While most of the work I do on my articles involves sitting at a computer and then gazing out the window for inspiration, I also go "into the field" on occasion to be sure that I am not totally out of touch with modern trends. So, last week, I went to a meeting of the DC metro area Electric Vehicle Association. It was an eye opener.
While I have been writing about alternate vehicles and have spent frustrating hours trying to decipher their comparative economics, something very interesting has been happening. A very active, motivated and intelligent group of "early adopters" has emerged and taken root in our metropolitan area. Maps of charging station locations, plans to obtain HOV status, and all sorts of publicity are directed at the new technology. The enthusiasm of the members is reminiscent of other technologies and movements which, at one time or another, "went viral" and changed things forever.
Apple Computer (AAPL) customers always had extreme brand loyalty and even a sense of the kind of "contra mundi" solidarity that Sebastian Flyte craved in Brideshead Revisited. Mac users had powerful brand loyalty and were a potent marketing force for the company. The electric car folks are also getting things done - creating pressure for more charging stations (some of which offer free charging!!! - after all, this is Washington D.C.) and public policy measures designed to ease what may be our most important product transition. In a real sense, these people are doing the industry's work for it by solving the infrastructure problem, educating the public, and constantly marketing the product.
So is Tesla (TSLA) the next AAPL? I really wish I knew but let me say this. Customer enthusiasm is a powerful force and the electric car customers are wildly enthusiastic. Like the AAPL products, the electric car enables the user to achieve liberation from an odious force - for the AAPL computer user that force, is the computer virus; for the electric car owner, that force is OPEC.
AAPL's revival was, of course, due to the iPod, the iPhone, and now the iPad - products that are much less expensive than electric cars. AAPL could ramp up production much faster than TSLA will be able to.
And the automobile business is voracious from the point of view of CAPEX. I remember the story about Henry Kaiser going to Detroit and announcing he was going to spend $1 billion developing a new car. One seasoned auto executive said, "Congratulations, in this poker game, you just bought one white chip."
The history of the automotive industry is a history of the triumph of customer enthusiasm over economics. Customers literally (well, maybe not exactly literally) fall in love (probably more eros than agape) with their cars - songs are written about Mustangs and T-Birds, clubs are formed, and consumers find their identities merged with their cars. Unhealthy, maybe. But it's what makes the world go round economically.
TSLA still has to show it can achieve profitability and also must scale up to compete effectively in an enormously competitive industry. There are other makers of electric cars - Ford (F) and General Motors (GM) have solid positions and Nissan (NSANY.PK) may have the inside track. It is also true there have been other automakers whose customers were intensely loyal and yet were unable to get over the very high hurdles characterizing this industry - I am old enough to remember Packard.
I will be honest here. I am a value investor and I haven't bought TSLA yet. But last week's meeting of the EVA has led me to start running the numbers.