NEW YORK ( TheStreet) -- Hockey great Wayne Gretzky taught us that in order to win, you have to skate to where the puck is going, not to where it is now. So what does that say about Tesla (TSLA - Get Report)?
To find out, I had to go to Ground Zero for Tesla. Where is that? In Silicon Valley, of course. I spent the weekend driving around the neighborhoods of Menlo Park, Atherton, Woodside and similar ZIP codes.
What I found was astonishing. There was, on average, a Tesla on almost every block. Some blocks had several. One block had eight houses, and I saw five Teslas in the driveways on that block.
Five out of eight! That's 62%. Seeing as Tesla started delivering Model S cars in June 2012, and production didn't ramp meaningfully until October, this pretty much means that every single new premium car sold in this area in the past six months or so was a Tesla. A 100% market share of new cars sold, most likely.Does this mean Tesla's market opportunity is now limited, because it has already peaked at 62% cumulative market share on some blocks? Not at all. These are relatively expensive homes in an expensive neighborhood. Silicon Valley does not come cheap these days. Good homes cost $2 million to $3 million -- or much more. Each home had what I estimated to be at least three cars. Three cars per home, multiplied by eight homes on the block, is 24 cars. With five Teslas, that's barely 20% cumulative market share out of the 24 cars. That's like the smartphone market in 2004 -- most of the growth was yet to come, as exemplified by Apple's (AAPL) and Google's (GOOG) stock-price explosions since then. Speaking of Apple, ask yourself: What was Apple's market share six months into the iPhone's launch in 2007? What was it exiting 2007? Did it break 1%? What was Google's Android market share in 2008? Basically, 1%. I stopped at the parking lots outside a couple of coffee shops, Whole Foods (WFM) and a prominent gym, where the number of plug-in cars was significant. Each place's parking lot had at least a couple of Chevrolet Volts, Nissan (NSANY) LEAFs and of course a couple of Tesla Model S cars. I asked a handful of people leaving and departing in these cars why they bought one. They responded mainly by a combination of the following: "I was on my third Mercedes S500 since 1993, and I was bored. I wanted something different, something exciting, some new technology." Alternatively, I heard "Tesla is a local California company. The factory and headquarters are right here. If I ever have a problem, I don't have to deal with a dealer -- I go straight to the source." The local theme mimics what appeared to be the reason some of these people were in the Whole Foods parking lot to begin with. Some of the food at Whole Foods may or may not be grown locally -- I neither know nor care -- but it's clear that it is the perception that matters. The image. Misguided or not, people believe locally made is better. As irrational as it may be, people have talked themselves into the notion that they are saving themselves, the environment, something by buying locally manufactured goods. This appears to go for both radishes as well as cars, apparently. And Tesla is capitalizing on it. The current Tesla Model S won't garner a massive share of the entire car market. The explanation is simple: It's obviously too expensive. The price ranges from $50,000 to $100,000 after tax rebates. That price range is a small part of the car market, although it's a lot higher in Silicon Valley than in the U.S. as a whole. Just visit the parking lots at Google, Facebook (FB) and Apple -- and then correlate with their income and net worth, and you figure it out in relation to our nationwide averages. For those who say you can't build a company selling cars priced from $50,000 to $100,000, I say look at Porsche. For 50 years straight, Porsche has built an entire company on mostly one model, the 911, although in recent years the brand branched out to a few other cars ... priced only moderately less than the now-$95,000 iconic 911. Why couldn't Tesla do the same? And Porsche, after 50 years, hasn't garnered anywhere the same market share as Tesla has, in significantly less than 50 weeks, measured by the driveways in Silicon Valley.
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