Wednesday, June 30, 2010

Revenge fo the Electric Car: Tesla IPO and the Future

Behind the wheel of a Tesla at the Detroit Auto Show, 2009
Hi folks -- as many of you have heard, the Tesla IPO yesterday proved to be the one bright spot during an otherwise dismal day on Wall Street. A few years ago I was very much in to learning about Tesla, as I hosted at UD Chelsea Sexton, one of the key characters in Chris Paine's documentary "Who Killed the Electric Car?" And while I have not driven a Tesla -- I did sit in one at the Detroit Auto Show in 2009 -- I did see one up close at Paine's home back when.

Yes, the Tesla roadster is expensive, and has a limited market, and there are some other drawbacks as well. And to be sure, the next model, a sedan that ill cost some 50k if projections are right, is still in the distnace. But Tesla has engineering technology that no one else owns, and Tesla has all the organizational energy that is lacking in Michigan. Telsa has "Iron Man" Elon Musk at the top of its leadership, and it is doubtful that anyone at the Detroit Three has that kind of panache. Analyst Mary Ann Keller, certainly knowledgable and an industry insider at the very highest level, argues that future of Tesla is perilous, as it must compete in a tough automobile, not technology marketplace. And maybe she is right.

The issue here is really economy of scale. If the battery-powered electric can achieve high volume production, then costs and prices will come down. But can that level be reached? The auto industry has a long history, after reaching maturity, of squashing outside. Just think about Tucker, Crosley, Kaiser-Frazier, and other entrants.

What could change the entire game however is what may happen in the Middle East. One wrong move against Iran -- might bring the whole internal combustion engine/gasoline matrix down on its knees. And Tesla will be there with an alternative technology ready to fill the gap.

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