Weekly Auto Update: Roadster Relaunch Shows Tesla’s Superiority

Elon Musk of Tesla Motors (NYSE:TSLA) announced via Twitter that the company was planning to relaunch its original electric vehicle Roadster in an upgraded version. ^[1] The company had stopped the production of Roadster three years ago in order to focus on the production of the luxury sport sedan Model S. It had launched Roadster in 2008 and sold about 2,500 units through January 2012. ^[2] The upgraded version of the vehicle boasts improvements in battery technology, aerodynamics, and tire technology. According to a release on the company’s website, the three improvements together can boost the range of the car by 40-50%, meaning that given a certain set of conditions it is possible to travel 400 miles in the Roadster 3.0. ^[3]

This news once again reaffirms the superiority of Tesla Motors to any other car company currently producing electric vehicles. For one, Tesla is the only company producing significantly large volumes of high-end, high-range electric vehicles. Comparatively, all other car companies are still experimenting with low volumes of low-end, low-range, electric vehicles that sell at prices comparable to those of mid-end sedans like Honda’s Accord, Toyota’s Camry, and Nissan’s Altima. Moreover, all these companies are still only expecting to be able to produce a car with a range of 400 miles in a few years and these expectations rest on succeeding in implementing “next generation battery chemistry,” —  something that doesn’t yet exist. Tesla is already producing such cars.

While Roadster is priced in a similar range ($110,000) to the signature versions of Tesla’s Model S, the car has a different look and feel. Consequently, it shall appeal to a different segment of consumers. This should allow Tesla to boost its sales numbers when the car becomes available on the market. Tesla is currently expecting to sell about 33,000 units of the Model S in 2014. It expects to sell 50,000 units next year aided by the launch of the SUV Model X and 500,000 units by 2020 aided by the launch of Gen III in 2017 and the refreshed version of Roadster.

Currently, our valuation of $165 (market cap of $20.5 billion) for the company is about 40% below the current market price of $228 (market cap of $27.9 billion). We expect Tesla to report revenue of almost $4 billion  for calendar year 2014.

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1. Elon Musk Tweet, December 2014 [↩]
2. Tesla’s new Roadster to cover two-thirds more miles per charge, Reuters, December 2014 [↩]
3. Roadster 3.0, teslamotors.com [↩]