Can Tesla Save the Auto Industry?
Though Tesla Motors (NASDAQ:TSLA) CEO Elon Musk was undoubtedly very excited last week when he recognized some dubious math and realized that with a new payment plan, 10 percent of the population could afford his new Model S, rather than 1 percent, it isn’t difficult to assume that he might have been relatively alone in this celebration. In fact, with the amount of criticism The Department of Energy received for loaning money to Tesla Motors, it’s a wonder anyone was sharing in the revelry. Though Tesla is a company that has been largely denounced as only catering to the wallets of the upper crust, it might actually be helping consumers more than they realize.
The startup company’s innovative prowess has come under fire for only churning out expensive vehicles; however, what people don’t realize is that, should Tesla be successful, its production of electric cars will eventually lead to increased competition with gas-powered vehicles, as explained by MIT Technology Review. The increased consumption of electric cars will not only contribute to decreased oil exhaustion, but also to the lowered cost of the battery.
Moreover, for as much criticism as Tesla is receiving, it’s important to note that the company has been outselling both Nissan and General Motors (NYSE:GM), despite a price tag that is almost twice that of its competitors. And it’s hard to blame these consumers…
The Model S not only can out-accelerate almost every other car on the road, but the construction of its model also allows its passengers to sit on top of the flat battery pack. MIT Technology Review reports it comfortably seating five adults with two kids in rear-facing seats, leaving plenty of room for storage.
Only time will tell if Tesla will ultimately succeed. Many doubt the company’s management and its ability to overcome inefficiencies; however, it is possible its risks will pay off in the long run. While most automakers employ the more specialized and expensive battery cells, Tesla is taking a different approach with its cylindrical type of battery. If its use of the less expensive battery leads to a successful progression that allows Tesla to amp up productivity levels and increase consumption, the percentage of the population who can afford its vehicles may continue to increase.
Investing Insights: Can Tesla Recharge Your Portfolio?