There was a wise man who once said great ideas are treated with scorn, then skepticism, then caution, until finally accepted as inevitable. One such example has been the electric car. Elbowed aside for generations by their gas-guzzling older brethren, cars running on substances other than fossil fuels are not only taking a foothold on the market, but could also be argued as though they are leading the market by example, and that investors had better take heed.
No less an observer of plum investments than the Motley Fool points to the example of Tesla Motors (Nasdaq: TSLA), the pride of Silicon Valley, which it says is beginning to sell "some very compelling vehicles", most noteworthy the Model S, poised to hit showrooms later this month, offering a fleet of vehicles capable of going up to 500 kilometres (300 miles) on a single charge.
The Tesla website spells out the benefits of the Model S powertrain thus: "Unlike the internal combustion engine with hundreds of moving pieces that spark, pump, belch, and groan, the Tesla motor has only one moving piece: the rotor. As a result, Model S acceleration is instantaneous, like flipping a switch. Hit the accelerator. In 5.6 seconds, Model S is traveling 60 miles (about 100 kilometres) per hour, without hesitation and without a drop of gasoline."
The Fool tells us that the Model S Signature series is already sold out, and those left out in the cold are anxious to test out the newer models. However, the site concludes, "the best sign for this industry… is that other competitors are starting to join the party." And those companies are focusing not only on the product they’d like to emulate, but Tesla’s entire way of doing business as well.
Bloomberg reported this spring that, starting this year, California will require the biggest automakers to sell increasing numbers of "zero-emission vehicles," or ZEVs, such as pure-electric, plug-in hybrid and hydrogen-powered autos – and those who don’t reach their sales quotas may either buy ZEV credits from rivals that exceed their targets.
One of the biggest, Nissan, says it may sell credits earned in the past two years from its battery-powered Leaf, the best-selling all-electric car in the U.S. It’s here that Tesla steps into the picture, for the company has let it be known that it had sold credits to Honda Motor Co. and another automaker it didn’t identify. Tesla didn’t disclose the number of credits sold or the price, but the company realized some $13 million U.S. for these credit transfers.
And it appears the electric gravy train is just gathering momentum.
The Bloomberg story goes on to say that regulations affect auto sales in 11 other states – including New York, New Jersey, and Massachusetts -- that follow California’s rules. Failure to get enough credits can lead to fines or even limits on their ability to sell cars.
Even so, the general malaise that virtually the whole market was feeling gripped Tesla stock on Friday, June 1. Toward the close of trading, each share changed hands for only $28.07 U.S., down $1.43, or 4.9%, from the day before. The stock has traded in a 52-week range peaking at $39.95 U.S. on March 27, and bottoming out at $21.50 U.S. last August. When much of the uncertainty clears out of the market – and investors’ hands steady – watch for this stock to step on the accelerator!
