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Developing a solid service center and Supercharger infrastructure in China is Tesla's largest revenue opportunity.

Tesla's growth depends on acceptance of its direct-to-consumer sales model.

North American legal battles dampen Tesla's full potential.

An innovative business model, trendy product and visionary leader, has catapulted this stock into the limelight. All of the glitz and glamour of this company has left investors paying for shares at a very high multiple of earnings. As we all know, this type of valuation is based on the future prospects of the company. Therefore, this article will analyze the financial and legal struggles, successes, challenges, and most importantly, the road ahead of TSLA. Given this insight we, as investors, will be better prepared to forecast the future of Tesla's successes or failures in the automobile arena.

North American Risks

Tesla uses a unique business model that allows itself, as a manufacturer, to sell vehicles directly to the consumer. This is differentiated from traditional vehicle sales that go from the manufacturer, to a dealer, then, ultimately the consumer. Tesla maintains operations of its service centers as well. Tesla's business model has caused much uproar throughout legal communities. Currently, there are several states that outright ban the sale of automobiles directly to consumers (states include Texas, Arizona, Virginia, Maryland and New Jersey). These states have imposed a ban because car dealerships claim they are being faced with unfair competition from Tesla. Additionally, many other states place restrictions on how many cars may be sold or stores in operation within their particular state (including Ohio, Colorado, North Carolina and New York). Although the restrictions and bans do not encompass all of the states, there is fear that other states may pursue similar paths.

Generally, Tesla sells its vehicles through retail stores similar to that of Apple or through its website. In states where there is a ban, Tesla sets up a gallery where the prospective customers could view the car and ask basic questions. However, the Tesla representatives cannot discuss the price, financing or purchasing options. The customers receive their limited information, then must purchase the vehicle though Tesla's website. This is very burdensome to parties interested in purchasing the vehicles and could have a negative impact on Tesla's revenue growth. States that do not ban the direct-to-consumer sales process allow potential consumers to test drive the vehicle and find out pricing information. Then, the consumer has the option to purchase online or at the retail store.

International Opportunities

Tesla is currently seeking growth in European and Asian countries. As you can see from its first quarter 2014 earnings report, Tesla has seen significant growth in Europe and will likely begin more focus in Asia.

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The growth opportunity in China was brought up quite a bit in Tesla's most recent earnings call. China is the world's largest luxury automotive market, and provides Tesla with a great opportunity to grow revenue. To penetrate this market, Tesla is using a bottom-up by constructing service centers and Superchargers. The Supercharger stations are free electronic charging stations for the Tesla fleet, which could provide a 50% charge in as little as twenty minutes. Currently, there are only three Supercharger stations in Asia. However, Musk has made it clear that he wants to build the electronic infrastructure to support the massive demand seen in China. This is much different than the rolling out of the Tesla Roadster and Model S in America. There has been concern about whether China's electronic grid could handle the charging of Tesla vehicles. However, in the latest earnings call, Elon Musk pointed that he was impressed with the strength of the Chinese electrical grid. The main issue Tesla is facing in China is the fact that consumers are complaining about the lead-time it is taking to receive the Tesla vehicles. There is definitely high demand, and Tesla needs to be cognizant of how to properly fill the demand to grow its revenue.

The Road Ahead

Tesla's latest earnings exceeded analyst expectations in terms of revenue and number of vehicles delivered. Further, the guidance for vehicles delivered was favorable.

So what should we look for next in Tesla? For Tesla to generate enough revenue to mass-produce luxury electric cars, it must overcome two major obstacles. Its direct-to-consumer sales strategy must be widely recognized and accepted in America. Additionally, Tesla needs to have a strong infrastructure of Superchargers in China to meet the high demand with efficient timing.

Investors should keep an eye towards the number of deliveries made. By the end of 2014 Tesla plans to have Supercharger coverage reaching 80% of the United States population. Consumers will be more inclined to inquire to the purchasing as they see the Supercharger stations being developed in easily accessible locations along their normal drive. Therefore, I would expect to see Tesla's United States deliveries to increase significantly through 2015. The increase in deliveries should boost the revenue, however, this will be offset by the spending put towards the production of Gigafactories. This cap-ex spending is in Tesla's long-term interest so that they will be able to efficiently produce batteries to supply the Tesla fleet. Elon Musk has been able to make remarkable progress with a vision of the mass produced electric car. If he can continue to deliver on his promises in the United States and China, Tesla will continue to reward shareholders.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TSLA over the next 72 hours. 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.