“Is the Tesla Model S the best car ever? We wrestled with that question long and hard. It comes close. And if your needs are confined to the Tesla’s driving range, it just may be…” noted Consumer Reports in its glowing review of the vehicle.
Riding on the back of Wednesday’s euphoric first-quarter earnings report — which revealed that the electric vehicle manufacturer generated its first quarterly profit after 10 years in business — was Consumer Reports’ assessment of Tesla’s (NASDAQ:TSLA) Model S sedan.
Following after-hour gains of as much as 9.39 percent on Wednesday, shares rose as much as 35 percent, to $75.77, on Thursday after the iconic ratings magazine gave the vehicle a near-perfect score of 99 out of 100, citing the electric car’s power, “pinpoint” handling, and its quiet, well-crafted interior. This is the highest rating of any vehicle the magazine has ever reviewed. It is “truly a remarkable car,” the assessment concluded, although the magazine did note that the Model S is still limited by the inherent constraints that all electrical vehicles are: its battery can take hours to fully charge, which complicates long distance travel.
Here’s how Tesla’s stock has traded this week:
Tesla’s Model S has been hit with several accolades this year. Motor Trend declared the electric vehicle its 2013 Car of the Year, an award the magazine has been conferring credibly for the last 60 years.
But, accolades can only take a company so far. The real question is how enduring sales of the Model S can be. Wednesday’s first-quarter earnings report showed the company delivered almost 5,000 vehicles during the three-month period, and Tesla has estimated that it will exceed its prior target of 20,000 worldwide deliveries this year. The company has even set targets for the production of 100,000 vehicles, then 200,00 vehicles, and finally 300,000 in the next few years.
However, even though Chief Executive Officer Elon Musk has pledged to squeeze expenses so that a version of the $60,000 Model S can be offered for approximately $30,000 within the next few years, the vehicle is still a luxury product, no matter how many elaborate calculations try to make it seem affordable. Sales have been improving, but Volkswagen’s Audi, Bayerische Motoren Werke’s BMW, and Daimler’s Mercedes-Benz buyers may not be switching brands in big numbers. These results may just be Tesla tapping the most enthusiastic community of early adopters.
Even worse, Tesla’s sales are becoming less transparent, making that question of whether the vehicle has a large growth potential harder to answer. The company said it has decided to stop reporting the size of its reservation list because its production system is now smooth enough to fulfill orders quickly, making the list less important. However, skeptics worry that this is actually a sign that new orders are not coming in at a strong rate; reducing disclosure is not usually a good sign.
Another important question loams on Tesla’s horizon: will the electric vehicle maker get bought out? As Musk told Bloomberg Wednesday, his company would be a very expensive purchase, but it could look good to somebody. “I’d guess it would come from outside the auto industry,” he said. “It would be a buyer with a very large cash position.”
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