Tesla Motors, Inc. (TSLA) has caught the imagination of investors who have bid up the electric car manufacturer’s share price from a scant initial public offering price of $17 in 2010 to more than $200 today. Elon Musk, Tesla’s visionary CEO, and its stylish cars, have generated continuous publicity for the company, but is Tesla stock still a good pick?

Green Luxury

So far, Tesla has introduced two cars. The Roadster, a high-performance sports car, started at $109,000, while the newer Model S, a luxury sedan, has a base price in the range of $62,400 to $72,400. Both cars appeal to the tech-savvy, entrepreneurial, upper income male driver.

Tesla also has plans to eventually manufacture affordable electric cars for the mass consumer. Tesla is looking to benefit from the energy efficiency of its electricity fueled cars. According to the company, the Model S saves its owners as much as $1600 a year in fuel charges compared to a traditional combustion engine car.

Musk expects to follow up the company’s Model S electric car with the Model X, a seven-seater car that will fill a market need for a vehicle that falls somewhere in-between a minivan and an SUV. The Model X is scheduled to be released in the fall of 2015. Beyond that, Tesla is also aiming to introduce a Model 3 car that is more geared to the mass market. The Model 3 is expected to hit the market in 2017. And, in addition to using them in its own cars, Tesla also provides electric powering components to other car manufacturers, as well as battery systems for residential and commercial use.

Charging Network

In order to facilitate charging, the company is building up a network of charging stations on major highways in the United States as well as overseas in Asia and Europe. There are also plans for such charging stations at other strategic locations, such as hotels. Tesla has also partnered with Panasonic to build a factory for battery production near Reno, Nev., so that it can better control costs and the production process.

Tesla also has some other advantages that help keep its costs down. It receives credits from the government under several environmental programs, including one for zero-emission vehicles. And thus far, the futuristic designs of its first two cars have been so eye catching that the company has not needed to spend much money on marketing and advertising.

Potential Minefields

The first Teslas were delivered in 2008. Given that these cars have not been on the road for long, they have yet to prove themselves over the long haul. There are a number of risks that investors could run into. For one, the company has to deal with various parts suppliers and any unavailability of parts could disrupt its production. Some states, such as Texas, have not granted Tesla a dealer license to allow it to sell directly to buyers. Tesla has developed workarounds, like selling over the Internet, in such states.

And of course, Tesla faces major competition in the electric car market. BMW, Daimler, Nissan, Ford, Mistubishi, and Fiat all have offerings in this niche. Volvo, Volkswagen, and Porsche also have plans for electric cars. There is also foreign competition from Chinese and other manufacturers who will likely have a significant cost advantage.

Also, if oil prices eventually stabilize at lower levels as a result of fracking ,or any other sources that increase oil supplies, Tesla’s cars could lose a part of their allure.

The company had its first profitable quarter in 2013, reporting net income of about $11 million, or $0.12 per share, for the first quarter of the year.  However, as of the third quarter of 2014, the company had a net loss of $74.7 million, or $0.60 per share. 

The Bottom Line

There is great potential for investors to reap good returns if Tesla lives up to its promise. But the technology behind the cars is still new and it is not clear how these vehicles will hold up in the long run. It also remains to be seen how the affordable mass market Model 3, which Tesla is betting on for profitability, will play with average consumers. While the company has been steadily growing its revenues, it is still operating at a net loss and has not generated profits for shareholders. Thus, there is not much likelihood of a dividend anytime soon, and shareholders will have to hold on in hopes that Tesla’s cars catch on.

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