Tesla Nabs 8% of the U.S. Luxury Car Market

As if Tesla's (NASDAQ: TSLA ) 280% stock price increase since the beginning of 2013 or becoming profitable in Q1 of this year wasn't enough, the Electrification Coalition released a report last week stating that Tesla's Model S made up 8.4% of the U.S. luxury automotive market in the first six months of the year.

In the first quarter of this, year Model S sales outpaced Audi A8, BMW 7-series and Mercedes S Class sales. But what's really striking about the comparison is that Tesla is a young car company and its Model S has been selling for only about 14 months, while BMW has sold its 7-series since 1977 and Audi's flagship A8 launched back in 1994.

Part of Tesla's success is due to the acceptance of plug-in electric vehicles, or PEVs, among U.S. consumers and an overall bounce back in automotive sales. We first saw evidence that the U.S. luxury auto market was coming back in 2011, with spikes in sales from BMW and Mercedes. Meanwhile, the PEV business has seen more than 110,000 U.S. vehicle sales since the beginning of 2011 -- including cars from Tesla, General Motors, Nissan, Toyota, and others.

Topping off Tesla's solid PEV and luxury position is that PEV sales have been twice as high in their first two years than hybrid vehicles were in the first two years after that market's initial launch -- a trend that could certainly continue to benefit Tesla.

But Tesla has bigger aspirations than just tackling the luxury or PEV market. Tesla CEO Elon Musk has been very vocal about introducing a $30,000 car for the masses by 2016. To achieve that goal, the company will need to significantly decrease the cost of its batteries. That's why the latest information form the Electrification Coalition is so important. The group expects battery costs to drop by almost half by 2020.

But not everyone is convinced Tesla can lower battery costs in time -- including Bill Alpert of Barron's. "Industries and governments around the world have spent billions on battery research, but few expect to trim electric-car battery costs by more than 20%-30% by the planned 2016 launch of Tesla's car for the Everyman," he wrote in an article last month.

But if battery costs do drop by half by 2020, then it's not out of the realm of possibility for them to fall by 20% to 30% over the next three or four years. GM and Nissan are researching how they can reduce EV battery costs by selling used batteries after their automotive lifecycle is finished. Used EV batteries can still have 70% of their initial capacity after about 10 years, and the two car companies are looking into ways to sell those batteries to energy companies.

But the best way to lower battery costs is for auto consumers to adopt EVs and scale down the overall cost of battery prices in the process. So far, things have been moving in the right direction for that to happen. From 2010 to 2011, just over 17,000 electric vehicles were sold. In 2012, that number jumped to more than 52,000. Now, just seven months into 2013, the EV auto market has already sold almost 41,000 electric vehicles. The models of EV cars on the market also jumped from just three in 2010-2011 to 13 right now. Those stats have contributed to a drop in EV battery prices by about 40% from 2010 to 2012.

Okay, without having the access to internal financial documents of the company let’s assume the profitability of the entire company right now relies on the tax credits. I personally disagree but let’s move ahead. I paid full sticker and sales tax for my model S and ordered every option. That’s $120k +. If it were $150k I would still buy it. Do you have any idea how many collector cars are registered in the US? Over 20 million! Why does that matter? Each one of those cars is owned by someone and the amount of buyers for cool cars even at $150k would blow you away. Of course the car has to blow you away too. The Tesla S does, that is well established. But what happens when this same technology is available for the masses at $30k? This dog hunts!

Think about it this way. Do you say the same thing about your phone? It was likely made in China and I could easily say, “Yeah, (insert your phone brand) makes money, but it is only because they are exploiting low wage workers.” You take advantage of anything available to succeed, if the government is offering financial assistance you use it while you are building the brand, infrastructure, and everything else a new company needs! Whose fault is it that the other companies need the credits and Tesla has an overage? In over 90 years no other company has ever been able to successfully start a new car company. The winner is always the end user, everyone should be cheering no matter what happens later.

Did you watch any videos yet? Type TED Elon Musk on YouTube and watch that one first. Now try to imagine a current automotive CEO laying his or her fortune on the line to make our world a better place. He isn’t doing it for the money!

The federal government is not a bank.

If you need a loan, go to the bank.
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The usual argument is that federal money is best for basic research—that is reasearch that won’t yield results inside the 5 years or so that corporations generally work.

