“If you’re driving a Tesla, it changes your life. This thing is an incredible wonder,” said CNBC’s Jim Cramer on “Squawk Box” Friday morning, regarding his Tesla (NASDAQ:TSLA) test drive. “I’m not talking about the stock, I’m talking about driving the car.” Consumer Reports is in agreement. The iconic ratings magazine gave the vehicle a near-perfect score of 99 out of 100 in its May issue, citing the electric car’s power, “pinpoint” handling, and its quiet, well-crafted interior.
Chief Executive Officer Elon Musk, the mind behind Tesla, explained just how powerful a tool testing driving one of the company’s vehicles has been for sales growth. About 25 percent of people who test drive one of the company’s vehicles eventually purchase one, he said on CNBC, which is a “really high conversion ratio.”
“The stock is a cult stock and it’s really difficult to figure out where it can go,” Cramer added. “When you get behind the wheel, you want to get behind the stock. I’m trying to distinguish that. I’m saying that’s not the right thing to do.” Since the company report its first quarterly profit in its ten-year history, Tesla’s stock has skyrocketed above $100 per share. Since the beginning of the year, shares have gained more than 200 percent in value. This massive jump has prompted analysts to question whether stock price has risen too much too fast.
But Dougherty Company analyst Andrea James has argued that the company’s potential to become a large-scale, lucrative automaker has made investors price the stock differently. “Tesla is not trading the way normal auto company would … But that’s fitting because it’s not a normal auto company,” she noted. This assessment indicates that the brand’s cult appeal has placed the company’s stock in a category unto itself.
Tesla has all the markings of a cult brand as well; Musk alleged on CNBC that the electric car manufacturer’s core customer base was comprised of drivers who want “the best car in the world.”
In order to be a cult brand, exclusivity is a must, and Tesla has that quality in spades. Its Model S Sedan comes with a $60,000 price tag, and its expanding network of charging stations are restricted to just Tesla-branded vehicles. The company announced Thursday that it plans to significantly increase the number of electric-vehicle charging stations near key U.S. cities over the next several years. But drivers of Nissan’s popular all-electric Leaf — the electric vehicle of choice for the middle class — will not be able to use the Tesla superchargers. Comparatively, Tesla vehicles can use any public charging station.
While Musk is pursuing a walled-garden policy for the charging stations, he does recognize that in order to boost sales figures, Tesla needs more affordable vehicles in its lineup. For those car aficionados who want “the best car in the world,” but cannot afford one, Tesla has arranged auto loan financing that makes the Model S “accessible to 5-10 million households,” according to the chief executive. Also, Tesla hopes to release a model that costs approximately half the $60,000-price of the Model S.
An advertisement outlining the expansion of the charging stations, which will number around 100 by the end of the next 12 months, reinforced the company’s commitment to both sustainability and an affordability of sorts. Musk’s voiceover explained that the super-charging stations will be “free forever,” noting that to drive across country in an electric-powered Tesla, a drive can pack some food, stay with friends, leave their wallet at home.
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