This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Tesla Motors: The Apple of Automakers

By comparison, the automotive gross margin inched up from 15% to 17%. Thus, the company's total gross margin expansion, from 22% to 30%, was primarily a result of the development-services division. However, Tesla's core mission is to build cars, not outsource its product-design and expertise to industry laggards, and it's remaining loyal to this tenet. Having just purchased a $42 million manufacturing facility in Fremont, California from United Motors Manufacturing, Tesla's production timeline for the Model S is intact. At peak capacity, when utilized by United, the facility was assembling 400,000 vehicles annually.

Tesla's strategy, commencing with a premium model, though seemingly contradictory to mass-market appeal, is a tech-industry tactic. Silicon Valley-based Tesla likens its Roadster to a first-mover product, and initial buyers are "innovators." Sleek design and limited production are likely to garner brand cachet. Thus, Tesla is employing a step-down marketing technique. The Model S, at roughly half the price of the Roadster and with greater production potential, will appeal to a broader demographic of "early adopters." Tesla's next model, codenamed BlueStar, is, purportedly, a crossover that will be priced at $30,000 to target "early majority" electric-car buyers.

This strategy, called "crossing the chasm", is derived from the Everett-Rogers diffusion of innovations theory. Smart-phone and tablet-computer designer Apple (AAPL) has repeatedly implemented it, flawlessly. It is unlikely that Tesla will enjoy comparable success. But, so far, the company's performance is praiseworthy. U.S. automotive behemoths GM (GM) and Ford (F), despite solid progress since the recession, are still lagging behind rookie Tesla in key respects. Neither of the old-line automakers has an all-electric vehicle. The Chevrolet Volt, a plug-in hybrid, utilizes a battery similar to Tesla's. GM Vice Chairman Robert Lutz has credited Tesla as Volt's muse.

Other companies, including Toyota and Panasonic, which builds Tesla's highest energy-density lithium ion cells, have made equity investments in the company. Toyota owns 3.2% of shares outstanding and Panasonic controls 1.5%. Toyota invested $50 million into Tesla, immediately following the company's initial public offering, underwritten by Goldman Sachs, Morgan Stanley, JPMorgan (JPM) and Deutsche Bank, three of which now cover its stock. Deutsche rates the shares "hold." Goldman ranks them "neutral." JPMorgan ranks Tesla "overweight", forecasting that its stock will advance 29% to $30 during 2011.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,099.33 -7.37 -0.04%
S&P 500 1,998.90 -1.12 -0.06%
NASDAQ 4,569.8640 -0.7730 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs