Commentary

The Drift On Tesla: How Founder Musk Drove Profitability

“The Tesla Model S takes everything you know about cars and stands it on its head,” an overview of the sporty vehicle started out in Consumer Reports last week. And that’s a good thing, with the car garnering 99 out of a possible 100 points -– CR’s top-scoring automobile ever -- “even though it's an electric car. In fact,” the report continues, it earns that designation “because it is electric.”

CR’s findings were announced on a “near-perfect day” for the motor company, ABCNews.com’s Richard Davies writes, as it also announced its first-ever quarterly profit –- $11.2 million -– after 10 years in business.

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It was also a rare dose good news for the “nascent electric vehicle market where, with rare exception, things have come unplugged,” writes The Detroit Bureau’s Paul A. Eisenstein, citing Fisker Automotive laying off 75% of its workforce, Coda filing for Chapter 11 and the Chevy Volt losing steam (although, on the plus side, the Nissan Leaf has so far had a 160.4% year-over-year increase in sales this year.)

Tesla shares have doubled over the past six weeks, and many investors shorting the stock have closed out their positions, Forbes Steve Schaefer reports. Most of sales, thus far, have come from the West Coast but Tesla is ramping up and will begin marketing the Model S to Europe in the third quarter “and projects global demand will hit 30,000 cars,” reports Quartz’ Todd Woody –- with 10,000 sales in Europe and 5,000 or so in Asia.

“There's a tremendous amount of enthusiasm for this car and this company in California, which we don't see here on the other side of the continent,” Theodore O'Neill, founder of Connecticut-based Litchfield Hills Research tells USA Today’s Chris Woodyard, Brent Snavely and Nathan Bomey. “How far can Tesla go? As far as they want to go.”

“This car does feel like tomorrow. And it’s being acknowledged for just that,” says Dan Neil, the Wall Street Journal’s Rumble Seat columnist (famously ex of the Los Angeles Times) on “WSJ Live.”

It doesn’t take a rocket scientist to figure out that one of Tesla’s marketing strengths is CEO Elon Musk, a combative and visionary rocket entrepreneur and PayPal co-founder who, like the best business innovators is self-delusionary enough to “willfully ignore all those naysayers and all that evidence to the contrary” and, as Chris Anderson wrote in a Wired profile last year, “disrupt the most difficult-to-master industries in the world.”

Nor does he suffer naysayers gladly.

“He has also shown a willingness to take on critics, notably the New York Times,” points out the Economist’s Joseph Schumpeter. “Tesla was generally considered the winner in a dispute over a critical review by the newspaper of the Model S, with the Times acknowledging that its reporter did not use especially ‘good judgment’ in a test drive that depleted the car’s battery.”

“Why has Tesla made it when so many others have not?” asks Forbes’ Joann Muller. Well, there’s the quality of the Model S, of course. But then there’s the Musk factor:  “He had the stomach to push through difficult times, and the chutzpah to twist the arms of reluctant investors.”

Tesla’s road to profit has its shares of curves, as its letter to investors last week indicates. “$7 million came from development services for the Mercedes-Benz B-Class Electric and Toyota RAV4 EV, while 12% of revenue – $68 million – came from selling zero emission vehicle (ZEV) credits to other automakers. Tesla expects that number to decline as the year wears on and assumes that a gross margin of 25% in Q4 will not include the ZEV credits,” writes Wired’s Damon Lavrinc.

Even before it announced its overall results last week, Consumer Reports released a video of its auto test director Jake Fisher gleefully fishtailing –- “drifting” seems to be the technical term -- around the test track in a Model S after having turned off the traction control.

“Driving a Tesla Model S is like having your own private amusement park,” CR’s Eric Evarts reports. “Not that we advocate tire-smoking, tail-sliding turns on any public road -- ever! But such drifting can be a measure of a car's great-handling chops, as well as its available power. And boy, can the Tesla drift!”

There are, no doubt, a couple of tons of metaphors there vis-à-vis the electric car market overall, but right now the drift is straight upwards for Musk and Tesla.

1 comment about "The Drift On Tesla: How Founder Musk Drove Profitability".
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  1. Dan Auito from Next Century Studios, May 15, 2013 at 9:51 a.m.

    Fun Read Thom. Bravo for making info fun today!

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