Tesla Motors is on a remarkable run for a company that not long ago seemed to be sputtering.
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In the past month, Tesla’s stock value has doubled to more than $90 a share. That gives the California-based company a total market value of $10.6 billion, greater than that of Italian automaker Fiat, worth less than $8 billion.
Such dramatic success, and the brash confidence of founder Elon Musk, has some fans calling Tesla the first successful new American car maker in more than a generation.
But some analysts say the electrifying rise is not what it seems.
Take that Fiat comparison: In the first quarter of this year, Fiat sold 1 million cars and made a $40 million profit. Tesla sold 4,900 cars and, not counting the sale of regulatory credits under California law, lost $53 million, or more than $10,000 per car.
Whether or not Tesla survives or thrives has become an important test of U.S. policy and automotive strategy. The Energy Department gave it a $465 million low-interest loan; President Obama has delivered generous subsidies for electric vehicles.
While the sale of electric cars will fall far short of Obama’s goals, Musk is taking an unconventional approach to establishing his brand. Instead of trying like the Chevy Volt to compete with moderately priced cars, Musk has wooed wealthy buyers with a sleek, four-door sedan that handles like a sports car and can cost more than $80,000. He plans to work his way down toward the mass market with future models.
Doubters have been waiting for Tesla to run out of cash, which it seemed poised to do last year, but it hasn’t. And Musk is moving to take advantage of the high stock price. On Wednesday, Tesla announced that it would raise $830 million in new stock and debt offerings, which it would use to repay ahead of schedule its oft-criticized loan from the Energy Department. Musk said he himself would buy $100 million of the offerings, and the stock climbed still higher.
But some analysts still say the company’s share price is a bubble on a par with foamy tech-era stocks. It is selling for roughly 600 times its estimated 2013 earnings.
Moreover, Tesla would have booked a first-quarter loss without the $68 million sale of special credits created by California regulations that reward makers of “zero-emission” vehicles. The ZEV credits have provided more assistance to Tesla than have generous federal incentive programs.
California’s Air Resources Board has mandated that large-volume sellers of cars must together meet a minimum quota of 7,500 zero-emission vehicles this year and next. Those who fall short must buy credits from those who produce more than their share.
Tesla’s strategy of building cars with 200-mile ranges dovetails with the ZEV rules, which say that cars with a 100-mile range get three credits per vehicle, while those with a 200-mile range get four. Long-range cars with 15-minute recharging capability get five credits, and Musk has hinted that a faster recharging device will soon be unveiled.