) growth story has been spectacular with shares jumping more than
fourfold in 2013 itself. The company is now valued at more than $20
billion. After winning over customers in the U.S., the automaker is
set to make its European debut. Tesla officially released its Model
S at the recent Frankfurt Motor Show and even installed a
Supercharger in the city.
In fact, by the end of 2014, Tesla plans to build a pan-European
network of chargers. There will be at least one Supercharger within
200 miles of every person in Europe. Tesla's Model S has a
higher battery range - 230 miles or 300 miles, depending on the
model variant. Superchargers are charging points installed by
Tesla that allow the company's customers to charge their car
batteries for free.
Helped by the European expanson, Tesla hopes to sell Model S at
an annualized pace of 40,000 by the end of 2014. In Norway
alone, the automaker expects to sell 800 vehicles this year. The
Supercharger stations are already up and running at select places
in the Scandinavian nation.
Germans Pile On The Pressure
But Tesla is not alone to debut its electric vehicle. BMW showed
its i8 plugin supercar - at a staggering $135,000 before any
government incentives. Unlike Model S, it is not a pure electric
but has a range of 310 miles in the hybrid mode. BMW also
introduced the i3 which will hit the showrooms in November. The
price of the cheapest model will be about $50,000.
Volkswagen debuted a couple of fully electric vehicles as well.
The first is the electric version of Golf or the e-Golf with an
electric range of 120 miles. The pricing of the car has not been
announced. The second is the e-Up ! with an electric range of
100 miles, that starts at 27,000 euros (~$35,500).
Tesla does have an advantage over its rivals in terms of the
electric range and the availability of the Supercharger network but
its Model S is more expensive than most other electric/hybrid cars
in the market. Europe will be a big test for Tesla since the
general public has long been loyal to its home brands.
See full analysis for Tesla Motors
a $84 price estimate for Tesla to $84
, which is about 50% lower than the current market price.
We have a pretty high discount rate of 14% for Tesla. The
weighted average cost of capital (
) yields a figure of 8-9% depending on the assumptions you make.
However, we feel that projecting annual sales of 300,000 units for
a product such as Gen III that is yet to be launched holds a
There could be a few hiccups down the road, ranging from
problems in production ramp up to increased competition. Any
negative publicity or unreliability issues down the road erode the
sheen of the Tesla brand name, that looks invincible at the
moment. The fairy tale might not go as per the script.
Lowering the discount rate to about 9% will raise our price
estimates to about $165, the level at which the company's shares
are trading currently.
How a Company's Products Impact its Stock Price at Trefis