But in addition to that the most effective agency in the US government pound for pound is DARPA. They fund companies that create products that have DOD dept of defense applications. Their money lies at the base of a huge portion of the USA technological base.

Typically speculative private capital yields results in somewhere between 1 and 30 to 1 and 100 tries.

The feds decided to play this role in the renewable resources field. Most of the money was thrown away. but there have been few successes. about as much as you’d expect. If tesla succeeds and helps change the world— alas it will reflect well on government investments in R&D.

The real deal for the feds of course would be to invest in thorium lftr development. after all the feds developed working prototypes of the thorium lftr design at oak ridge labratory from 1966-70.

The developer of thorium lftr reactors Alvin Weinberg was the head of oak ridge labratories. he also held the patent on the original light water reactors.

He said the thorium lftr designs were orders of magnitude cheaper better safer than the light water designs. the thorium reactors were abandoned because they were not dual use. they could not be used to produce nuclear weapons.

Edward Teller, father of the H bomb —wrote his last paper on thorium reactors. For more info on this see http://www.amazon.com/kindle-store/dp/B0089Z7V6Y

I compare federal R&D investments to things like clearing rivers of debris and creating dikes for flood control.

There’s no cut and dried rules here. The feds paid a company to build the hoover dam. Today NASA is stepping back from building and running rockets and letting SpaceX and others compete for their business. (SpaceX is a company that Elon Musk built.Musk currently runs Tesla)

That said, I do understand there’s plenty who believe that private capital should take a lead role in all R&D. That the government should be strickly hands off.

The federal government is not a bank.

Typically speculative private capital yields results in somewhere between 1 and 30 to 1 and 100 tries.

The real deal for the feds of course would be to invest in thorium lftr development. after all the feds developed working prototypes of the thorium lftr design at oak ridge labratory from 1966-70.

The developer of thorium lftr reactors Alvin Weinberg was the head of oak ridge labratories. he also held the patent on the original light water reactors.

Edward Teller, father of the H bomb —wrote his last paper on thorium reactors. For more info on this see http://www.amazon.com/kindle-store/dp/B0089Z7V6Y

I compare federal R&D investments to things like clearing rivers of debris and creating dikes for flood control.

That said, I do understand there’s plenty who believe that private capital should take a lead role in all R&D. That the government should be strickly hands off.

Tesla didn’t generate a profit by selling sexy cars, but rather by selling sleazy emissions “credits,” mandated by the state of California’s electric vehicle requirements. The competition, like Honda, doesn’t have a mass market plug-in to meet the mandate and therefore must buy the credits from Tesla, the only company that does. The bill for last quarter was $68 million. Absent this shakedown of potential car buyers, Tesla would have lost $57 million, or $11,400 per car. As the company sold 5,000 cars in the quarter, though, $13,600 per car was paid by other manufacturers, who are going to pass at least some of that cost on to buyers of their products. Folks in the new car market are likely paying a bit more than simply the direct tax subsidy.

How’s this going to work in the future? As long as the competition has to pay greenmail to Tesla, probably just fine. And with California gradually ratcheting up the electric-vehicle mandate, maybe just finer. No wonder the stock price doubled and Goldman shelled out.

What crap.

Nowhere in the article is the term “US luxury market” defined. I mean, that’s sort of important.

This statistic smells ugly.
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The title of the article is:

“Tesla Nabs 8% of the U.S. Luxury Car Market”

The first sentence of the article reads:

” the Electrification Coalition released a report last week stating that Tesla’s Model S made up 8.4% of the U.S. luxury automotive market in the first six months of the year.”
‘’’’’’’’’’’

I went to the Electrification Coalition site. Here’s what they say:
http://www.electrificationcoalition.org/media?type=50
http://www.electrificationcoalition.org/StateOfMarketPresser

“Tesla’s Model S has captured 8.4 percent of the luxury market in the first six months of 2013, and sold more units than several in-class competitors including the Audi A8, BMW 7-series, and Mercedes S class.”

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so yeah you’re right. They have not totally pinned down the definition of “US luxury market”. Could be the number is very narrowly defined.

However, the report was prepared in conjunction with PricewaterhouseCoopers—which limits the fudge factor.

“This was a key finding of a new Electrification Coalition (EC) report released today in consultation with PricewaterhouseCoopers.”

Likely if you went to the original report and PricewaterhouseCoopers or somewhere else — you could get the precise definition of Luxury Car Market. But I didn’t want to spend the time doing so.

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