Tesla: A New Generation Of Competing Plug-In Luxury Hybrids Will Shrink The Niche Of The Model S

| About: Tesla Motors (TSLA)

Skeptics of Tesla's Model S sedan (myself included) acknowledge that it's a great driving car with a minimal carbon footprint (assuming it isn't being recharged by a coal-fired power plant) but claim that for the vast majority of people spending $80,000+ on a car, those positive points plus $1,500 or so of annual fuel savings will be outweighed by the car's inherent range limitations, and thus after the initial flush of Model S orders are satisfied (both in the U.S. and abroad) the car's current sales pace will be greatly diminished. (Rather than rehashing those arguments in this article, here's a link to a long Seeking Alpha comment thread I kicked off last week covering this as well as Tesla's potential future models: seekingalpha.com/article/1532842-tesla-m....)

The purpose of this article, then, is to highlight some very tough new competition which is about to be launched against the Model S, beginning with Porsche's newly redesigned 2014 Panamera S E-Hybrid. Performance-wise, this new model from Porsche accelerates from 0-60 mph in 5.2 seconds and tops out at 167 mph vs. Tesla's claim of 5.4 seconds for the "standard" 85 kWh Model S and 4.2 seconds for the "Performance" model, with top speeds of 125 mph and 130 mph, respectively.

Most relevant for "green" Tesla fans, though, is that the new Panamera will drive 24 miles purely on its plug-in batteries while achieving a real-world 53 mpg on gasoline which -- when combined with the car's 21-gallon fuel tank -- will provide a range of over 1,100 miles. (As this, of course, is far greater than the "range" of the human bladder, its true significance is that unlike the Tesla driver, the Panamera Hybrid driver will require no "road-trip stop planning" whatsoever.)

Equally significant for the environmentally conscious is that as the average American automobile commute is 12.6 miles to and from work, this new Panamera will provide many of its "green oriented" buyers the opportunity to burn no more than a few ounces of gasoline each day, while the car's 53 mpg will allow those same folks to minimize their carbon footprint on longer trips.

While this new model from Porsche stickers at $99,000, Porsches can easily be ordered at 5% to 7% off MSRP, which put its real-world base price at $92,000 to $94,000 vs. $72,400 for the 85 kWh Model S and $87,400 for the "Model S Performance." So a key question is: will people wealthy enough to spend $72,000- $87,000 on a car be willing to spend an additional $5,000 to $20,000 in order to maintain their "green bona fides" while completely eliminating the lack of personal freedom inherent in being tied to the availability (and recharge waiting time) of an electrical outlet? I think they will (at least in the case of potential buyers for the "Model S Performance," which is almost certainly Tesla's most profitable model), although as the new Panamera won't be available until November, I fully acknowledge that it may be a year or so before we find out.

Meanwhile, as Tesla's current market cap of nearly $14 billion pretty much assumes that there will never be any real competition ever for the company while BMW, Mercedes and Audi all plan to introduce plug-in hybrid versions of their own largest sedans, I'm willing to sit with my short position and see how this all plays out.

Disclosure: I am short TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.