Tesla is easily the most successful new car company to come along in decades. You have to go back to Henry Ford and his little enterprise, a century ago, to find anything comparable.
And Elon Musk’s electric-car maker is moving fast. In less than 10 years, Tesla has captivated both the technology and automotive worlds. Its market cap is $25 billion, and yet the company produces, so far, one car at one factory.
At the end of 2014, a bunch of questions arose about whether Tesla’s lofty stock price, up more than 1,000% from the 2010 IPO, is sustainable. Can the company grow into its valuation? Some on Wall Street think so. Some don’t.
The bumps that the company endured last year were due largely to production challenges and a debate about whether seemingly ample demand for the Model S sedan was real. But those factors are a distraction from Tesla’s real problem: The company is building the wrong car.
It’s building the right car for the early adopter, love-the-company-love-the-mission crowd. Everyone in Silicon Valley seems to want a Model S.
But at the moment, the best segment to be in if you’re an automaker is SUVs. Even better: luxury SUVs.
Consumers are feeling better about the economy, and gas prices are relatively low (compared to previous years). The US auto market is booming, and the carmakers that are selling SUVs are printing profits.
But Tesla is selling a four-door luxury sedan.
Later this year, an SUV will come online, but Tesla isn’t expected to sell a huge number of them (although demand, unsurprisingly, for the vehicle is reported to be robust). The Model X should be able to catch some of the SUV wave. But if the X follows the pattern of S, it could be a year or two before Tesla works out all the kinks.
There haven’t been very many flaws in Tesla’s execution. The hot, hot, hot Roadster, Tesla’s first car, proclaimed that electric cars didn’t have to be glorified golf carts. It made sense to ramp up in the direction of luxury, high-performance sedans from Mercedes and BMW. Thus, the Model S.
But Mercedes and BMW have large portfolios of vehicles, including SUVs, so when the market swung back toward these vehicles, especially in the US, Mercedes, and BMW (as well as Audi) had them to sell. Tesla didn’t.
I’ll grant you that this is asking a bit much of a visionary automotive startup. It would have been difficult to ditch the Model S to focus on speeding up the Model X, particularly given that Tesla only introduced an all-wheel-drive system last year.
And besides, if you can sell 35,000 of a $100,000 car, you’re doing something right. It’s not clear that Tesla would have higher demand for an SUV than a sedan, but the company is playing a bit of catch-up on the SUV front. That’s why it created an AWD version of the Model S — the “D” — and started delivering it last year. It had to plug its SUV gap, in regions such as the US Northeast.
That said, in Tesla’s biggest market, the US, consumers have shown that they really, really like the versatility that SUVs provide. In fact, there could be a structural change afoot in the US: Sedans could be relegated to niche status, as SUVs and so-called crossovers — SUVs with car-like features — of varying shapes and sizes become the driving population’s favorites rides.
It won’t be long before Tesla is selling an SUV. Let’s just hope it isn’t too late.
By: MATTHEW DEBORD
Source: http://uk.businessinsider.com/tesla-biggest-problem-is-that-its-selling-the-wrong-car-2015-3?r=US
