According to data provided by the University of Colorado,  in the early 1900’s there were around 2000 firms that manufactured automobiles but at present only three companies are leading the market- Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM) and Chrysler. This clearly highlights the risk in investing in the auto sector, so based on this, one can assume that the investment in an electric car company becomes much more risky.

tesla model s

Tesla Motors Inc Electric cars-evolution

The electric cars are known to the world since the 1800’s, but the cars lost their popularity when the efficiency increased in the internal combustion engine and price of gasoline dropped down. In 1960, an electric car became a vague concept because of its very limited driving range at times when concept of the highway was tossed.

But in the current scenario, consumers have a desire to own such car that has almost zero emission. In countries like the United States, people want zero pollution as they are not satisfied by the combustion engine.

To fill this gap, Tesla Motors Inc (NASDAQ:TSLA) has given buyers the option of owning a stylish car as well as a vehicle, which runs a lithium- ion battery.

Tesla Motors Inc Tesla filling the gap

Tesla Motors Inc (NASDAQ:TSLA) is one of the few companies that have invested in a business that is comparatively risky. According to the general trend if an automaker from Japan or Korea wants to tap the market in the United States then he comes up with the low cost cars and increases the number of customers and later on launches a high end model. Tesla has done the exact opposite of this strategy and first dropped a high end roadster, which was fast, expensive and electric.

After the expensive roadster, Tesla Motors Inc (NASDAQ:TSLA) launched the Model S, which was not as expensive as the Roadster. It is a sedan from Tesla that defines luxury with a zero emission. The Tesla Model S was named 2013 Motor Trend Car of the Year and Automobile of the year. The Model S from Tesla was termed as the almost perfect car and the best car among all the cars tested to date. The Tesla Model S was not ranked as the electric car, instead a consumer report said that it was the best car in any price segment or period.

Uncertain Environment For Tesla

Tesla Motors Inc (NASDAQ:TSLA) has posted a profit for the first quarter which has been the first ever quarter for Tesla in which it posted a profit. However, whether the company will remain a solid investment in the future as well is unclear. The financial ratios are based on only four quarters so they aren’t going to be very impressive as the company has earned profit for only one quarter.

Going forward it may possible that electric cars could once be put on backburner due to the falling gasoline prices. The supply of oil in the US is increasing significantly helped by new sources of oil based on fracking. Apart from US, Australia has discovered a harvestable oil field, almost similar in size to oil reserves of Saudi Arabia.

Best strategy

So, in this uncertain environment, it will be best to create a small position in Tesla Motors Inc (NASDAQ:TSLA), and watch the company grow while also keeping an eye out for competition, says a report from Forbes.