DETROIT May 9 Kevin Baillie, co-founder of a
visual effects company that works on major motion pictures, had
never been in a car like his new Tesla Model S electric sedan,
but somehow it looked familiar.
"When I got into my car, I thought, 'Wait a minute, this
looks like something from the movie I just worked on,'" said
Baillie. "It's like Star Trek."
The ringing endorsement of car enthusiasts like Baillie has
given Tesla Motors Inc a much needed stamp of approval
in a "green" car industry that has seen high-profile failures
and struggles over the last year.
The Model S is ten-year-old Tesla's first attempt to reach a
mainstream audience for electric cars. Sales of the
five-passenger sedan have outpaced expectations since its launch
last year, and on Thursday, Consumer Reports magazine awarded it
with a near-perfect rating.
The review coupled with Tesla's first-ever quarterly profit
boosted the company's shares 36 percent to an all-time high of
$75.77 - more than quadruple its 2010 initial public offering
price of $17.
The stock's surge came as a surprise to a number of
investors betting on Tesla's decline. Tesla is more heavily
shorted than 98 percent of the roughly 4,200 companies tracked
by Thomson Reuters StarMine.
Many industry experts and analysts celebrated Tesla's
fortunes, but warned that the Model S - which starts at around
$70,000, before a federal tax credit - remains a niche offering
available to only the wealthiest 10 million U.S. households, at
best, even with the help of Tesla's new financing deal.
"Have we read the final chapter on Tesla? No. But at this
point, you get measured on what you've accomplished to date, and
they've done a damn good job," said Tim Leuliette, president and
CEO of auto parts supplier Visteon Corp, in an interview.
For Tesla to reach a broader market and silence electric car
naysayers, the company must successfully deliver its Model X
crossover next year as well as a third-generation car by 2017
that will cost between $30,000 and $35,000.
"One good car does not a car company make, unfortunately,"
said Tom Gage, the former CEO of AC Propulsion, which developed
the drive train for Tesla's first model, the Roadster.
"They have to continue to grow by orders of magnitude before
they become a real car company," he said.
COSTS THE SAME AS LUXURY GAS CARS
Tesla said it expects to deliver 21,000 Model S cars
worldwide, up 5 percent from its earlier target of 20,000. Many
investors had believed the 20,000 target was out of reach.
"My hat's off to them," Ford Motor Co Executive
Chairman Bill Ford said at a press briefing after Ford's annual
meeting in Wilmington. "It's really hard to start up a company,
particularly in the auto business, and be successful."
The strength of demand for the Model S has surprised
industry experts, investors and analysts. Limited driving
ranges, high prices and relatively spartan interiors have
hobbled demand made by other car makers like Nissan Motor Co Ltd
and General Motors Corp.
Edmunds.com predicts electric cars will account for 0.1
percent of the U.S. market this year, 1.1 percent in 2017 and
2.3 percent by 2020.
"A lot of people just never believed that electric cars
would ever happen or that it would ever be anything desirable,"
said Jefferies analyst Elaine Kwei, who has a "buy" rating on
Tesla shares. "Most of them are not. I can't see why someone
would want to pay double for a car because its electric."
But unlike its rivals, the Model S costs about the same as
similarly-styled gas-powered luxury cars.
Russ Sands, 72, the retired chief executive of an insurance
brokerage firm, said the vehicle is on par with the BMWs,
Mercedes and Corvettes he has driven in the past.
"At times I feel like the smartest guy in the class as I
drive along the freeway, looking at cars that cost more, that
I've owned," Sands said.
"SHE COMPLETES ME"
Tesla is able to afford a more well-appointed interior than
other electric cars partly because of its decision to use
conventional lithium-ion battery cells, which are widely used in
These cells can cost less than $200 per kilowatt hour, a
fraction of the large-format cells used by automakers like GM
and Ford, which can deliver more power in a compact package.
The high cost of the battery, which can make up about half
the cost of an electric car, remains a challenge in keeping
vehicle prices low.
Consumer Reports gave the Model S a score of 99 out of 100,
far ahead of electric and gas-powered rivals, including the
Porsche Panamera sports car.
The magazine said the car "performed better or just as well
overall as any other vehicle, of any kind, ever tested by CR."
The magazine said it achieved a range closer to 200 miles on
the Model S, compared to 80 miles and 75 miles on the Ford Focus
Electric and Nissan Leaf, respectively.
David Cowan, a venture capitalist in Silicon Valley who owns
both a Model S and a Nissan Leaf, said he has driven from the
San Francisco Bay Area to Sacramento and back - about a 200-mile
trip - on a single charge. He has owned his Model S since late
"I just don't have to think about range at all," Cowen said,
adding that he could not do such a trip in his Nissan Leaf.
"She completes me," Cowan said of his Model S. "And I've
never been a car person."