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Summary:

While Tesla hasn’t made a profit and doesn’t plan to for at least two years from now, the world needs a lot more Tesla’s to emerge in order to get it on track to remaking our energy infrastructure away from fossil fuels.

Electric car startup Tesla Motors made history last week when it delivered the first IPO for a U.S. car company since Ford Motor’s public debut more than half a century ago. While Tesla hasn’t made a profit and doesn’t plan to for at least two years from now, the world needs a lot more Tesla’s to emerge in order to get it on track to remaking our energy infrastructure away from fossil fuels.

Tesla itself might not even end up a success story. While its shares soared over 40 percent on the first day of trading, its stock price has now drifted back down to a more reasonable $19.20 (it started trading at $19 last week). My guess is that you can expect the price to trend even lower and Tesla’s stock will likely mirror lithium ion battery maker A123 Systems’ descent from above $20 after going public in September, to below $9 today.

One of the reasons I think the stock price will slide will be due to the fact that Tesla has a major gap in revenues coming. It won’t be selling (or even producing) its next-generation electric sedan the Model S until 2012, it will stop selling its current Roadster in 2011, and won’t sell the next version of the Roadster until a year after the Model S goes on sale. As Tesla put it in its S-1: “Prior to the launch of our Model S, we anticipate our automotive sales may decline, potentially significantly.”

So why is Tesla, a startup that has only sold a little over 1,000 luxury electric cars at $100,000 a pop, and won’t deliver profits for years so important? First off, with a successful IPO under its belt, the venture-backed company has proven that early investments in a risky electric vehicle startup can pay off. At the IPO asking price of $17 per share, Tesla founder, CEO and major backer, Elon Musk’s percentage of the company was worth $481.1 million. Venture investors Technology Partners and Draper Fisher Jurvetson saw their shares worth around $50 million each.

But beyond the economics for the early risk takers, Tesla and its IPO, has managed to capture the imagination of investors and the market. Tesla’s vision — to use an electric sports car to create mass appeal — is such an utterly cool concept that, as Marketwatch reported last week, it drew interest from investors from all over the globe, from Bahrain to Australia.

A similar amount of excitement surrounded an IPO that kicked off the dotcom boom in 1995: Netscape. The Netscape IPO “mesmerized investors,” as this Fortune article put it and “More than any other company, it set the technological, social, and financial tone of the Internet age.”

The same could be said for Tesla’s IPO and I think it will pave the way for many more greentech startups to follow suit. Ray Lane, a venture capitalist with Kleiner Perkins who backed electric vehicle startup Fisker Automotive (a Tesla competitor) said last week that Fisker, like Tesla, would at some point plan to sell shares in the public market once its vehicle was on the road. A variety of entrepreneurs and greentech venture capitalists that I spoke with last week saw the Tesla IPO as a very positive sign for their companies’ future success.

After Netscape’s IPO it later lost the famous “browser war” to Microsoft. Tesla, too, will have a long road ahead and will no doubt struggle as a company. But its successful IPO has marked a beginning of the larger world taking notice of new innovation and opportunities for greener cars.

And the reality is that we need a whole lot more of these IPOs and success stories if the world is going to remake the fundamental building blocks of transportation, electricity generation, and energy consumption. To build the needed infrastructure to ween the world off of fossil fuels and reduce carbon emissions we will need thousands of Tesla’s.

  1. Totally agree. The next two years are going to be irrelevant stock-wise as Tesla has nothing to back it up. Model S will still be the first reasonably priced EV with a long range (300 miles).

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  2. Agree with some of this, especially the 2 year lull and how that shouldn’t affect Tesla’s long term prospects. Not sure about the comparison to Netscape though. Tesla has a lot more competition, a less differentiated product, and is not available to the masses. Nor is it the only, or most succesful, innovator – look at the Prius.

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  3. Ronald Stepp Tuesday, July 6, 2010

    “…the world needs a lot more Tesla’s to emerge in order to get it on track to remaking our energy infrastructure away from fossil fuels.”

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  4. Ronald Stepp Tuesday, July 6, 2010

    Sorry hit submit by accident, to follow up on what I quoted, um, you do realize that the Tesla uses electricity, which is not magically provided by volt elves?

    That energy comes from traditional sources, and if we get many more Tesla’s we will need even more traditional sources of energy, in this case, coal again.

