Should Tesla Motors Inc (TSLA) Hook up With Another Automaker?

Page 1 of 2

Tesla Motors Inc (TSLA)Tesla Motors Inc (NASDAQ:TSLA) has been in the news recently for both the good and the bad. Tesla Motors Inc (NASDAQ:TSLA) just revealed a battery swapping service that takes place in 90 seconds, less time than it takes to fill up a tank of gas, and potentially ending the controversy of owners having to wait too long for their vehicles to recharge.

Tesla is also in the cross-hairs of dealer networks. The dealers are claiming that Tesla Motors Inc (NASDAQ:TSLA) is a manufacturer directly competing with them, and they provide a valuable service to the general public, whereas Tesla is just a company that cannot provide that level of service without a network of its own. Only time and voters will tell what happens in this battle.

Stepping on Dealers’ Toes

Tesla Motors Inc (NASDAQ:TSLA)’s sales model is to directly sell its cars to consumers, totally bypassing the dealer networks that General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) have spent decades and millions of dollars building. The National Automobile Dealers Association has stated that it offers “a reliable network for sales and service, which is strictly regulated to ensure the vehicle transportation needs of car buyers are met.”

Fiskar Automotive is a great example of a car company growing too fast with too little support. The Karma was a cousin of the Volt, and shared much of the same technology as General Motors Company (NYSE:GM). However, potential buyers were turned off by the low number of shops to repair their cars. This, among supplier issues, led the ambitious company to file for bankruptcy this year.

Tesla Motors Inc (NASDAQ:TSLA)’s potential buyer market could skyrocket if it were to team up with General Motors Company (NYSE:GM) or Ford Motor Company (NYSE:F). Tesla sold over 4,750 Model S cars in the first quarter of this year. Access to the dealer networks would give Tesla access to thousands of locations and give consumers a place to test drive the vehicle.

Competition is heating up

GM’s Volt and Ford Motor Company (NYSE:F)’s C-MAX may be just getting their bearings, but these two giants in the auto industry know that they have customers that are uncomfortable purchasing cars over the Internet, and these customers in the over 45 category are the wealthiest demographic in the US. Those looking to purchase electrified vehicles that are more moderately priced than the Tesla scooped up plenty of vehicles from Ford & GM. Year to date, Ford sold 3,711 C-MAX hybrids. While across the street GM sold 9,855 Volts year to date, and over 30,000 Chevy Volts and Opel Amperas last year.

With a market cap of over $12 billion, Tesla has a higher value than Mazda. As GM launches the Cadillac ELR early in 2014 Tesla’s stock price needs to fall more in line with its fundamentals.

The fundamentals

GM was able to eek out 2.8% net profit margins while funding its pension liabilities and repurchasing shares from the US government; it pays no dividend. Ford, on the other hand, has a net profit margin of 4.3% and pays out 17% of its earnings to support a dividend of 2.4%. Both companies have massive pension obligations, however Ford’s management team has been able to return to profitability without declaring bankruptcy.

Tesla Motors Inc (NASDAQ:TSLA) is a relatively new company with a new business model. It has a host of different revenue streams: vehicle sales, licensing technology, selling carbon credits to other manufacturers. And to boot, it doesn’t have the legacy workforce costs both Ford and GM do.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!