That isn't to say that Tesla is without its warts. A large portion of the share price move is being driven by short covering, and that will end at some point. The company also generates a significant portion of its cash flow and risk management from its regulatory credits, Jonas noted. "Credits such as ZEV (Zero Emission Vehicle credits) and GHG (Greenhouse Gas credits) that Tesla accumulates from a surplus of long-range EVs that they can sell to competing manufacturers at auction are a big deal to Tesla." The regulatory environment on selling credits could change in the future, so this is something Tesla will need to keep an eye on. It's worth noting that Tesla has said in the past that it doesn't want to rely on selling credits for the long-term.
Tesla appears to have become the first company to successfully break the hold of the "Detroit 3" (Ford, GM and Chrysler) in garnering attention and mind share as an American automaker.
The company is still in its early growth stages, so it's going to be a while before anyone has any idea just how large the market is for electric cars. One thing is clear, though. Tesla is here to stay, and it's off to the races. Enjoy the ride while it lasts.
--Written by Chris Ciaccia in New York>Contact by Email. Follow @Chris_Ciaccia
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- 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 + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV