Once again, the CEO of Tesla Motors (NASDAQ:TSLA) Elon Musk claimed that the year of 2013 would be the first profitable year for the company. Mr. Musk believes that Tesla will be able to increase production levels to meet the entire demand for its cars by the end of the year. As the company has already collected deposits from thousands of people looking to buy its cars, the problem in the short term is supply rather than demand. At the moment, the company's production rate is not high enough to keep up with demand and many of those that have paid a deposit for a car might have to wait many months before they finally get their car.
The company expects to sell 20,000 of its Model S cars in 2013. If this number actually materializes, it will be high enough to offset all the operating costs and make the company profitable. Of course, Tesla Motors will have to build more than 60 cars every day, which means that the company will have to increase its production capacity significantly. Earlier, Elon Musk claimed that the company would see positive cash flow if it was able to sell 8,000 Model S cars annually. So far, more than 12,000 people have committed to buy the Model S car.
Well known auto magazine Motor Trend test-drove the company's Model S car and the results were reportedly impressive. The car was able to reach from 0 mph to 60 mph within 3.9 seconds. The car performed comparable to Ford Motor Company's (NYSE:F) Mustang or General Motors Company's (NYSE:GM) Chevy Camaro. Also, the car was able to cover a distance of 238 miles with one fully charged battery, which is a far better performance than the other electric cars in the market. On an interesting note, the car used for the test drive was the very car owned by Mr. Musk. Besides the performance, the good looks also signify the superiority of Model S over the competition.
It looks like sky is the limit for Mr. Musk's company. The next goal is to build an all-electric super car comparable to brands such as Lamborghini or Ferrari. The car will be an upgrade to the company's current sports car Roadster. If the company is able to pull this, it will be an exciting development for the investors of the company. The more expensive the cars get, the better their margins get. Of course, this goal will be possible to meet only if the company starts posting profits. Tesla can't just keep burning cash and it will have to do whatever it takes to post profit in 2013.
In the first half of 2013, the Model S will be sold outside of the US. One of the countries confirmed to have the Model S in 2013 is Japan. While the economy in Japan is not very strong at the moment, the strong Yen and high gas prices in the country might help sell this car in the country.
For Elon Musk, electric cars aren't all about "saving the environment" or saving money on gas. He believes that Tesla cars will see a lot of demand mostly because of how good these cars are:
"What Tesla is trying to do is create an EV that is better than a gasoline car. Leaving aside electricity is far cheaper than gas and it's good for the environment, if we just make it a better product then you don't have to make the environmental argument and get a much broader set of people willing to buy the car."
On another development, Mr. Musk mentioned the idea of creating a holding company that will encompass his two companies Tesla Motors and SpaceX (a space exploration/travel company). Currently, this is just an idea he has been thinking about and there is nothing planned as of right now. I personally wouldn't support this idea. Investors might believe in Tesla Motors, but not in SpaceX, or vice versa. Combining two companies under one would turn off the investors that are only interested in investing their money in one of the companies. Both companies are based on futuristic ideas and if successful, both companies can grow exponentially, however there is always risk associated with brand new ideas like this. Then again, Mr. Musk has a lot of credibility due to his success with PayPal (eBay Inc.: EBAY).
At first I was very skeptical of Tesla Motors. I will still wait until next year to see if the company is able to show profits before investing in this company; however, I believe that there might be a lot of growth ahead of this company with the sky being the limit if it meets its initial goal of being profitable in 2013. The next few months will play a huge role in Tesla's future.
Disclosure: I am long F, GM. 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.