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Electric Cars: With Model S, Tesla Takes the Lead

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High praise from Consumer Reports could put the Tesla on the lists of plenty of luxury-car shoppers.

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In recent years, the electric car has been hyped, debated, derided, and even used as "a political punching bag," in the words of Tesla Motors' (NASDAQ:TSLA) serial entrepreneur CEO Elon Musk. Republican presidential candidate Mitt Romney lumped Tesla in with other green energy "losers" like Solyndra. Just last month, Sarah Palin used that label for Tesla, too, when she took to Facebook to criticize the Obama administration for backing another electric car maker, Fisker Automotive, which may soon file for bankruptcy protection: "This losing tax-subsidized venture joins other past losers like the Obama-subsidized Volt that gets 40 miles per battery charge, or like the Obama-subsidized Tesla that turns into a 'brick' when the battery completely discharges and then costs $40,000 to repair."

Palin's point, like Romney's, was that the government shouldn't be in the business of picking winners and losers in the marketplace. Well, Tesla may have gotten $465 million in loans from the Energy Department to develop and build its cars, but it says it will pay off the loan by 2017, five years early. And if the market is picking, the company is anything but a loser right now.

The 10-year-old company on Wednesday reported its first-ever quarterly profit, with earnings of $11.2 million, or $15 million excluding one-time items, on revenue of $561.8 million for the first three months of the year. Those sales were helped by $68 million from sales of Zero Emission Vehicle credits to other automakers. Tesla's gross profit margin for the quarter was 17.1%, up from 8% for the prior quarter and higher than Ford's 11% margin for its North American business.

Tesla sold 4,900 of its Model S in the first quarter and expects to sell about 21,000 cars this year – or, as the Wall Street Journal noted, "four times the combined US sales of Maserati, Lamborghini, and Ferrari." For the quarter, Tesla also outsold Chevy's Volt plug-in hybrid and Nissan's Leaf. (On the other hand, Toyota sold nearly 56,000 of its various Prius models in the first quarter and was aiming to sell 250,000 of the hybrids this year, though it said last month it may not reach that goal as gas prices fall faster than expected.)

Then on Thursday, the famously stringent testers at Consumer Reports showed how charged up they were over the battery-powered Model S. The car scored a 99 out of 100 on the magazine's rating system, matching the highest rating of any vehicle ever tested and prompting an outpouring of superlatives. The reviewers praised the car's design, construction, and handling, while warning about the Tesla's limited driving range (about 208 or 265 miles on a charge, depending on which battery is in the car) compared to gas-powered vehicles. The car, Consumer Reports said, "is brimming with innovation, delivers world-class performance, and is interwoven throughout with impressive attention to detail. It's what Marty McFly might have brought back in place of his DeLorean in Back to the Future." In case the point wasn't clear enough, they also wrote that the Model S is "truly a remarkable car."

That echoed earlier praise from Motor Trend magazine, which also called the Model S "truly remarkable." In November, Motor Trend had named the Tesla Model S its 2013 Car of the Year. Consumer Reports considered an even loftier designation: "So is the Tesla Model S the best car ever? We wrestled with that question long and hard. It comes close. And if your needs are confined to Tesla's driving range, it just may be."
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