While General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F), and other major companies may be making headlines with their new plug-in electric hybrid cars, niche car company, Tesla Motors Inc (NASDAQ:TSLA), has been selling pure electric cars to the general public since 2008. The car company has received solid reviews for its cars, is generating a lot of publicity, and has the potential to carve out a niche market that could eventually expand mainstream. At the same time, the car company has faced production and supply problems, and even its low-perfomance, short range cars cost USD 50,000 or more. The question now is whether Tesla Motors Inc (NASDAQ:TSLA) will go boom or bust?
Tesla Motors builds pure electric cars, meaning their cars have no traditional combustion engine. Plug-in hybrids rely primarily on their electric engines within short ranges, but a combustion engine will kick in when the car needs extra power or the battery runs out of juice.
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Tesla Motors’ Inc (NASDAQ:TSLA) first model, the Tesla Roadster, has sold only 2,200 units. A solid first showing for niche and novel products, but not nearly enough to sustain a major manufacturing facility and large R&D budget. The car garnered generally good reviews, and was the first “mass produced” all electric car in the United States, capable of being driven on the interstate.
Tesla’s next car, the Model S, promises to be a high performance luxury sedan capable of hitting 60 miles per hour in under five seconds. With a wait list already in excess of 10,000 units reserved, is there a chance that Tesla could become the next “big” car company? As far as investors are concerned, the jury is still out. In the last two years, stock prices have oscillated between a low of 18 dollars and a high of 37 dollars.
Like their namesake, Nikola Tesla, Tesla Motor’s technology certainly looks promising, but so far, actual implementation has proven problematic. Tesla’s shares have tumbled over the last few days, on news that full-year revenue projects have been slashed from about USD 600 million to USD 400 million, on account of supply problems. Simply put, Tesla doesn’t have the parts to produce the goods.
Meanwhile, competition from the plug-in hybrid market is ramping up. In December 2010, Chevrolet launched the lauded Volt, though some industry analysts have been disappointed, due to quality control problems and poor demand. Still, the Volt is showing signs of life, selling nearly 13,500 units through August of 2012, a huge jump over 2011 sales.
The Nissan Leaf, another plug-in car, sold a dismal 3,500 units, due to concerns over its battery performance, small size, and other issues, however most automakers are discounting this as a failure on Nissan Motor Co., Ltd. (TYO:7201)’s part, not a lack of demand.
Toyota Motor Corporation (NYSE:TM), Ford Motor Company (NYSE:F), and Honda Motor Co Ltd (TYO:7267) (NYSE:HMC) either have, or are planning to launch, plug-in electric cars within the next year. The Ford Fusion, particularly is generating a considerable amount of buzz, with its sleek all electric “Fusion” Energi model.
Tesla Motors Inc (NASDAQ:TSLA) has certainly proved they can deliver a high-quality product with their Model S. The company must now figure out a way to lower production costs and increase output, especially as traditional automakers continue to pour funding into developing more hybrids and plug-in hybrids. If Tesla’s production issues do not work themselves out soon, the company may find itself unable to keep up with increasing competition from traditional automakers.