Tesla Motors Inc (TSLA)’s Two Biggest Hurdles

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) is now evolving from a small electric car maker into an international luxury automaker. The company has expanded its business in Europe, started deliveries in China, and has started taking pre-orders in Australia. Of course, all eyes are set on China because it’s the world’s largest luxury automobile market – that’s where Tesla’s biggest opportunity lies.

Will United States accept and recognize Tesla’s direct sales model?

While China is a land of opportunity for TSLA, the San Francisco-based company has two major hurdles which could very well determine Tesla Motors Inc (NASDAQ:TSLA)’s success or failure, says Fray Financials of Seeking Alpha. The company uses a unique direct sales model that allows it to sell vehicles directly to end users. Its sales model has caused much uproar throughout the country. Many states in the country have banned its direct sales model including Texas, Arizona, Virginia, New Jersey and Maryland. Many other states like Colorado, New York, Ohio and North Carolina have put restrictions on how many stores Tesla can operate and cars it can sell in a particular state.

If Tesla Motors Inc (NASDAQ:TSLA) wants to generate massive revenues by producing mass-market electric cars in the long run, its direct-to-consumer sales model must be widely accepted and recognized in the United States. Today, only a few states have banned or restricted its sales strategy, but many fear that other states may pursue similar paths.

Tesla needs to build solid infrastructure in China

Tesla Motors Inc (NASDAQ:TSLA) is seeking growth in Asia and Europe. The company discussed growth opportunities in China during its first quarter earnings call. The world’s most populous country is undoubtedly the biggest opportunity for Tesla. The company is using a bottom-up approach to penetrate this market. The EV maker is constructing Superchargers and service centers in the country. Currently, the company has only three Superchargers in China. But Elon Musk has made it clear that he will rapidly build the electronic infrastructure to support huge demand in China.

There have been concerns around whether Chinese electronic grid could handle the charging of Tesla Motors Inc (NASDAQ:TSLA)’s cars. The second hurdle before the company is to build a strong infrastructure of charging stations in China to support massive demand with efficient timing. The problems in China are more about efficiency, technology and execution, which Elon Musk could easily overcome. In contrast, the challenges in the U.S. involve politics and lobbying.

Tesla Motors Inc (NASDAQ:TSLA) shares inched up 0.12% to $208.01 at 9:33 AM EDT on Monday.

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About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com or on Twitter @VikShukla10

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