What will eventually determine whether Tesla justifies its valuation is electric car demand really taking off, said Ben Kallo, an analyst with Robert W. Baird & Co. If the car market is near an inflection point in which battery-powered vehicles become the big draw, then Tesla not only has a lead, but players like GM and BMW have a lot of capital trapped in making gasoline-powered autos that could be in decline.
"If we do make this transition to electric vehicles, the other car companies have stranded capital," Kallo said by phone.
If Tesla stopped trading on potential growth and started trading on profitability, the stock would plummet, Tynan said. Musk would need to raise billions to get to BMW's size. It takes the German car maker about $US59 billion in plants, property and equipment to generate its $US104 billion in revenue. Tesla, by comparison, uses about $US6 billion in plants and equipment to generate $US7 billion in revenue.
As well as giving BMW a run for its money in the markets, Tesla is about to be competing more head-on in showrooms.
The Model 3 will start at about $US35,000 and may typically sell at prices similar to BMW's bread-and-butter 3 Series sedan. BMW has the i3 plug-in hybrid in its lineup and plans to sell an electric version of its X3 sport utility vehicle in 2020. Volkswagen's Audi and Porsche brands also plan to introduce sporty electric cars to test Musk's growth plans.
Not to worry, says Kallo - Musk has a lot of fans.
"I'm not sure if people want electric cars, but they do want Teslas,"
Maybe they don't want that many Teslas in Australia yet as Govt here not sure about their own future !!!
