Tesla Motors Inc (TSLA): What Does 2014 Hold?

Tesla Motors Inc (TSLA): What Does 2014 Hold?
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Tesla Motors Inc (NASDAQ:TSLA) certainly had a wild ride in 2013, but what will happen to the automaker in 2014? It seems like everyone’s making predictions about the automaker’s future this year, and those predictions cover the spectrum. But no matter what happens to Tesla this year, one thing is for certain: people will remain riveted. Daniel Sparks of The Motley Fool writes (via Daily Finance) about three “bold bets” he’s making for the automaker this year.

Tesla to see tremendous margins

The first prediction he makes is that Tesla Motors Inc (NASDAQ:TSLA) will hit gross margins of 29% this year. We will find out if the automaker made its target of 25% margins by the end of 2013 when it releases its next earnings report. Tesla looked primed to hit that target at the end of the third quarter, and if it does indeed hit the target, I don’t see 29% margins as being out of the question. CEO Elon Musk himself said they want gross margins which exceed those of Porsche, which were once over 50%.

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Sparks notes that Ford Motor Company (NYSE:F)’s margins are only 15.5%, but he also points out that the average selling price of Tesla’s cars is much higher. The Model S starts out at $70,000, but thanks to all of the options, the average selling price is $109,600, according to non-GAAP revenue. Another factor in Tesla’s healthy growing margins is the fact that it only makes one vehicle right now and won’t be making a second model until sometime later this year. In addition, the automaker is making plans to expand its production capabilities quite a bit, which should improve margins further.

Tesla to see a true competitor

Sparks also believes that a true competitor for Tesla Motors Inc (NASDAQ:TSLA)’s Model S sedan will appear in 2014. Currently the other all-electric vehicles on the market do not have a meaningful range, so they aren’t true competitors to the Model S.

While on the surface, this might seem like a bad thing, but Musk did say recently that he would welcome competition because it would speed up how quickly the general public adopts all-electric vehicles. Personally, I’m not sure we’ll see a true competitor to the Model S just yet. General Motors Company (NYSE:GM) has said it is working on a longer-range EV, but I believe Tesla is still ahead of the other major automaker in terms of battery technology.

Tesla to still have trouble keeping up

Sparks also thinks Tesla Motors Inc (NASDAQ:TSLA) will still have trouble keeping up with demand for its vehicles. Of course this is a good thing, as long as the automaker doesn’t get so far behind that buyers become frustrated with the wait. But even Apple Inc. (NASDAQ:AAPL) deals with supply constraints, and they only seem to whet the appetites of fans even further.

Meanwhile Tesla is expanding its production capabilities, which means that it should be able to catch up with demand a bit, or at least keep the wait from getting any longer than it is. And the more the automaker expands its Supercharger network, the more it could boost demand for its vehicles. All in all, I would say this is probably a safe bet for 2014.

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