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Former GM Product Czar: Tesla a "Fringe Brand"
cartechboy writes There's been plenty of skepticism when it comes to Tesla. The Silicon Valley startup unveiled an all-electric car that stunned the world and had many other automakers rolling their eyes. Fast forward to 2014 and Tesla's preparing to launch its third model, the Model X. Production of the Model S sedan is humming along, and this new automaker continues to make headlines multiple times a week. Industry veteran Bob Lutz was the champion behind the Chevrolet Volt, and has been quite vocal about Tesla from the beginning. So what's his view on the company now? He said Tesla will remain a "fringe brand" until it launches its next generation of vehicles and the smaller, less expensive Model 3. Speaking Wednesday on CNBC's "Squawk Alley" finance show he said that Tesla's stock price was "kinda high" at the moment.
"First they ignore you, then they laugh at you, then they fight you, then you win."
It's a fringe brand in that Ferrari is a fringe brand. I don't think most people wouldn't want one but I don't know a soul who has one. Very few have seen them. They aren't exactly a larger brand. IF they can mass produce a model in a reasonable price range comparable to a modern model of car it will take off. Right now it is in the fringe but I don't think it will stay there. That's exactly what the guy in the article said. He didn't say Tesla was a bad idea or that it won't take off, he said it's not there yet but this next model could very well take it there.
It will be exciting to see where we go from here.
Well from GMs perspective, until Tesla gets a Government Bailout they will remain a fringe brand.
Tesla actually has a significant profit margin per car sold (25%) versus GM at 0.7% for this latest quarter across all of their divisions. That's where the massive disparity comes from. When you can sell luxury cars at a much higher price with much higher margins, volume doesn't mean dick.
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What's wrong with calling Tesla a "fringe brand". Sorry but if you can afford a Tesla you ARE on the fringe!
I don't think that really says anything bad about Tesla itself. Any new car company in the US that can survive as long as Tesla has in the face of the big three has nothing to be ashamed of. The fact that the cars are relatively expensive.. of course they are! They aren't as mass produced as other cars are! Now if Tesla manages to get their cars to a point where they are no longer fringe and a regular person can and is likely to purchase one... that would be awesome! Even if they never get that far, even if Tesla closed up shop tonight I'd say lasting this long in the face of super entrenched and government supported incumbents was a good accomplishment.
GM market cap 51.8B
Ford market cap 58.44B
Tesla market cap 30.66B and this is after a major drop in stock price, I believe it has been higher than GM !
A fringe brand that is worth over half of the big auto boys... Fringe my a..
If only any other brand got rave reviews like Tesla is getting. Specially in customer satisfaction.
Market cap is nothing but a virtual valuation based on how investors value future revenue. It's basically a bet that the company will continue to grow profitability at an increasing rate. In the case of Tesla, there is a lot of cheer-leading investors in the stock. To maintain that level of growth, Tesla does have to come out with a product that is appealing to a much larger audience than the current product offerings. Today's investors are betting on a mass appeal product, that people will buy the product, and that Tesla will gain a decent share of the overall automobile market.
The point that the ex GM Czar makes is correct. Until Tesla can execute on this vision, they will remain a fringe or niche brand. There is a risk that Tesla will screw up in execution, misunderstand the market, etc. Only time will tell if they can succeed.
Tesla actually has a significant profit margin per car sold (25%) versus GM at 0.7% for this latest quarter across all of their divisions. That's where the massive disparity comes from. When you can sell luxury cars at a much higher price with much higher margins, volume doesn't mean dick.
You don't understand their business models.
If Tesla is claiming a 25% margin, then that's solely on the direct cost of the car and doesn't account for overhead such as the capital depreciation. It doesn't matter how much money they make over the direct cost of the car, what matters is the profitability, money left over after ALL expenses of the company. In accounting circles that's called Net Margin, and Tesla has not has a positive net margin in it's history; they are burning cash to claim market share. That only works for so long.
Last year Tesla lost $75M, which is an improvement over the $350M they lost last year and the $250M they lost before that:
http://finance.yahoo.com/q/is?s=TSLA+Income+Statement&annual
GM makes .7% on their cars. This is a bid for market share. That's ok though, because GM doesn't make money selling cars. They make money on *financing* cars; their auto loan and lease divisions are the real money generators; the physical cars are just an entry point. GM made $5B last year, which was a 3.4% net margin over gross revenues.
I'm a fan of Tesla, but seriously if you're going to make a comparison at least get the facts right and don't obfuscate it with pointless numbers.
Tesla made 750m in profits last year off of 40,000 Model S sales.
GM made 31.8m in profits last year off of 130,000 Nissan Leaf sales alone.
Tesla is generating 3 billion dollars per year in revenue, and of that 750 million is profit.
All of GM combined is generating 155.42 billion dollars per year in revenue, and of that 1.087 billion is profit.
If Tesla sells an additional 18,000 cars per year (58,000 total), they will surpass GM's Combined Yearly Profit.
That is why Tesla is doing well in the stock market, considering that they don't need much staff to build their products, they just build what is already sold, and they don't need to sell many cars to generate a lot of profit for their investors.
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