What Would Happen If Tesla Motors Inc (TSLA) Built a Truck?

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If you’re not up on what Tesla Motors Inc (NASDAQ:TSLA) is doing, you might want to rethink your priorities. For a company with an automotive lineup consisting of just two cars, it has major long-term potential. Let’s take a look at why Tesla should think, or is already thinking, about making a truck. Yes! A truck!

Tesla Motors Inc (NASDAQ:TSLA)

A feature of electric motors

One technical component to think about when considering electric vehicles like Tesla Motors Inc (NASDAQ:TSLA)’s is tourque. Torque is the ability to create massive force through the wheels of a machine. When it comes to electric cars, torque rules. It’s more powerful in electric engines than gasoline and thus more efficient for the pushing and pulling that trucks are often asked to do.

Even if Tesla Motors Inc (NASDAQ:TSLA) does not want to build a truck under its own brand, it should think about creating an offshoot to do so. Or, perhaps it could license its own technology to some other company that might build a truck. One problem: the truck market is already a pretty crowded place.

Trucks are popular products

Last year, sales of trucks were up for all automakers, with the exception of General Motors Company (NYSE:GM), which saw a 0.3% decrease in sales.

Source: CNBC

An improved housing market along with growth in the domestic energy sector is boosting truck sales, reports The New York Times. Given this environment, Tesla Motors Inc (NASDAQ:TSLA) might be well timed to enter the truck market. The problem is that it takes a lot of time and effort to build a vehicle from scratch. Tesla’s first car, the Roadster, shares a lot of components with a Lotus Elise because of these challenges.

In the beginning, Tesla Motors Inc (NASDAQ:TSLA) was just trying to perfect its electric motor and battery systems. Now that it has found a design good enough for mass production, it’s building cars of its own complete design. The plan to build the Model X sport-utility vehicle is a testament to this.

A big premium

Trucks have the highest premium prices and as a result offer the best margins on automobiles in the United States. The reason why Ford Motor Company (NYSE:F) makes money despite gigantic ($30-billion plus) quarterly operating expenses is because of the nice margins it gets from trucks. The Wall Street Journal reported earlier this year that Ford Motor Company (NYSE:F) makes a hefty 10% off of the retail price of its F-Series trucks.

Source: Google Finance

Tesla Motors Inc (NASDAQ:TSLA)’s operating expenses have jumped dramatically, which suggests continued investment in its vehicle systems. Vertically integrated, the company has potential to control more of its supply chain than the likes of GM and Ford. This, in effect, can insulate the company from issues that might emanate from its supplier chain.

Source: Google Finance Data

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