Tesla: 100% Market Share in Silicon Valley

NEW YORK ( TheStreet) -- The plural of anecdote is statistics. There are lies, damned lies and statistics. So take what I am about to say for whatever it is worth. Maybe nothing. I own some Tesla ( TSLA) stock, after all, just so I can go to the annual shareholder meeting, get a free coffee and be my usual pest.

You could argue that what I am about to present is the equivalent of saying, "I've never seen a non- Apple ( AAPL) tablet out in the wild, so therefore..." -- and you would be right. But people are still justifying this kind of reasoning as one factor to consider when predicting the success of this or that gadget, operating system, etc.

So because this is the case in other cases, you will have to indulge me for committing this sin in this case now. The opportunity is simply too rich.

Tesla started delivering its all-electric Model S luxury sedan to consumers in the middle of 2012. By all accounts it appears to have delivered at least approximately 3,000 of them by year's end, and for 2013 the company has guided to 20,000 cars.

On the one hand, that's a whole lot of cars. On the other hand, it's like spitting into the ocean. There are over 300 million people in this country, and there are over 15 million cars sold per year in the U.S. Even at 15,000 cars per year, Tesla would constitute only 0.1% of the U.S. new car market. Obviously, an even smaller percentage of the cumulative stock of cars on the roads.

Here's the thing, though: This is still very early days for Tesla. It's like judging the prospects of the iPhone based on how many people bought the iPhone on that first day in June 2007. It told us nothing about the iPhone's success two, four or six years hence. It's hard to believe now, but for the iPhone's first year in the market, it was not considered to have had a meaningful quantitative impact in the market.

In the early days, a new product can sometimes take root in a very uneven pattern, geographically speaking. The Tesla Model S is an excellent example. There are multiple reasons for this:

1. Tesla's Year-End 'Mad Dash'

Tesla had hoped to build 5,000 cars by year's end. Over the summer and fall of 2012, it became clear that it simply took an extra month to pull all the parts and manufacturing processes. Therefore, to maximize the probability of delivering at least half as many as cars -- 2,500 -- by year-end, Tesla focused on first delivering cars to people living as close to the factory as possible. Those would be the people who pick up at the factory, and where delivery otherwise can take place inside the San Francisco Bay area.

Yes, I know, Tesla still made some deliveries to other geographies, and some people -- such as some from Los Angeles -- picked up the car at the factory themselves. But Tesla focused on maximizing deliveries by Dec. 31, and that meant focusing disproportionately on people living within an hour or two away, driving-wise.

2. The California Climate

The pure electric car experience has a variety of known drawbacks, including initial purchase cost (battery) and relatively long charging times (30 minutes can give you no more than 150 or so miles, typically much less). One drawback that's not discussed as often is the impact of extreme climates.

In particular, an electric car is sensitive to cold weather. Why? In a petrol car, you obtain cabin heat from the engine's excess heat. You just pipe it into the cabin. You get a full effect after only a few short minutes, and it doesn't subtract from the car's efficiency in any meaningful way.

In an electric car, any kind of heat -- seat, steering wheel and cabin air -- will draw from the battery, and therefore subtract from the driving range. In addition, if it's cold outside the car must effectively "heat itself" in order to protect the battery, which will otherwise be partially destroyed if left in extreme temperatures.

This tells us electric cars are particularly inefficient in extremely cold climates. In very hot climates they are also a bit inefficient, but not necessarily much more than regular cars -- at least if you don't have them sitting in the extreme heat for too long.

The bad news here is a car such as Tesla won't sell as well in North Dakota or Finland. The good news is there are plenty of places where the temperature is nearly ideal for electric cars. Over 100 million people live in the U.S. sunbelt alone. One such ideal place is Tesla's home base, the San Francisco Bay area.

Tesla's Market Share in Silicon Valley: 100%

The two points above lead us to my main point with this article: Tesla's market share in Silicon Valley, in and near its home base in Palo Alto.

I have operated on most days for over a month on the central streets of Silicon Valley, where there is the most slow traffic of people going to restaurants, cafes, offices and shopping. I am an observant car nut, constantly scanning every single car that's parked or coming down the street. I can recognize every car model and year.

The $100,000-ish Tesla Model S competes primarily with other $100,000 luxury sedans. What does that mean? It means Mercedes S550 and BMW 750. That's the market segment. A $100,000 luxury sedan doesn't compete with a $40,000 car or a $20,000 car.

So the critical question is this: In the seven or so months since volume production began, what has happened to Tesla's market share in its target segment?

One way to find out is to count these new cars on the street. When you buy a brand-new 2013 model-year car, you get a dealer document that's pasted to the front window, which you exchange for the final license tags within 60 or so days.

As it happens, the last 60 or so days is the relevant time period for Tesla anyway, in this case. So this makes the case easy.

On the average day in the last month or two, I have seen at least a dozen Tesla Model S cars on the streets while hanging out in Silicon Valley -- every day -- increasing in frequency every few days.

The key point here is: How does this compare with Tesla's main competitors, the Mercedes S-class and the BMW 7-series?

In the last two months, I have not seen a single brand-new Mercedes S class or BMW 7 series. Not one. That's compared to at least a dozen brand-new Teslas every day.

You know what conclusion I draw from this? In a matter of only a few short months, Tesla has gone from 0% market share to 100%. Not 99%. 100% -- in these parts of Silicon Valley anyway.

I can hear the complaints and objections already. "That's anecdotal. Not enough sample size. You didn't look at every street 24/7. BMW and Mercedes sell their flagships somewhere."

The complainers would be right. But I'm also right. I'm not making this up. I'm only doing what analysts in New York are doing when they comment "When I ride the N.Y. subway, the only tablet I see is the iPad, no Android" -- or whatever the comparison may be.

What is the moral of this story? It is this: By my own account as an extremely observant car nut, Tesla now has 100% market share in its "home" market of some part of Silicon Valley. The fair climate makes it an ideal place for an electric car, but 100%? Seriously? Tesla isn't banking on getting even 20% of the $100,000 luxury sedan car market.

In other words, if Tesla can quickly get to 100% market share in Silicon Valley -- where over a million people live -- perhaps it can get to 50% or whatever other decent number somewhere else. Even 10% would be heroic. If Tesla gets anywhere close to a double-digit market share number, it will have been an epic success.

As of today, there probably aren't much over 5,000 Teslas on the road -- in the whole world. But it took only a few hundred of them to prove to me that Tesla is getting to 100% market share at its geographical tip of the spear -- Silicon Valley.

The beauty of an uneven distribution in the earliest phase of deploying a new product is that we can see much further into the future in at least some corner of the market. For Tesla, that future is in its home market, and Tesla's competitors -- BMW 7-series and Mercedes S-class -- had better watch out because the air just went out of their sales balloons.

"Tesla already got to 100% market share" -- now that's a headline you can take to the bank, unfair as it may be.

At the time of publication the author had a position in TSLA and AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.