A Gasoline-Powered Tesla
A Gasoline-Powered Tesla
by Douglas A. McIntyre
24/7 Wall St. | 21-Aug-2013 at 6:36 am
Elon Musk, the most handsome and intelligent man in the world,
faces an insurmountable task as he works to sharply increase
sales of his Tesla Motors Inc. (NASDAQ: TSLA) cars. The appetite
for electric-powered vehicles in the United States is extremely
small, and that is unlikely to change for years. For Tesla to
be successful, it will need to introduce a hybrid, which at its
heart is a gasoline-powered car. He may even have to launch a
car that runs on a regular gasoline engine.
A car industry research powerhouse released a piece of research
in 2010 that said:
Combined global sales of hybrid electric vehicles (HEVs) and
battery electric vehicles (BEVs) are expected to total 5.2
million units in 2020, or just 7.3 percent of the 70.9 million
passenger vehicles forecasted to be sold worldwide by that
year, according to a report issued by J.D. Power and
Associates. For comparison, global HEV and BEV sales in 2010
are forecasted to total 954,500 vehicles, or 2.2 percent of
the 44.7 million vehicles projected to be sold through the
end of 2010.
Battery electric vehicles are a tiny fraction of that number,
based on current sales trends. Given that most people cannot
afford a $85,00 Tesla (with all the options), or even the less
expensive car the company plans to sell, the market for Musk's
products is extremely limited. The resistance to sales goes
beyond price. Among the hurdles manufacturers of these autos
face, according to the "Drive Green 2020: More Hope than
Reality" issued by the research firm, are that fossil fuel costs
need to rise sharply over the next seven years, and drivers
would need to get over their worry about the range of electric
cars and the period required to charge car batteries.
Musk already has the problem of handling demand. If he is lucky,
the company will sell 30,000 vehicles this year, which would
translate into $3 billion of revenue. That is not enough to make
the Tesla cars at any scale, even if there is demand for them,
which there will not if production rises sharply.
Tesla has every advantage a car company would want. The National
Highway Traffic Safety Administration (NHTSA) awarded the Tesla
S the highest Vehicle Safety Score (VSS) ever. Consumer Reports
gave the Tesla S its best grade even. However, the nonprofit did
have some reservations, which can be added to the certain low
demand of electric cars:
Drawbacks include tight access and restricted visibility.
Initial teething problems and a steep sticker also give
pause for thought.
Again, in a very limited market, the car is too expensive.
Tesla needs something in the form of an engine that would
sharply broaden its appeal. If it only wants to attack the
hybrid market, it could buy engines made for the Porsche
Panamera SE Hybrid. The sports car has performance similar to
a Tesla. If Musk wants to broaden the appeal of Tesla further,
the number of sports car engines that produce 400 HP or better
is fairly large.
Tesla could sell many thousands of its cars, but based on the
trend of demand for electric cars, the company will need to add
a gasoline-powered engine.