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Electric car maker Tesla defies skeptics

Bet against Tesla founder Elon Musk at your own peril. Just ask the short-sellers who predicted his Tesla Motors would be the next electric carmaker to short-circuit.

Quite the opposite has happened. The California electric vehicle manufacturer reported this past week its first-ever profit of $11.2 million as sales of its Model S sedan outpaced even its own optimistic expectations. Tesla is promising even better numbers for the rest of the coming year as it ramps up production at its assembly plant near San Francisco and opens up new markets in Europe and Asia.

That’s sent Wall Street into a frenzy: Tesla shares surged 24 percent in the hours after the maker’s first-quarter earnings announcement – and doubling since hitting a low point late last winter. That’s bad news for the short-sellers who hold more than 40 percent of the battery-carmaker’s shares and who had been anticipating more bad news after Tesla’s unexpectedly steep loss during the fourth quarter of 2012.

Skeptics certainly have had reason to predict the worst, at least if they were watching the rest of the nascent electric vehicle market where, with rare exception, things have come unplugged.

The much-ballyhooed Fisker Automotive recently laid off three-quarters of its workforce and, during a hearing on Capitol Hill last month, company officials signaled bankruptcy may be in the offing. Battery-carmaker Coda recently filed for Chapter 11. Even the much-touted Chevrolet Volt has been losing momentum. Battery-car suppliers may be in even worse shape: Battery maker A123 was purchased by a Chinese maker after its own financial collapse.

There are a few bits of good news, such as the recent upturn in demand for the Nissan Leaf after the Japanese maker cut the price of the battery-electric vehicle and began production at a new plant in Tennessee. But for the moment, Tesla seems to be the battery-car market’s only real success story.

The Silicon Valley firm managed to claw its way into the black after a decade of losses, even though it had to cough up $13 million towards the $465 million federal loan it received as part of a controversial Department of Energy program to fund clean, alternative propulsion technology.

Things hadn’t looked nearly so good going into the New Year. The launch of the Model S went more slowly than expected at the old Toyota plant near San Francisco Tesla had purchased. But suggesting “our manufacturing processes stabilized,” Musk told shareholders that production is now running faster than expected, even as the number of man hours per vehicle has dropped by 40 percent. The maker sold about 10 percent more of the battery sedans than it expected during the first quarter – at a price well above its initial projections. In fact, Tesla has now dropped the base version of the Model S, focusing on longer-range – and significantly higher-priced — versions.


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