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Summary:

Electric vehicle startup Tesla’s IPO-filing last Friday provided industry-watchers with the first real glimpse behind the company’s hip brand and high-profile PR. What they saw wasn’t as pretty as the image: a company that’s lost $236.4 million, sold less than 1,000 cars, and will lose many […]

Electric vehicle startup Tesla’s IPO-filing last Friday provided industry-watchers with the first real glimpse behind the company’s hip brand and high-profile PR. What they saw wasn’t as pretty as the image: a company that’s lost $236.4 million, sold less than 1,000 cars, and will lose many millions of dollars more as it retires its current generation Roadster next year and strives to produce the more mainstream and lower cost Model S.

If investors actually respond positively to Tesla’s public offering, to me, it will mean that in this media-saturated day and age, branding is truly everything. The hip silver (and green) brand, and the company’s claim to fame of being “the first, and currently only, company to commercially produce a federally-compliant highway-capable electric vehicle,” according to its S-1, will have completely outshown investor’s natural instincts to back companies that will be able to generate sustainable profits in the near term.

Tesla’s vision — to use an EV sports car to create mass appeal — is such an utterly cool concept that despite a lot of ups and downs at the company (from the founders feud, to months and months of delays of the Roadster, to layoffs, to slapping Roadster customers with charges for previously standard features, to recalls) most are still rooting for the company to make it.

The company does very little advertising, and has used word-of-mouth and media appearances to create a brand that Ad Age recently declared one of America’s Hottest. Tesla referenced its “Brand Leadership” in its S-1 as one of its competitive strengths — to me it seems like it’s by far and away it’s biggest strength.

But the problem with brands is that they can also be vulnerable. One incident with a battery that blows up, or too long of a delay in production of the Model S, could seriously handicap Tesla’s brand and thus its future. And as Business Week points out when Tesla’s Model S comes out there will be many more competitive brands out there. Nissan will have its Leaf on the market, General Motors will be selling the Chevy Volt and there will be a plug-in version of the Prius. Tesla’s best bet for a successful IPO at this point is to just to maintain its stellar brand, but then again, there’s that whole quiet period ahead.

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  1. Tesla is unknown outside the green and EV sphere, so I would like to see them really advertising the Model S en mass to the public when it is available. The general public are unaware of Tesla (sadly) so the company needs to get to work on this part of the business.

  2. Katie Fehrenbacher Monday, February 1, 2010

    @Mark, that too will take a lot of investment.

  3. I think a good portion of that $236.4 million could be seen as an investment rather than just “lost.”

    Also, have they sold fewer than 1,000 cars or just delivered fewer?

    I agree they may burn through a lot of cash but when the S does come out, it will be a lot more desirable than any of the sedans announced so far. I find the range on those (real world about 70 miles) to be about half of what could help them reach real sales success. Couple that with the styling and a fresh brand? I think it’s definitely worth investing money one can afford to lose even if it only spurs the established companies to try harder.

  4. Monday links: nuanced returns Abnormal Returns Monday, February 1, 2010

    [...] Katie Fehrenbacher, “If investors actually respond positively to Tesla’s public offering, to me, it will mean that in this media-saturated day and age, branding is truly everything.”  (earth2tech) [...]

  5. waltinseattle Monday, February 1, 2010

    no, perception is everything. branding is a means to that. Fortunate for Tesla they are not well known out there. less rocks in the road have slain bigger giants before

  6. Richard Whitney Monday, February 1, 2010

    Batteries are an issue in every product where they are used. The charge runs down before you expect, they require a long recharging time, they only tolerate so many recharging cycles, and occasionally they catch fire. Where are we going to dump all the used batteries? I need to use the heater on my car several months of the year; that heat comes from my engine. What does this car do for heat? Run a heater on a battery?

    1. Batteries in consumer electronics devices have serious issues because they aren’t built to last very long. They typically will charge to 100% and run until completely dead, while sitting right next to heat-generating things like chipsets or hard drives.

      The reason Telsa hasn’t turned a profit yet (different selling the cars at a higher price than cost) is because of the massive amount of money put into R&D for the battery system, and digital motor controls. This is R&D that’s applicable to any future car they develop, so is mostly a one-time cost.

      The Tesla Roadster uses seat-warmers, and efficient resistive heating to heat the cabin when needed, it will also climate-control the car while plugged in to grid power. The battery is also water-cooled/heated to keep it within optimal working temperatures, greatly reducing the effects of external climate on battery range.

      People like to point at headlights and heating/AC as something that will dramatically reduce range. Compared to the demands of the motor, properly designed ancillary systems use almost nothing. Say you have a 1kW heater. In 1 hour of use that will be 1 kWh. 1 hour of driving at 60 mph will be around 15 kWh. that’s less than a 7% increase in usage by adding the heater, which drops the EPA estimated range (range mode) from 244 miles to ~227. Or in standard mode, ~180 miles down to ~163

      Headlights are only 35-50 watts, which is small enough to be nearly insignificant you could leave your lights on in a Roadster for a month without the battery dying.

  7. What a successful Tesla IPO would mean: branding is everything – Viewsflow Monday, February 1, 2010

    [...] Tesla is a weak company with great PR. Will it be enough for a successful IPO?Close [...]

  8. Katie Fehrenbacher Tuesday, February 2, 2010

    @driving98, this is what the S-1 states: “as of December 31, 2009 we had only sold 937 production vehicles to customers, almost all of which were sold in the United States and Europe”

    1. Thanks for that. I really need to make some time to read it for myself.

  9. The Story Behind Tesla’s History-making IPO Tuesday, June 29, 2010

    [...] What A Successful Tesla IPO Would Mean: Branding is Everything [...]

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    [...] In the meantime, however, Tesla has shown that investor appetite exists for a greentech IPO with the right marketing. Tesla increased the number of shares slated for the public offering by 20 percent yesterday, a [...]

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