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Thu August 8, 2013
Tesla's Stock Boosts Projections For Carmaker's Staying Power
Originally published on Fri August 9, 2013 5:27 am
LINDA WERTHEIMER, HOST:
Earnings season is wrapping up in the car world. And the small American company Tesla is doing better than expected. When the high-end electric automaker released its earnings this week, it handily beat Wall Street expectations. Tesla's stock is up about 300 percent this year.
As NPR's Sonari Glinton reports, the question is, whether the company has enough power to sustain it for the long term.
SONARI GLINTON, BYLINE: Building cars is a tough business and you need look no further than the Detroit three who all have more than 100 years of experience doing it. And then there's Tesla, which has only been around for about 10 years.
KARL BRAUER: There's a long and non-distinguished list of dead carmakers out there who've tried to do what Tesla's doing.
GLINTON: That's Karl Brauer. He's a senior analyst with Kelley Blue Book.
BRAUER: But I think why the stock is where it's at is because most of them didn't even get close to getting to this point.
GLINTON: Tesla's stock is doing well, it's trading well over $100. And to give you an idea, General Motors is in the 30's and Ford is in the teens. Last year at this time, the company lost $100 million or so. And if you account for one-time expenses, the company is on the verge of making a profit now.
JOHN O'DELL: The company seems to have a growing record of beating expectations and estimates, and they've done it again. And the record that they've got for overcoming hurdles and continuing to move in the right direction keeps making the company's long-term future look more and more strong and promising.
GLINTON: Tesla makes high-end all electric cars that run over 70 grand. They sold about 5,000 of them, which was more than expected.
John O'Dell is with Edmunds.com.
O'DELL: I can't afford a $70,000 car. But there are enough people that can - I think globally - that can sustain that, you know, $40,000 to $50,000 a year that they'd like to get to.
GLINTON: O'Dell says the real hurdle for Tesla is consistency. Can it be consistent financially and quality-wise.
O'DELL: Can they keep producing relatively trouble-free at a rate to 500 to 600 a week? They say they can and, you know, more power to them if they do that. You know, can they hit the numbers?
GLINTON: Southern California is filling up with the brands signature car, the Model S. Karl Brauer with Edmunds says the challenge is can the company go beyond its current niche?
BRAUER: Right now they're producing a high cost, lower volume model. They're doing it profitably. That's still something really no one else has done. So they still get kudos for that.
GLINTON: Brauer says it's got a long way to go. The company hasn't even made a dent in Middle America, let alone the markets that are the future, such as China.
BRAUER: For Tesla to go from being a kind of a young, new and growing car company to a real car company that has an indefinite long-term future, they've got to produce a low cost, high volume electric vehicle profitably.
GLINTON: The analysts say only then can Tesla join the big boys.
Sonari Glinton, NPR News. Transcript provided by NPR, Copyright NPR.