Much has been written lately about how overvalued Tesla Motors' (TSLA) stock has become after its recent run-up. Routinely, comparisons have been made between Tesla and the other three established American automakers without regard to the fundamental differences between them. In this article I will try to highlight the unique position Tesla holds, and the enormous advantage the company has over not only the American but also the German and other international automakers.
First let's look at the Model S and current, as well as future models by other automakers with similar performance and price. For the sake of simplicity I will only consider the 85 kWh Model S performance variant that retails for around $100K. Its range is rated at 265 mi, and it accelerates from 0 to 60 mph in 4.2 seconds (Motor Trend achieved an even faster 4.0 second run with the car they tested for their Car of the Year comparison). This puts the Model S in the company of high performance German sedans such as the Audi (AUDVF.PK) S7, BMW (BAMXF.PK) M5, and Mercedes (DDAIF.PK) C63 AMG . Those cars, however, burn copious amounts of gasoline, whereas the Model S derives its power from an all electric motor. I will therefore only consider electric cars with similar performance characteristics.
This, of course, narrows down the list of competitors significantly, as most pure electric cars on the market today fall far short of the Model S' performance parameters. The only other car available for 2013 that has an electric only range of over 100 miles is the Toyota RAV4 EV (TM), and that car has a powertrain and battery engineered by, you guessed it, Tesla Motors. As a comparison, the Chevy Volt (GM) and the Nissan Leaf (NSANY.OB) have electric only ranges of merely 38 and 75 miles, respectively. Furthermore, all three of the aforementioned electric cars need more than 7.0s from 0 to 60 mph. This leaves us to compare the Model S with electric cars that are (or were) planned to go into production in the future. At this point we can concentrate on cars a potential buyer might actually cross-shop against the Model S.
First on the list is the Audi R8 e-tron. It is somewhat ironic that Iron Man Tony Stark, whose character supposedly was inspired by Tesla Motors founder Elon Musk, drives an Audi R8 e-tron in the third movie and not a Model S. The car is capable of accelerating from 0 to 62 mph in 4.2 seconds, and has a range of 133 miles. It was projected to cost about $150K, but Audi recently announced that the 10 currently existing e-trons (which each have cost about $1.3 million to build) will be the only ones to be produced. Why? The main reason is thought to be the slow progress of battery technology, with regards to both price and range.
Next let's look at the BMW i3 and i8. The electric only version of the i3 has a range of about 60 miles (the optional range extender increases that to an expected 250 miles), and the i8 has an all electric range of only 22 miles, which the added diesel engine extends to 430 miles (overall consumption is estimated to be 40 mpg, acceleration from 0 to 62 mph is estimated to be 4.8 s, and price is estimated to be over $120K). Therefore neither one of these cars can be considered a direct competitor to the Model S.
Mercedes, the third German automaker is slated to start selling the SLS AMG Electric Drive in 2014. The SLS has a maximum range of 155 miles, will reach 60 mph in less than 3.9 seconds, and is expected to retail for over $400K.
Porsche (POAHY.PK) doesn't have an electric-only car, but the 2014 Panamera S E-Hybrid can go for around 20 miles on pure electric energy and accelerates to 60 mph in 5.2 seconds. In recent tests it returned around 53 mpg combined, and the US base price is $99K.
Cadillac will enter the electric car fray with the 2014 ELR. This car is based on the Chevy Volt and has an all electric range of about 35 miles, reaches 60 mph in about 8 seconds and costs about $60K.
Infinity, which gained ample electric car experience with its Nissan Leaf, was scheduled to bring to market a stylish 4 door sedan based on the LE electric car concept. However, it has recently announced that it will put that car on hold and instead focus on volume models in an attempt to increase the brand's sales to 500,000 units by 2017. Apparently Infinity is also waiting for a breakthrough in battery technology.
This brings us back to the Tesla Model S. From the examples above it becomes clear that the car essentially has no close competitor, primarily because Tesla's battery technology is years ahead of everybody else's. It appears that the other automakers have realized this and essentially are giving up (see Audi and Infinity). Officially, they are waiting for a breakthrough in battery technology, however, if such a breakthrough should actually materialize, Tesla Motors will no doubt be the first one to capitalize on it. During the last annual shareholder meeting Elon Musk essentially said as much. Once Tesla brings the new Model X to market, luxury SUV buyers will have a very compelling alternative to the current gasoline and diesel driven models. Americans love their SUVs, and with gasoline prices hovering around $4 per gallon no doubt the Model X will also become a sales success. The generation III midlevel sedan and a smaller SUV based on the same platform will then complete Tesla Motors' offerings for the near future. Each of these cars will have an enormous advantage in the marketplace due to Tesla's highly advanced battery technology in the face of continuously high gasoline prices that are not expected to decrease any time soon (or ever again). With gasoline prices in Europe being even higher (at around $8 per gallon), and China suddenly becoming serious about cleaning up its extreme levels of air pollution, it is expected that Tesla will also quickly gain traction in these regions of the world.
Tesla's enormous advantage in battery technology will give it a lead in electric vehicle technology for years to come. As acceptance of more efficient vehicles will gain pace, this advantage will turn into steadily increasing sales (and profits) for Tesla Motors. In the next Iron Man, Tony Stark might drive a Tesla after all, and the people shorting the stock today might not want to stick around to find out.