line cars like the Porsche Panamera. Both Audi and Porsche are now effectively under control of Volkswagen (NASDAQOTH: VLKAY), an automaker determine to continue building an empire over the next decade.

The best comparison between Porsche's and Tesla's offerings would be a base Panamera versus and 85 kwh Model S. Seen in the table below.

<table> <tbody> <tr> <td> </td> <td>Tesla Model S 85 kWh</td> <td>Porsche Panamera Base</td> </tr> <tr> <td>MSRP</td> <td>$69,900</td> <td>$75,850</td> </tr> <tr> <td>0-60 mph</td> <td>5.6 s</td> <td>6.0 s</td> </tr> <tr> <td>Peak Power</td> <td>362 hp</td> <td>300 hp</td> </tr> <tr> <td>Peak Torque</td> <td>325 lb.-ft</td> <td>295 lb.-ft</td> </tr> <tr> <td>Top Speed</td> <td>125 mph</td> <td>160 mph</td> </tr> <tr> <td>Supercharging</td> <td>Included</td> <td>N/A</td> </tr> </tbody> </table>

Sources: Teslamotors.com, Porsche.com

Reading the table above shows the Model S to be very competitive with comparable gas models. With over 10,000 Model S reservations booked, Tesla is not letting up on production. In out of the norm Elon Musk style, Tesla's CEO Elon Musk tweeted that Tesla was narrowly cash flow positive for December signaling a positive sign in Tesla's finances.

Putting it All Together

Tesla has taken apart previous visions of the electric car and created a truly exceptional product that already has a backordered demand. With the success of the Model S, Tesla can continue to survive and expand its product line. Next up: the Model X, an all-electric SUV based off the Model S. After that, an all-electric sedan in the $30k range. If Tesla can execute their low cost sedan as well as the Model S it could mean a threat to the dominant BMW 3 Series. And with that, financial success for Tesla Motors.

 


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