The feeling is electric with Tesla

After overcoming many hurdles, Tesla has become the juggernaut of global electric car production.

Tesla chief executive Elon Musk’s appetite for risk and depths of self-belief have pulled the company through. Picture: AFP.

Whether you like electric vehicles or not, it was difficult to avoid the news last week that Tesla had become the second most valuable carmaker on the planet. With its share price above $US550, its market capitalisation now exceeds $US100bn ($146.8bn). That’s more than General Motors and Ford combined. Only Toyota is bigger.

It had analysts quickly rewriting their forecasts, with some bulls now targeting $US800-plus a share while bears such as UBS — sensing a short squeeze perhaps — still have it as a sell.

For Tesla chief Elon Musk there’s some personal vindication, not least because it triggers payout plans that could be worth billions, adding to a fortune put at $US32bn. He also got a verbal pat-on the back from Donald Trump.

But Tesla remains a relative minnow next to the familiar names, with 367,000 vehicles sold last year. By comparison Volvo sold twice that and Mercedes, the leading luxury car badge, delivered 2.3 million. And, crucially, aside from a couple of quarters, Tesla has failed to show it can make money from building cars. If it survives to output — as some expect — up to three million cars a year by 2025, then we may look back at 2020 as an inflection point.

This week will be key, with Tesla’s fourth quarter results announcement midmorning on Thursday (AEDT) certain to be scrutinised for signs it can generate sustainable profits.

It comes after a strong start to the year with the share rally set against the biz­arre backdrop of Musk dancing awkwardly at a ceremony to mark the opening of a factory in Shanghai.

That plant, established in record time, is already churning out 1000 Model 3s a week. It will help Tesla cash in on huge Chinese appetite for the badge, with sales tripling last year to 42,000 against an overall downturn in electric vehicle demand.

Globally, Tesla already outstrips Chinese battery car specialists such as BYD and has cemented its position as the dominant electric brand. That’s mainly down to the Model 3. With more than 300,000 deliveries, it left rivals in the shade and even popular mainstream battery cars such as the more affordable Nissan Leaf did not come close. In the US, Model 3 on its own accounted for two-thirds of all pure electric vehicles sold. In Australia, after a three-year wait, orders were finally filled when Model 3s began arriving in August. Tesla does not disclose local sales figures but carsales.com.au journalist Sam Charlwood reliably reports total deliveries of 3793 last year, with the bulk of those Model 3s. That makes Tesla our favourite electric brand by a country mile, with about 8000 on Australian roads.

The second-generation Tesla Roadster will be ‘the fastest production car ever made, period,’ Musk says.

As successful as it is, Model 3 soon may be outdone by the next Tesla, Model Y. It’s reputedly on schedule to start production in the northern summer. If it does, it will break Tesla’s reputation for repeated delays. Musk expects demand for Model Y to outstrip all its other cars put together. To meet this, Model Y will roll down assembly lines in Shanghai as well as California while work has began on expansion into Europe, with a huge factory being built near Berlin.

Another positive is a US legal victory that allows Tesla to sell direct to customers in Michigan, bypassing dealers and extending its retail model into the heartland of traditional US carmakers.

However, Tesla sceptics remain. They point to an avalanche of electric cars from all the traditional makers, from Porsche to Hyundai, vastly expanding the options for buyers. European makers are desperate to sell electric cars to avoid emissions fines, and Tesla soon will face fierce competition for the first time.

Subsidies in China are due to end this year, although recent comments from Beijing suggest it’s having doubts in the wake of a sales decline. In the US, tax credits offered to Tesla buyers ended on January 1 after it passed the landmark of 200,000 sales, raising the relative cost of its cars.

On the issue of safety, crashes allegedly involving Tesla’s Autopilot have been subject to investigations by the US National Highway Traffic Safety Administration, casting doubt over the capability of its semi-autonomous system.

The NHTSA also is considering a petition calling on it to investigate unintended acceleration in Teslas that could involve a recall of 500,000 cars.

Tesla dismisses those allegations and says it’s the work of a short-seller, but the doubters have never been short of ammunition.

Musk’s ambitious promises invariably have outdone his ability to deliver. More than once Tesla seemed doomed to run out of cash, especially when production problems stalled Model 3. Musk’s appetite for risk and depths of self-belief have pulled the company through.

That, along with an eager fan base of true believers. At the moment, in developed markets, Tesla is the only electric game in town. If Model Y goes to schedule, Tesla could begin making consistent profits. But with a new Roadster, Semi and Cybertruck on its to-do list, there’s still a lot that can go wrong.

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ROADSTER

The original Tesla, built for four years from 2008, was developed with British sports car specialist Lotus. With prices starting at $206,000, two dozen came to Australia from a run of 2400.

MODEL X 

Based on Model S, Tesla’s large SUV features large “falcon-wing doors” that initially were prone to problems. The third-row seats also experienced some issues. Early examples prompted a lawsuit and hasty fixes following recalls. Production ramped up in 2016 and passed 100,000 units two years ago.

MODEL 3

This mid-size sedan was touted as the first mainstream Tesla and it attracted hundreds of thousands in deposits within days of being unveiled four years ago. Ambi­tious rollout targets were plagued by what was described as “production hell”, delaying target output of 5000 a week. With its factory finally up to speed last year, Model 3 quickly became Tesla’s bestseller. First deliveries reached Australia in August last year, with prices from $68,000.

MODEL Y

Unveiled a year ago, this mid-size seven-seat SUV shares parts with Model 3 and is expected to be Tesla’s most popular car to date. It initially will come in three grades with a range of up to 540km, and with rear or all-wheel drive. US deliveries are due to begin in a few months with prices starting about $US48,000; a more affordable base model will be added later. It should reach Australia in 2021.

SEMI

An electric semi-trailer was rolled out in 2017 as the answer to heavy hauling. Semi has better performance than diesels along with lower cost of ownership, Musk says, and claims about 2000 pre-orders. Limited production is projected to begin late this year.

ROADSTER

A bonus reveal at the Semi event was the second-generation roadster, which Musk introduced as “the fastest production car ever made, period”. The “base model” can reach 100km/h in 2.1 seconds, has a top speed above 400km/h and 1000km range. It features twin motors, all-wheel drive, seating for four and a detachable glass roof. Reservations require a $US66,000 deposit against a $US326,000 price and it’s due in about a year.

CYBERTRUCK

Tesla’s wildest design to date, revealed last month, is an angular pick-up made from stainless steel. The range-topper has three electric motors for supercar acceleration plus towing and cargo ability to match the best from Ford or GM. With prices starting from $US40,000, it’s due to enter production late next year.

MODEL S

This large sedan put Tesla on the map. Model S was the first vehicle to emerge from the California car factory Musk acquired in the wake of the global financial crisis. Model S turned heads with its design, becoming the planet’s favourite battery car for a few years and in some markets beating the sales of traditional luxury badges. Impatient Australian buyers had to wait until 2014 for first deliveries, with prices starting around $100,000.