Owning a really great car
The green argument holds up, saving money on variable costs doesn’t work, but what about the argument that the Tesla is a great car and owners want it for its merits alone? Consumer Reports just gave Tesla the highest mark it has ever given out, 99 out of 100. This has only been achieved by one other car, the 2007 Lexus LS 460L, priced at $72,000 to $120,000. The only gripe that consumer reports had with the vehicle is its range, stating that if the Model S could reach 500 miles, it would receive the never reached 100 out of 100 mark.
Tesla Motors Inc (NASDAQ:TSLA)’s Model S is great, but Tesla, the company, only had its first profitable quarter in 1Q 2013. The company is rapidly expanding production to meet demand, and is cashing in on its drive train technology by providing Toyota Motor Corporation (ADR) (NYSE:TM) access for the use in its RAV4 SUV.
Also, Tesla is able to sell its zero emission green credits that it obtains on every car made to auto companies that make large trucks and SUVs. GM, for example, has been stockpiling these credits from Tesla Motors Inc (NASDAQ:TSLA) and uses them to offset their bread and butter truck fleets. This allows General Motors Company (NYSE:GM)’s entire fleet to meet averages EPA mandated mpg increases if it doesn’t sell enough cars like the Chevy Volt to offset it on its own.
Investors’ guide
Both General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) are targeting profit margins just below 3%, and it is too early to tell for Tesla what their full year profit (or loss) margin will be since they only had their first profitable quarter this year. Even though Tesla is able to capitalize on multiple streams of revenue, and demand seems to be out stripping supply, this company is too richly valued at today’s prices with much more downside than upside potential.
Foolish bottom line
Tesla Motors Inc (NASDAQ:TSLA)’s vehicle is a win for consumers who can afford it, but what about its stock? Tesla has run up way past its fundamental value as a vehicle manufacturer and is bound to get a reality check soon. Buyers beware, Tesla’s run up will keep me out of this great manufacturer until its operations can support its stock price.
Wes Patoka has no position in any stocks mentioned. The Motley Fool recommends Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), and Tesla Motors . The Motley Fool owns shares of Ford and Tesla Motors .
The article The Argument for Purchasing a Tesla originally appeared on Fool.com.
Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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