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Electric Cars: With Model S, Tesla Takes the Lead


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

So even if it's not the best car ever, Tesla might just have had the best week ever. Such high praise from the tough, typically reserved reviewers at Consumer Reports could put the Tesla on the lists of plenty of luxury-car shoppers. And combined with the profit and sales picture from earlier in the week, it has already scored the company huge gains in the stock market. Tesla shares jumped more than 40% last week and have now rocketed 127% on the year. Many of those who bet against the company – and there has been no shortage of short sellers – had to scramble to cover their positions, fueling the rally. Tesla now has a market capitalization of $8.7 billion. That's "truly remarkable," alright.

But Tesla still has further to go if it really is to become the first successful automotive startup the US has seen in nearly a century. As Justin Lahart at the Wall Street Journal pointed out this week, Musk has laid out his plan: "First, build a high-performance electric sports car, to prove it could be done. Second, market a luxury car that broadens Tesla's appeal. Finally, produce an affordable mass-market electric car." Step 1 is complete. Step 2, already well underway, just got another huge boost. Step 3, where the rubber will really meet the road, is still in question. "It has always been my dream to produce a low cost, compelling electric car," Musk tweeted in March. "We are three to four years away. Wish it could be sooner."

To get there, Tesla is working to reduce component costs, improve its manufacturing efficiency and speed its production process. "We haven't really tried to push volume super hard yet," Musk told analysts this week, "because I think you need to make sure that staff is in order and the car is being made as efficiently as it can be made before you try to push volume." At the same time, Musk said that sales could grow next year as the company tests just how much demand exists for a luxury electric car with a starting price of $62,400 (including a $7,500 federal tax credit). "I think it's probably quite a bit higher than what we had originally thought," the CEO told analysts.

Tesla will also need to build out an infrastructure that can support electric cars nationwide. It will need better batteries and a network of supercharging stations to allow drivers to hit the road without getting stranded on the side of the road. Tesla isn't necessarily going to do all that on its own, potentially partnering with other carmakers such as Mercedes. As Farhad Majoo detailed at Slate:
If Tesla's technology helps Mercedes sell a lot of electric cars, the deep-pocketed luxury car company will have an incentive to build its own charging stations, too - places where Tesla owners could charge up. The more charging stations there are, the more attractive both firms' vehicles would become. And then, as its battery production scales up to meet that demand, Tesla's batteries will likely improve as well, as many in the industry see increased production as one of the main ways to lower the cost of electric-car batteries.

Tesla's ride won't always be as pleasant as it was this week, but after a decade of promoting the promise of electric vehicles, the road to success may finally be opening up.

Editor's Note: This article by Yuval Rosenberg originally appeared on The Fiscal Times.

For more from The Fiscal Times:

The 10 Most Incredible Cars of the Future

Why Americans Still Don't Drive Electric Cars

The 10 Greenest Cars to Buy in 2013

Follow The Fiscal Times on Twitter @TheFiscalTimes.
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