Tesla: 100% Market Share in Silicon Valley

NEW YORK (TheStreet) -- The plural of anecdote is statistics. There are lies, damnedlies and statistics. So take what I am about to say for whatever itis 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 ofsaying, "I've never seen a non- Apple ( AAPL) tablet out in the wild, sotherefore..." -- and you would be right. But people are stilljustifying this kind of reasoning as one factor to consider whenpredicting the success of this or that gadget, operating system, etc.

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

Tesla started delivering its all-electric Model S luxury sedan toconsumers in the middle of 2012. By all accounts it appears to havedelivered at least approximately 3,000 of them by year's end, and for2013 the company has guided to 20,000 cars.

On the one hand, that's a whole lot of cars. On the other hand, it'slike spitting into the ocean. There are over 300 million people inthis country, and there are over 15 million cars sold per year in theU.S. Even at 15,000 cars per year, Tesla would constitute only 0.1% ofthe U.S. new car market. Obviously, an even smaller percentage of thecumulative 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 peoplebought the iPhone on that first day in June 2007. It told us nothingabout the iPhone's success two, four or six years hence. It's hard tobelieve now, but for the iPhone's first year in the market, it was notconsidered to have had a meaningful quantitative impact in the market.

In the early days, a new product can sometimes take root in a veryuneven pattern, geographically speaking. The Tesla Model S is anexcellent 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 andfall of 2012, it became clear that it simply took an extra month topull all the parts and manufacturing processes. Therefore, tomaximize the probability of delivering at least half as many as cars-- 2,500 -- by year-end, Tesla focused on first delivering cars topeople living as close to the factory as possible. Those would be thepeople who pick up at the factory, and where delivery otherwise cantake 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 carat the factory themselves. But Tesla focused on maximizing deliveriesby Dec. 31, and that meant focusing disproportionately on peopleliving 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 chargingtimes (30 minutes can give you no more than 150 or so miles, typicallymuch less). One drawback that's not discussed as often is the impactof extreme climates.

In particular, an electric car is sensitive to cold weather. Why? Ina 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 afew short minutes, and it doesn't subtract from the car's efficiencyin any meaningful way.

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

This tells us electric cars are particularly inefficient inextremely cold climates. In very hot climates they are also a bit inefficient, but not necessarily much more than regular cars -- at leastif 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 inNorth Dakota or Finland. The good news is there are plenty ofplaces where the temperature is nearly ideal for electric cars. Over100 million people live in the U.S. sunbelt alone. One such idealplace 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 inPalo Alto.

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

The $100,000-ish Tesla Model S competes primarily with other $100,000luxury sedans. What does that mean? It means Mercedes S550 and BMW750. That's the market segment. A $100,000 luxury sedan doesn'tcompete with a $40,000 car or a $20,000 car.

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

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

As it happens, the last 60 or so days is the relevant time period forTesla 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 adozen Tesla Model S cars on the streets while hanging out in SiliconValley -- every day -- increasing in frequency every few days.

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

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

You know what conclusion I draw from this? In a matter of only a fewshort 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 andMercedes sell their flagships somewhere."

The complainers would be right. But I'm also right. I'm notmaking this up. I'm only doing what analysts in New York are doingwhen they comment "When I ride the N.Y. subway, the only tablet I see isthe iPad, no Android" -- or whatever the comparison may be.

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

In other words, if Tesla can quickly get to 100% market share inSilicon Valley -- where over a million people live -- perhaps it canget to 50% or whatever other decent number somewhere else. Even 10%would be heroic. If Tesla gets anywhere close to a double-digitmarket 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 toprove to me that Tesla is getting to 100% market share at itsgeographical tip of the spear -- Silicon Valley.

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

"Tesla already got to 100% market share" -- now that's a headline youcan 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.

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