Tesla Shows Electric Vehicles Can Be Profitable

Detroit Free Press - May 12, 2013

Sud­den­ly, Tes­la Motors has altered the com­pet­i­tive land­scape of the fledg­ling elec­tric car mar­ket as the com­pa­ny records a sub­stan­tial first quar­ter 2013 prof­it.

Share ana­lyst com­ments on Tesla’s remark­able first-quar­ter sales.

Tes­la Motors has altered the com­pet­i­tive land­scape of the fledg­ling elec­tric car mar­ket.

Not only did its $11-mil­lion first-quar­ter prof­it shat­ter the assump­tion that no automak­er can make mon­ey sell­ing small num­bers of plug-in cars, it post­ed a 17% gross prof­it mar­gin, using Amer­i­can work­ers, in an indus­try where 10% is con­sid­ered out­stand­ing.

“There’s a tremen­dous amount of enthu­si­asm for this car and this com­pa­ny in Cal­i­for­nia, which we don’t see here on the oth­er side of the con­ti­nent,” said Theodore O’Neill, founder of Con­necti­cut-based Litch­field Hills Research. “How far can Tes­la go? As far as they want to go.”

The com­pa­ny sold 4,900 elec­tric cars over the first three months of the year com­pared with 4,244 Chevro­let Volts and 3,539 Nis­san Leafs over the same peri­od. Musk said Tesla’s gross prof­it mar­gin should increase to 25% by the end of the year.

In con­trast, Ford’s first-quar­ter prof­it mar­gin in North Amer­i­ca hit 11%, a result that both the com­pa­ny and ana­lysts thought was a sign of strength.

“It has many of the ele­ments of a tech stock,” said Jere­my Anwyl, vice chair­man of Edmunds.com. “(Investors) are mak­ing a bet on Elon. Wall Street was enam­ored with the cult of per­son­al­i­ty.”

Still, some ana­lysts ques­tion whether Tes­la can man­age its rapid growth while devel­op­ing an afford­able elec­tric car for the mass­es.

“We would be skep­ti­cal about those claims,” said Cos­min Laslau, a mobile ener­gy ana­lyst for Lux Research. “We don’t think there’s a mag­i­cal path­way to reduc­tion in lithi­um-ion costs.”

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