Navigant Predicts ‘Volatile Year’ For Tesla

During 2013, the name of the California start-up EV maker, “Tesla,” became known to many more people as the Model S came into its stride, and 2014 will be similar, but potentially filled with more ups and downs, says a just-released report by Navigant Research.

“Throughout 2014, Tesla Motors fortunes will have tongues wagging (and international car buyers salivating) as the brand becomes a global phenomenon,” concludes an ultimately positive overview on the automaker which was part of a larger market forecast.

“Tesla Motors will have a volatile year,” is the title of the overview section that opens noting positive and negative press for Tesla during 2013, and that its stock saw a low of $32.91 in January, a high of $193.37 in September, and finished around $143 after a fourth-quarter correction.

Beyond that, the study observes four major challenges Tesla faces for 2014: expanding its Supercharger network, scaling up its factory’s production capacity, branching into China, and upscale competitors.

Superchargers

During 2014, in order to expand U.S. and Canadian Supercharger stations from an estimated 37 to over 150, Tesla will need to spend $62 million, observes Navigant.

The goal is to increase coverage of its quick-charging stations to 80 percent of the U.S. population by year’s end, and each station costs $500,000, it says.

UPDATE 1/13/14 Supercharger stations actually cost on average $150,000 per copy, and stations with solar and grid storage can cost $300,000.

In November, Tesla reported third-quarter results including a $38 million loss according to generally accepted accounting principles (GAAP).

Navigant does not specifically cite the earnings report, but this is a background fact as Navigant projects “challenges” for Tesla as it undertakes the capital-intensive effort added onto other major expenses and factors it must carefully manage and execute besides.

Factory Expansion

You have to spend money to make money, goes the old adage, and Tesla is increasing the capacity of its large, presently underutilized factory in Fremont, Calif.

Navigant reports this “will perhaps be the largest challenge for Tesla in the coming year” as Tesla plans for global demand, and production capability by the end of 2014 to be able to build 56,000 Model S sedans annually.

Navigant very conservatively said Tesla has exceeded 19,000 global units sold since its June 2012 launch, and this is certainly an underestimate as Tesla itself reported 18,200 sold through the third quarter of 2013. This week HybridCars.com estimated global sales at over 25,000 based on published reports.

Tesla_Factory

Tesla will also be looking at expanding its product line including its Model X, an entry level car, and more, so these naturally are factored into what the company aims to do in the next 12 months.

“Automakers and their suppliers face greater quality control issues as production expands, and any perception of a reduction of quality would be magnified by the media,” observes Navigant.

It has been largely observed that media has had an enormous influence on the volatile TSLA stock and public perceptions of the ambitious company.

Thus far, one of Tesla’s biggest public relations concerns is an ongoing federal investigation over a couple U.S. fires, and those incidents plus the Q3 earnings report were what cut Tesla’s stock in the fourth quarter.

Tesla showed itself adept in ramping up its early Model S production at a very slow rate in 2012 to ensure quality control. It also does have an impressive quality control regimen in place.

While challenges do remain, it undoubtedly is the one most aware of this, and time will tell how it does.

China

Tesla is already managing European sales, service and distribution, and as it branches into the growing and already largest auto market in China, it is not permitted to use its own brand name due to a local trademark issue.

How much that will affect the company is unknown, but it does plan to launch Model S in China this quarter as it also readies the Model X in the U.S. by end of 2014.

“Unfortunately, EV makers – including Tesla – have not had a stellar record of launching new models on time,” says Navigant. “Manufacturing and distributing vehicles in multiple regions of the world presents many logistical issues, though established automakers have overcome similar challenges in the past.”

The Model X is already delayed, and Navigant only suggests, and does not state unequivocally, that more delays could possibly come – for Model S in other markets, and maybe even Model X in the U.S.

Rather than go out on a limb, the Navigant forecast benignly states this is one of the challenges, and that much is true.

Competition

Tesla has no direct competitors of its actual product, as the Model S sedan is a superb car with no apple-to-apple all-electric sedan on the horizon ready to challenge it on every point.

However, to car shoppers, perceptions may still be swayed by the coming of the BMW i3, i8, Cadillac ELR, Mercedes-Benz B-Class Electric Drive, and Porsche Panamera S E-Hybrid, says Navigant.

Porsche Panamera S E-Hybrid.

Porsche Panamera S E-Hybrid.

Common to all these cars is they are positioned as premium plug-in products, and could present an alternative – if not direct replacement – for the Model S.

Navigant makes the point that until now, Tesla enjoyed zero direct competitors.

Until now, consumers had primarily as alternatives the Chevrolet Volt, Nissan Leaf, or other electrified cars targeted at the mainstream, priced far less.

The value of the BMW roundel, the Porsche crest, and Mercedes Benz’ silver star, and even General Motors’ Volt-based Cadillac brand will be known and considered by upscale shoppers in 2014.

It’s been observed Tesla is not so much competing as a pure green car, and its all-electric range, or MPGe boasting rights are not the only considerations for an affluent demographic making a luxury purchase.

Tesla fans have already said all the other cars mentioned do not hold a candle to the Model S, but the other cars coming will make sales, and they will take sales from the same pool of buyers who could have chosen a Model S or Model X.

Watch Your Step, Tesla

Navigant is a market research company, not a blogger attempting to sensationalize things. Its benign list of “challenges” are noted in light of what happened in 2013, how the general public and stock market behaves, and related unspoken assumptions.

Its one stated assumption however says much: “Tesla Motors Will Have a Volatile Year.”

Tesla Model X

Tesla Model X

Navigant’s 2014 forecast thus implies it is unlikely Tesla will do everything right, and every foible or twinge is being watched by those who could amplify actual effects.

And that is the final word on Navigant’s summary:

“The company has had a nearly flawless record of execution thus far, but as the stakes get higher, even the smallest of missteps will likely be exaggerated as the company will continue to be one of the focal points of the EV industry.”