Tesla Triumphs but Questions Remain

NEW YORK ( TheStreet) -- Let's start with the two main unanswered questions regarding Tesla's near-term future: Demand and profitability. These are two questions Tesla has got to answer on its quarterly earnings call this week.

1. Demand: I walked into a Tesla store this weekend and asked several times how long the wait is for a car, for someone ordering a Tesla right now. I was told 30 days, which is shockingly quick, compared to what we were told only one to two months ago.

There are only three things you have to stick to if you want delivery in 30 days:

A. the battery must be the 60 or 85 kWh version -- not the 40 kWh;

B. you must order the $1,500 air suspension option;

C. you can't have the new red color.

Basically, those three options (40 kWh battery, regular non-air suspension and the new red color) go into production in April.

There are multiple ways to interpret this 30-day lead time. Let's start with the worrisome interpretation.

It is said that Tesla had over 19,000 reservations (deposits) for the Model S in the US. Approximately 5,000 have been delivered by now. That yields us 14,000 net.

Furthermore, the consensus is that Tesla is now building 400 cars per week. That's approximately 1,600 cars per month, 5,000 cars per quarter and 20,000 cars per year.

With 14,000 U.S. net reservations for the Model S remaining, how can the wait for the car be only 30 days? They're only building 1,600 cars per month. The wait should be almost 11 months (14,000 divided by 1,600).

Clearly some of the cars are red, 40 kWh battery and don't have the air suspension -- but 90% of the order stock? Seriously? That seems like a lot. Seems very unlikely.

A Tesla bear would say that thousands of people must have asked for their deposits back. Basically, the backlog has been significantly reduced. If true, this would be a horrendous bearish sign, and it could cause the stock to collapse upon the earnings report.

Another explanation would be that those who have deposits have chosen to "defer" their deliveries until some time in the future, even though they could have taken delivery right now in February. This may be true to some extent, but it would be surprising if it explained the whole gap.

Some would argue that those who are placing orders today are "cutting in line" against the will of those with earlier deposits. I find this unlikely. Word of this would spread like a prairie fire. People would feel cheated and become upset. I can't imagine Tesla doing this other than in carefully selected special cases for good reason.

The optimist has a different interpretation: Tesla has increased production from the recent consensus of 400 cars per week. Most people reported that the 400 per week goal was reached some time in December or January. Well, what if it simply continued to rise?

For a production increase to explain the whole multi-thousand gap in such a short time-frame though, production must have gone up almost 10-fold, not just a somewhat half-realistic doubling from 400 cars per week to 800 or whatever in the last month or so.

Bottom line on this point: There is at least some chance that this development is not a good sign for Tesla's order book. I really don't know, and the numbers appear somewhat contradictory and inconclusive. There are multiple possibilities.

2. Profitability: This is a much more straightforward point. If I recall Elon Musk's statement from last June's shareholder meeting accurately, he said Tesla's breakeven point is 8,000 cars per year. That's 2,000 cars per quarter.

Well, if this is true, Tesla would have been profitable already in the December 2012 quarter, and would be profitable every single quarter in 2013. With a total backlog -- Model S domestic, Model S international and Model X -- of approximately 25,000 cars already, Tesla should have no problem delivering 20,000 in 2013. Model X starts in 2014.

If Tesla breaks even at 8,000 cars, selling 20,000 would then make Tesla extremely profitable, no? If not, one would think someone's got some 'splaining to do.

The New York Times Dispute

My take on the well-publicized failure by the New York Times to drive the car from supercharger to supercharger in the DC-Boston corridor is this: Seeing as everyone else -- from CNN to regular consumers -- has managed to accomplish this task, the NYT journalist looks terrible with his failure.

What makes this drive so relatively difficult right now is that there are too few superchargers deployed, and they are too far from each other. If you are doing this drive now, you are facing odds that are only moderately better than Jimmy Doolittle on April 18, 1942. To accomplish the task, you have to use common sense in terms of charging the car, so that you don't fail to fill up the car to the max.

The NYT writer blames his failure to fill up the car's battery with a full charge on advice he was given by Tesla. The real question is this: If he indeed received this bad advice, why did he follow it? Driving an electric car to a place near the range limit requires knowledge of mathematics, basic physics, logic and common sense.

This includes:

1. charge the car as much and as often as possible;

2. drive smoothly and not too much above the speed limit;

3. don't sit and idle with the heat on, thinking it will help.

If Jimmy Doolittle had piloted his plane in the same manner the NYT treated the Tesla Model S this Winter, he would never have made it to Tokyo, let alone China.

In the end, Tesla managed to turn a piece of crummy publicity into a PR triumph. All it took was for other people -- CNN as well as regular owner-volunteers -- to re-create the NYT journey, and achieve a successful result.

There are many reasons Tesla is succeeding as a company -- although that does not constitute a prediction for the stock. One of them is product positioning. There simply isn't another car in the market that's anything like it.

The $80K (and up) Tesla Model S has a EPA-certified average range of 265 miles. The only other all-electric car that beats 100 miles is the $50K Toyota RAV4 EV, which uses the Tesla drivetrain with a smaller battery. All other cars are below 100 miles, with the best-seller being Nissan LEAF at 75 miles.

Yes, I know: If you want the electric car experience for only the first 38 miles, and being able to go 370 miles in total, the GM's ( GM) Chevrolet Volt (and soon Cadillac ELR) is for you. And while that's a car that I personally prefer, considering that it costs half or less than half of the Tesla, it's not the same. It doesn't have the same acceleration, suspension, interior space, etc.

Tesla has loads of patents, a new kind of sales experience, and of course a car that is totally unique in its market positioning. This should make for a successful company.

Considering the large short interest, I'm modestly optimistic on the stock as well, but we shall see. In either case, not bad for a company that went from zero to an amazing 100% market share in record time.

At the time of submitting this article, the author was long TSLA.

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

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