Tesla Motors Inc (TSLA): Value of the Carbon Credits

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Tesla is taking the Apple manufacturing notes and building out a fully walled manufacturing economy. The implications can be dangerous for the rest of the car manufacturers. An upstart is creating the hottest car in generations and has taken strong first steps to create a national charging infrastructure. Not only is Elon doing ‘the impossible,’ but he is succeeding! 2013 Q1 sales for the luxury Model S outstrip similar competitors like the Mercedes S Class, the BMW 7 series, and Audi A8.

It is not a foregone conclusion this will be successful, but as of today it appears competitors or their consumers will need to sign onto the Tesla Motors Inc (NASDAQ:TSLA) model to have long distance viability. Battery’s and EV production car will get more efficient and the charging stations will be less of a fixture in the long-term Tesla strategy, but it will provide a dominating feature for Tesla to advance its platform through marketing and revenue as the other EVs play catch up in the coming years.

So what are the value of the ZECs to Tesla? Not much if you are counting them in terms of one year’s profitability. But Tesla’s internal rate of return is huge. Sure Tesla is scraping by profit-wise, but what is their future?  They are the front runner for cornering an entire automobile segment and doing it to compete with ‘regular’ luxury cars! In 5 years what will their profitability be?  Probably multiples of what it is now.  Where else can Elon get that kind of return?  Stocks, bonds, hedge funds?  He might as well just plow all that money back into his paradigm shifting company. ZECs will become a minor role in their future, but for the moment they provide essentially free cash to juice their expansion.

The truth is that Tesla Motors Inc (NASDAQ:TSLA) the company is off to an incredible start, despite the speed bumps they have hit the past few years. They have captivated consumers and stock analysts alike. The question isn’t so much is Tesla a good company with a bright future, but does the valuation match its potential. As always that’s in the eye of the Foolish beholder.

The article Tesla: Value of the Carbon Credits originally appeared on Fool.com and is written by Andre Mittag.

Andre Mittag has no position in any stocks mentioned. The Motley Fool recommends Apple and Tesla Motors. The Motley Fool owns shares of Apple and Tesla Motors. Andre 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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