4 Reasons Why Tesla Won’t Be the e-Car King
Tesla Motors has drawn a strong following from gearheads and investors alike, but there are still several problems that need to be overcome.
Tesla is Too Expensive
Tesla only has one car on the market, and that car–the Roadster–starts at a price just over six figures. While the Roadster has been popular among movie stars and the ultra-wealthy, it simply isn’t catching on with day-to-day drivers due to its cost. Tesla plans to have a new four door sedan out that will cost just under $50,000 after government subsidies, but it may be too little too late.
Established Car Markers
Established car makers were arguably late to develop their own line of electric cars. However, within the next two years nearly every company will have its own lineup of purely electric or hybrid electric and gasoline powered automobiles. One such car, the Chevy Volt, will enter the market at a price point roughly the same as Tesla with practicality that is simply unmatched. Unlike Tesla’s forthcoming sedan, the Volt will run for 40 miles on a purely electric charge at which point the car will switch to gasoline power for another 300 miles. That kind of range and flexibility gives it the qualities it needs to compete for consumers looking for a good family car. To compare, Tesla’s sedan will run around 100 miles before the batteries need to be recharged.
Financing
Tesla Motors founder Elon Musk may have made billions during the internet boom, but he’s nearly insolvent after throwing his fortune into high tech startups. Combine that with a looming divorce that could force him to sell shares, and ruin a financing deal through the US government and you have a disaster waiting to happen. To make matters worse, Tesla’s debt servicing is going to cost a bundle per car, keeping its price out of range for the consumer-grade market and effectively ruining the possibility that the car can sell to a discount to already established automakers. While Tesla did get a bump in fundraising from an IPO, most of the cash went to insiders and did little to solidify the startup firm’s cashflow issues.
Oil Prices Aren’t Going Anywhere in the Near Term
Oil prices may have very well peaked for 2010 at a price of just under $80 per barrel. That’s not very good news for any electric car company considering that in the end they’ll have to compete with gasoline powered cars as much as they have to compete with other electric vehicles. A backlog of oil and limited demand for energy due to an economic crisis only helps weaken the most debt saddled firm—Tesla.
Tesla has all the makings of an innovator that will be crushed by an implementor. Unless something changes very quickly, Tesla is toast.
