Tesla Motors Inc. (NASDAQ: TSLA) sold 17,400 cars last quarter. The number was disappointing. Several analysts pointed out that Tesla could not produce enough of its Model X sport utility vehicles (SUVs). Some people have waited for over a year to get one. Tesla did not say how many. Since supply is so small, the demand number may be as well. At a sales run rate that may not even hit 100,000 next year, Tesla models remain niche cars for the rich and, for the time, being nothing more.
Tesla CEO and founder Elon Musk has forecast his company’s sales will reach 500,000 by 2020. On a percentage basis, that is a surge from current levels. On an absolute basis, Tesla still will be a small car company in five years. Mercedes will sell 400,000 cars in the United States. Tesla will need to draw sales from around the world to even come close.
If the all-electric car business becomes a big market worldwide, which is a big if, Tesla management must already know that every major car manufacturer in the world is chasing it. Each has a stronger balance sheet than Tesla, more dealers, more product development and more marketing power. The risk to all the rest is the risk for Tesla. Cheap gas, hybrids and ever more efficient engines may crumple the all-electric car business, no matter how much firepower the industry brings to bear.
Incidentally, Tesla faces a crisis of confidence with Wall Street as well. The company has not grown into its $31 billion market cap. Put into context, the market cap of General Motors Co. (NYSE: GM) is $55 billion. Depending on how much Toyota Motor Corp. (NYSE: TM) falters, GM may be the largest car company in the world in 2016, based on unit sales.
Tesla’s disappointing fourth-quarter numbers don’t tell how much demand the company has for its new SUV, as well as a future car that will be less expensive. Tesla has another year or two to prove whether it is a real company or just another tech fad that made noise before it disappeared.
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