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Is Tesla Fully Charged?

Tesla Motor Car Company ReviewConsumers are signing up for waiting lists, government keeps throwing money at it and investors drove the stock up over 62% since its IPO in 2010, but can Tesla Motors Inc (TSLA) execute and survive to deliver on its promise?

In the last 12 months TSLA has bled almost all that market valuation off and continues to face challenges on several fronts. Battery Suppliers are dropping like flies (A123 Systems (NASDAQ:AONE), labor at the state of the art plants is challenging and competition from established manufacturers are all making the road to their vision of ubiquitous electric vehicles more than a little uphill. Many analysts think that the market is just not ready for a mainstream luxury electric vehicle, and no one seems ready to pay for the charging infrastructure that makes them practical, although come October 19, California will be leading the way with the most ambitious rollout of 440 volt charging stations yet.

The key to the whole market may end up being how the rollout of charging stations can be accomplished. The 440 volt Supercharger stations being rolled out in California give the Tesla S vehicles 300 hundred miles of range in just an hour of charging. Range and the availability of charging stations continue to be an Achilles heel for the electric vehicle market, because unlike the more popular hybrid vehicles, when your Tesla goes dead, you aren't going anywhere and you can't hitch a ride to the nearest charging station and bring a "gallon" of electricity back to get it started.

Alternative Energy Vehicles Sales and Projections

Despite Tesla's woes hybrid cars, by many measures, are going strong. Through the first six months of this year, Toyota sold 117,626 of the Prius family units, just 12,080 vehicles shy of its 2011 full-year total. Edmunds.com estimates that market share of alternative fuel vehicles will rise from roughly 3% in 2012 to nearly 5% by 2015. Using sales data provided by Edmunds.com, the 10 vehicles below are the best-selling hybrid for the first half of the 2012. These 10 models alone account for more than 90% of total alternative-energy vehicles sold.

The 10 Top Selling Alternative Energy Vehicles

1. Toyota Prius

2. Toyota Camry Hybrid

3. Lexus CT Hybrid

4. Chevrolet Volt

5. Hyundai Sonata Hybrid

6. Lexus RX Hybrid

7. Kia Optima Hybrid

8. Honda Civic Hybrid

9. Honda Insight

10. Ford Fusion Hybrid

Tesla was at the bottom of the sales pyramid for Electric Vehicles in September 2012. Out of the 5,809 plug-in cars sold, the Tesla Model S accounted for just an estimated 150. General Motors’ Chevrolet Volt, which was punished for high production costs recently, had the most sold with 2,851 units sold. Toyota’s Prius PHV claimed 1,652 units sold in the same period. Tesla did beat out the Ford Focus Electric model, which only sold 59 units.

The company recently cut both its 2012 revenue forecasts and production expectations. The stock fell 10 percent at the end of September when the delays were announced. As of September 23, Tesla had produced only 255 of its luxury sedans, delivering 132 to customers.  The company has issued a second offering of stock to raise more cash.  The $10 Million grant from California was to build production facilities for a SUV named the Model X, to be built in their California plant and create over 500 jobs. This is in addition to the $456 million loan that the Federal Government has already given them.

The big difference here is that Ford, Toyota, and GM don’t rely on Electric Vehicle sales to stay alive. Tesla does and they are looking for life support, like that $10 Million grant from the State of California that they recently received.  While Tesla has been timely on repaying the Federal Department of Energy loans so far, the DOE has asked for a more aggressive repayment schedule.  In the minds of investors, the shadow of Solyndra (Solyndra, the Silicon Valley startup that collapsed, leaving taxpayers liable for $535 million in federal guarantees) continues to shadow any optimism. Plug-in cars are what will make or break Tesla motors, and the company has been hit with some setbacks.

Gas Pains

Tesla Model S and RoadsterIncreasing competition from natural gas vehicles could also play to Tesla’s disadvantage. General Electric and an affiliate of Chesapeake Energy are laying down fueling infrastructure plans for natural gas similar to Tesla’s Supercharger stations. States seem more eager to convert fleets to natural gas than to all electric. This trend was highlighted at a recent summit hosted by America’s Natural Gas Alliance where natural gas vehicle adoption was promoted, with over 20 states engaged.  Natural gas has also made significant inroads in mass transit, domestically and globally.  Natural Gas is the most prevalent mass transit alternative energy by far, and its popularity is driving the rollout of fueling infrastructure that can support consumer use of Natural Gas as an alternative energy.  

Significant facts:

  • There are about 120,000 NGVs on U.S. roads today and more than 15.2 million worldwide.
  • There are about 1,000 NGV fueling stations in the U.S., about half of which are open to the public.
  • There are also “Home Refueling Appliances” available.
  • In the U.S., about 50 different manufacturers produce 100 models of light-, medium-, and heavy-duty vehicles and engines.
  • Natural gas currently costs from $1.50–$2.00 less per gasoline gallon equivalent (GGE).
  • In the U.S. alone, NGVs offset the use of nearly 360 million gallons of gasoline in 2011.
  • NGVs meet the strictest emission standards, including California’s AT-PZEV standard.
  • NGVs are as safe as or safer than traditional gasoline or diesel vehicles.

Going the Distance

Tesla is both the media and investor darling of the Electric Vehicle market.  So far, despite a challenging economy, technical challenges and a shaky supply chain, the company has performed well and not fallen into the abyss of other federally funded alternative energy failures.  If the Supercharger rollout in California goes well and they can deliver on the project Model S sales, it could pave the way for ubiquitous adoption of Electric Vehicles.  Most analysts are cautiously optimistic, and expect that mass adoption of purely electric vehicles and the infrastructure to support it are some years away. 

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