Sun, Apr 16, 2017 - Page 15 News List

Tesla’s meteoric rise has even fans looking for feet of clay

By Neal E. Boudette  /  NY Times News Service

A Tesla dealership is pictured in Brooklyn, New York, on April 4.

Photo: AFP

In the past four weeks, exuberant investors have driven up the share price of Tesla Motors Inc, putting the upstart in the league of car companies that have been in the business for a century.

However, there are others who think Tesla, for all its potential, has become an overpriced investment — and something of a risky play in the near or medium term, given the challenges of turning battery-powered cars into mass-market products.

Among the skeptics are some of Tesla’s biggest fans.

Take Dennis Pascual, a tech industry consultant in Long Beach, California, and owner of two Teslas — a Model S sedan and a two-seat Roadster, the first car Tesla put on the road. He is such a fan that he has put down deposits to buy two Model 3 compacts once Tesla starts making the car this year.

He also owns some Tesla stock, but is not about to buy more.

“It’s a little pricey for me to jump back in,” he said, speaking by telephone from his Model S. “Right now, I think we’re in a hold.”

Moreover, he worries about Tesla’s ability to carry out the bold expansion plans it has for this year and next.

Tesla’s high-profile chief executive officer Elon Musk has said the company expects this summer to begin production of its first mass-market offering, the Model 3, ramping up to 5,000 cars per month by the end of the year and driving output to several hundred thousand cars over the course of next year.

“They really need to deliver and that has me concerned,” said Pascual, who has worked at start-up companies and has years of experience in the technology business. “I’m bullish long term, but yes, I’m worried. I’m always worried about companies executing.”

Tesla’s market surge has been extraordinary. Since March 13, its shares have risen 25 percent, in a period when the S&P 500 Index has declined slightly.

Along the way, the market value of Tesla, which last year sold fewer than 80,000 cars and does not yet generate steady profits, has grown to US$50 billion — roughly equal to that of General Motors Co (GM), which sold more than 9.8 million vehicles worldwide and earned US$9.4 billion.

That Tesla and GM are comparably valued is “totally inexplicable,” dealership chain AutoNation chief executive Michael Jackson said on Tuesday at a conference in New York.

He said that Tesla “is either one of the great Ponzi schemes of all time” or will somehow work out for investors.

The run-up was fueled in part by some encouraging signs that Tesla’s Model 3 is proceeding on schedule.

Early this year, the company began production of batteries at its gigantic new plant in Nevada, known as the Gigafactory. Then it announced that Model 3 production would start in July, despite concerns among some analysts that the debut would be delayed until late this year.

A smooth Model 3 rollout could propel Tesla to new heights. It has customer deposits of US$1,000 for about 400,000 orders of the new model, which is priced at US$35,000, making it affordable to far more buyers than Tesla’s existing models, which go for US$90,000 with options.

There have been other positive notes.

Last month, Tesla reported a loss of US$121 million in the fourth quarter of last year, but that was smaller than its loss in the same period of the previous year.

On April 2, the company announced it had delivered more than 25,000 cars and sport utility vehicles in the first quarter of this year, an annual rise of about 69 percent, prompting investors to pile into the stock.

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