NEW YORK (
) -- 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
To find out, I had to go to Ground Zero for Tesla. Where is that? In Silicon Valley, of course. I spent the weekend drivingaround the neighborhoods of Menlo Park, Atherton, Woodside andsimilar ZIP codes.
What I found was astonishing. There was, on average, a Tesla onalmost every block. Some blocks had several. One block had eighthouses, and I saw five Teslas in the driveways on that block.
Five out of eight! That's 62%. Seeing as Tesla started deliveringModel S cars in June 2012, and production didn't ramp meaningfullyuntil October, this pretty much means that every single new premiumcar 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 ithas already peaked at 62% cumulative market share on some blocks? Notat all.
These are relatively expensive homes in an expensive neighborhood.Silicon Valley does not come cheap these days. Good homes cost $2million to $3 million -- or much more. Each home had what I estimatedto be at least three cars.
Three cars per home, multiplied by eight homes on the block, is 24cars. With five Teslas, that's barely 20% cumulative market share outof the 24 cars. That's like the smartphone market in 2004 -- most ofthe growth was yet to come, as exemplified by
stock-price explosions since then.
Speaking of Apple, ask yourself: What was Apple's market share sixmonths 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,
and a prominent gym, where the number of plug-incars was significant. Each place's parking lot had at least a coupleof
LEAFs and of course a couple of Tesla Model S cars.
I asked a handful of people leaving and departing in these cars whythey bought one. They responded mainly by a combination of thefollowing: "I was on my third Mercedes S500 since 1993, and I wasbored. I wanted something different, something exciting, some newtechnology."
Alternatively, I heard "Tesla is a local California company. Thefactory and headquarters are right here. If I ever have a problem, Idon't have to deal with a dealer -- I go straight to the source."
The local theme mimics what appeared to be the reason some ofthese people were in the Whole Foods parking lot to begin with. Someof the food at Whole Foods may or may not be grown locally -- Ineither know nor care -- but it's clear that it is the
. Misguided or not, people believe locally made isbetter.
As irrational as it may be, people have talked themselves into thenotion that they are saving themselves, the environment,
by buying locally manufactured goods. This appears to go for bothradishes as well as cars, apparently. And Tesla is capitalizing onit.
The current Tesla Model S won't garner a massive share of the
car market. The explanation is simple: It'sobviously too expensive. The price ranges from $50,000 to $100,000after tax rebates.
That price range is a small part of the car market, although it's a lothigher in Silicon Valley than in the U.S. as a whole. Just visit theparking lots at Google,
and Apple -- and then correlate with their income and net worth, and you figure it out in relation to ournationwide averages.
For those who say you can't build a company selling cars pricedfrom $50,000 to $100,000, I say look at
. For 50 yearsstraight, Porsche has built an entire company on mostly one model, the911, although in recent years the brand branched out to a few othercars ... priced only moderately less than the now-$95,000 iconic 911. Whycouldn't Tesla do the same? And Porsche, after 50 years, hasn'tgarnered anywhere the same market share as Tesla has, in significantly less than 50weeks, measured by the driveways in Silicon Valley.
During the entire weekend of driving around, I did not see a singleMercedes S-class or 7-series
that was less than three months old,either in a driveway or on the street. Tons of Chevrolet Volts, NissanLEAFs and Tesla Model S's -- but very few brand-new gasoline cars over$60,000. I define "brand-new" as cars with the temporary dealerregistration tags, typically valid for 90 days or less.
It would be good to see what the official statistics are, if any,on the plug-in electric cars in at least these parts of SiliconValley. Are they 70% of all new-car sales? Higher? Seventy percent of all car costing more than $40,000? Ninety percent?
How is this dramatically high demand for electric cars reflected inthe demand for public electric-car charging stations? I drove intodowntown Palo Alto and checked the five charging stations severaltimes every day, several days in a row. The occupancy rate: 100% atall times. It didn't matter whether it was 9 a.m. or 9 p.m. Even worse:There were several electric cars parked next to these cars, waiting tocharge. The demand for electric chargers appears to be close to 10times the supply of them -- and probably more on weekdays.
The point here is this: Tesla cars are, of course, not yet commonplaceall over the country. However, at ground zero, in its home market,the luxury-sedan market share has already hit 100% based on mypersonal observations. Given how many cars are sold every year in themajor California coast cities -- San Francisco, Los Angeles and SanDiego -- Tesla may not need to sell a single car anywhere else in theworld, ever. It can easily sell the 20,000 to 30,000 cars it has plannedto sell every year in California coastal cities alone.
Other carmakers are taking note of this steep adoption curve inSilicon Valley. The major carmakers are spending billions of dollarspreparing their answers to Tesla, Chevy Volt and Nissan LEAF. Therewill be an onslaught of models from all carmakers entering productionstarting already this year and accelerating all the way to 2018.
More about this in another article, coming soon.
At the time of publication, Wahlman owned shares of AAPL, GOOG and FB.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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