Tuesday, 19 July 2011
Rising energy costs and increasing consumption are on all of our minds. In fact, Sara and I recently had a debate about ethanol. We know this is a controversial topic for our readers, so we decided to offer this debate as an online webinar. It will be part of a series of webinars leading up to our 2011 Survival Summit coming to Las Vegas in September. (If you haven’t signed up for the Summit, click here.)
Controversial talks like Sara and I had are a necessity, especially for investors. Take a look at this chart.
A large part of America’s thirst for crude oil comes from cars and trucks. In 2007, there were over 255 million registered cars on U.S. streets. If those vehicles traveled an average of 10,000 miles per year at 20 miles to the gallon, that would burn 127.5 billion gallons or 3 billion barrels of gasoline per year.
Since only 35% of a barrel of crude oil is used to make gasoline, we need 8.5 billion barrels of oil just to meet the needs of passenger vehicles here in the U.S.
The Next Trend: Electric Cars
There is an American car company building 100% electric cars, and it’s not Nissan or Chevy. It’s Tesla Motors (TSLA:NASDAQ), and it went public in 2010. At the time, the company only offered one sport model and it cost over $100,000. The stock was not a big hit.
Tesla Roadsters: The first Tesla cars produced
But Tesla’s future may be starting to look a bit clearer. The company’s first car, the Roadster, was basically a modified, electric version of the Lotus Exige. It’s a tiny exotic sports car. Not for the masses… I did get to test-drive one last week in Greenwich. I was stunned by its performance, but it is still not an everyday car for most.
Now, Tesla has a new model. It’s called the “S,” and it is slated for delivery in 2012. It is gorgeous and much more comfortable than the Roadster. This is the car that should turn the company from a novelty into a serious competitor in the electric car space.
The Tesla S is a unique, sexy and “smart” sedan designed and engineered from the ground up. Priced at about $50,000 it’s also in the range of other luxury brands like Mercedes and BMW. That’s the base Tesla’s going after. And they have a chance of winning over some customers. I was blown away by the S’s styling and its fit and finish. The interior layout and leatherwork rivaled any fine Italian automobile.
And because it’s an electric car, you would get $7,500 in government incentives. That’s on top of incentives that some states offer. For those of you across the pond, you should also see reduced taxes and driving fees.
Tesla 2012 Model S
(Don’t forget to sign up for Smart Investing Daily and let me and fellow editor Sara Nunnally simplify the market for you with our easy-to-understand articles.)
Tesla Price and Practicality
Let me be clear: Tesla is NOT trying to produce economy cars. With the Model S they are going after the luxury sedan market, targeting customers who would normally buy a BMW 5 series or Mercedes E Class. They are looking for drivers who won’t sacrifice their driving experience and comfort, but want to be green.
The price is competitive. The average sales price for BMW, Mercedes, Cadillac and Audi all come in right around $50,000. The S should also cost less to maintain than most cars, because there is no combustion engine or complex transmission.
The Tesla S is NOT a hybrid like the Chevy Volt; it is 100% electric, zero emissions and very powerful. It will go zero to 60 in 5.6 seconds, about the same as the BMW 535i.
The average model “S” will travel about 250 miles per charge and will have a “Fast Charge” option that will allow the car to be completely “re-fueled” in about 45 minutes. For most of us, our daily commute is less than 25 miles each way, so the Model “S” would have no problems fitting into our daily drive. Longer trips may require a bit more planning, but there are several battery pack options to help you pick what’s best for your lifestyle.
Most owners could simply plug it in at night like a cellphone and have a full charge when ready to go in the morning.
Tesla can produce up to 20,000 of the Model S per year. That figure would eclipse the current production of the Nissan Leaf and Chevy Volt. But Tesla’s playing it smart… It will ramp up production slowly as demand rises. If the car lives up to its promise, I think they should be able to sell that many and more.
Should You Buy Tesla Stock?
I was impressed with what I saw in the cars, both in styling and performance. Driving a Tesla car is an exhilarating experience. But I’m not here to sell you a car…
You want to know if Tesla is a good investment.
The wealthy and upper middle class are still buying cars, even in these tough times. With a $50,000 price tag, Tesla is offering them a chance to jump into a luxury car that is fast, beautiful and “green.”
It’s not just the wealthy here that could be interested… With the price of gasoline and road taxes around the globe, Canada, Europe, China and Latin America should welcome an all-electric luxury car.
And get this.
Tesla also has partnerships with Daimler-Benz and Toyota. The new electric Rav4 will be completely powered by Tesla’s drive train and battery. The Mercedes electric A-class and Smart Cars will utilize Tesla’s battery packs, all of which should drive revenue for Tesla.
The world is changing and gas prices are NOT getting cheaper over time. I believe that Tesla is on to something great. While the company is not making money at present, they are growing earnings. In this year’s first quarter, revenues jumped 135%!
Tesla developed an amazing automobile in the S, and its sales model and international expansion are good signs of growth.
A conservative investment for the long term would be warranted.
Publisher’s Note: If you like to read about the “next big thing,” you will love New Growth Investor. As a former hedge fund manager, Zach Scheidt knows what it takes to find growth opportunities and uncover the truth behind the headlines.
His latest report is one of his most popular yet. To see why, click here.
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