A sample text widget

Etiam pulvinar consectetur dolor sed malesuada. Ut convallis euismod dolor nec pretium. Nunc ut tristique massa.

Nam sodales mi vitae dolor ullamcorper et vulputate enim accumsan. Morbi orci magna, tincidunt vitae molestie nec, molestie at mi. Nulla nulla lorem, suscipit in posuere in, interdum non magna.

Model S Makes Inroads For Tesla

Since 90% of Tesla’s (TSLA) revenues are expected to come from the Model S this year as well as next year, it will not be wrong to say that a successful Model S will lead to progress for Tesla.

Therefore, discussing the future of the Model S is like discussing the future of TSLA. When the market first heard exuberant CEO Elon Musk declaring that 50% of the cars produced in 2032 will be electric vehicles (EV), nobody believed him. Most thought it was nothing more than pandering to the shareholders. Many considered a single digit growth rate for the EV market.

However, since the launch of the Model S, the views have changed considerably. Moreover, the fuel emission targets set by the Obama administration for 2025 and Japan’s expanding EV market have illuminated the story of EV.

Above all else, the main reason behind the recent success of the Model S has been its unique features, such as solid engine power and 0-60 mph acceleration, which has forced its audience to compare it not only with other EV, but also with BMWs, Benz AMGs and the Porsches of the automotive world.

Therefore, the Model S does not have a demand problem, as was anticipated by the market. However, supply may be an issue for the carmaker, as it plans to roll out almost 60 Model Ss per day next year, as compared to the present rate of 10-11 cars per day. However, the company has established great credibility with its shareholders, and it will be no surprise if the company achieves the target by exponentially expanding production capabilities.

EV Market & Obama’s Energy Ruling

The current EV market gives a confused outlook. Currently, fewer than 13 million cars are sold in the U.S. each year, and EV (including hybrids) account for only 2% of the market. However, due to the increasing trend of the government opting for a greener U.S., the market predicts that the EV market will grow by a CAGR of 32% till 2020. Amidst all of this, there are examples like General Motor’s (GM) Chevy Volt, whose production has been halted given a weak demand for EV. GM has been able to sell only 10,000 Volts this year up till now, which is well short of its target to sell 45,000 Volts for this year in the U.S. alone.

The market is expected to expand after the recent ruling by the Obama administration to achieve almost double the current fuel economy in 2025. The current average fuel economy is 28.6 miles per gallon (mpg). Obama wants to see it grow to 54.5 mpg in 2025. The state has also established intermediate goals, and companies who do not meet these goals will be fined accordingly. One of the goals is to achieve an average fuel economy of 35.5 mpg by 2016, which is 24% greater than the current level.

Model S

The Model S is expected to gain from Obama’s energy drives. Under this law, credits will be awarded to the producers of natural gas cars and EV. Also, the companies that use other fuel saving techniques, such as start stop engines and efficient air conditioning mechanisms, will win some credits. Therefore, production of EV will win Tesla credits. Tesla can sell those credits to the companies who have not been able to meet their pollution quotas, resulting in a monetary benefit.

Also, the average price per car is expected to go up by $1,800 due to the increase in costs brought by technological advancements. However, this does not hold true for EVs like the Model S, which is already compliant with the law.

As far as the growth rate for the EV market is concerned, the Model S has clearly outperformed the market by securing orders for more than 12,000 Model Ss in a span of 2-3 months. The reason for this success has been largely because of the Model S having features that give it access to the market for luxury sedans as well. This is reflected by Musk’s words:

The trick with EVs is we’ve got to make cars that are more compelling as products than electric cars. That’s really critical for the mass adoption of electric cars. You can’t tell people, buy this electric car it’s ugly, it’s slow, it’s got a lower range.


Leave a Reply