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    1. Absolutely! I keep reading all these green tech articles about electric cars with no mention about how the electricity grid is going to keep up with demand. With the heat wave going through the North East right now the electric power grid is strained providing power to all those air conditioners. We’ve had at least one brown out this week. Imagine if everyone EV owner now coming home and plugging in to re-charge!!! I imagine that fossil fuel usage will increase with the increased use of electric cars.

      That being said, I also expect that alternative power sources ( I love Stirling Engine type solar power generation ) will become even more critical for our future.

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  5. @Ronald Stepp You do realize an EV uses 1/10th the energy compared to an ICE?? Obviously not, otherwise you wouldn’t make such banal comments. And Coal generates less than 50% of US energy… don’t be so ignorant!

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  6. [...] been acquired with the proper frameworks in place.  Lets take a recent example of the high profile IPO of Tesla. The PayPal Mafia is a great example of how to take care of the people that make the company [...]

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  7. The entire auto fuel consumption debate is based on one hugely flawed assumption: That people will drive the same number of miles regardless of the efficiency of their car.

    If my fuel efficiency increases, all that means is that I can drive more miles for the same amount of money. That’s all it means. It does not mean I will use less fuel.

    I doubt that there is any means to capture data to compare fuel efficiency against total miles traveled, but it would certainly be interesting.

    @tsport100: The efficiency of the EV is irrelevant. You need to compare the efficiency of the ICE to that of the power plant. According to Wikipedia, both ICEs and steam turbines used in power plants have a maximum theoretical efficiency of around 35%. Drilling for oil and natural gas, and mining for coal are all environmental disasters, as is the storage of nuclear waste. Alternative power sources won’t come close to providing enough electricity for decades, if ever.

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    1. Don’t forget that power lines add another 5-7% to the losses.

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    2. “If my fuel efficiency increases, all that means is that I can drive more miles for the same amount of money. That’s all it means. It does not mean I will use less fuel.”

      Huh? I’m not quite sure I follow your argument there. People drive for a reason. For most of us, that means getting back and forth to work. Just because I have a more efficient vehicle doesn’t mean I’m going to drive further to work. I’m suddenly taking the long route because I’m getting a few more miles per gallon? If I have a more efficient vehicle, that means I will use fewer resources while commuting to work and doing the same stuff I’ve always used a car for.

      As far as the efficiency numbers involved, you need to include the cost of drilling, refining, transporting and pumping gas to the internal combustion side of the story. It’s cheaper to generate and distribute electricity, and EVs are several times more efficient than gas powered vehicles. Look up “Well to Wheel” studies if you want some facts on that.

      And finally, remember that electricity can be generated by wind, solar, hydroelectric, geothermal and other renewable sources. Coal only counts for about 50% of the national average and as our sources of electricity get cleaner, so will electric vehicles. EVs aren’t perfect for every situation, but they’re a very good step towards cleaner, more efficient transportation.

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  8. Where do you guys get this crap?

    Tesla is a great battery surrounded by irrelevant hardware. You feel-good investors scare heck out of me. Since when is feeling better more important than putting money into things that pay you back.

    Tesla is WORSE than a failure. It is a failure propped up by over $600M in FEDERAL GRANTS AND LOANS.

    Do we really need to expend scarce government resources on a 2-seater sports car that retails for over $109,000? Or failed solar projects? Or failed seawater conversion technologies?

    From now on, my $$$ will be spent with Republican VC’s.

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    1. Tesla is getting loans from the government that it has to repay (with interest). There are no grants involved, and the American Taxpayer will make the $450M (not $600M) back plus interest. THEY HAVE TO PAY THE MONEY BACK. IT IS A LOAN, NOT A GRANT. Their car is expensive primarily because it is new technology (dozens of new patents applied for on the Roadster). Remember how expensive computers and cell phones were when they were first introduced? All of the tech in electric vehicles will get less expensive as it is perfected and produced in larger numbers, but you have to start somewhere. People always hold up the Model T as an example of an inexpensive “people’s car” but few realize that Henry Ford made the money to produce the Model T from investors and by selling a very expensive gentleman’s car first, and then using the profit from that. Tesla is pursuing a very similar business model.

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  9. Why The World Doesn’t Need More Teslas

    Tesla proved adept and milking local, state, and federal governments for grants and tax credits while producing an expensive electric vertical with limited appeal, enough unfortunately to attract hapless investors to the IPO.

    Even the car itself isn’t a advance in technology. The heart is a vehicle, the battery, is a conglomeration of standard Li-ion cells. Hardly a breakthrough.

    What is really needed are start-ups with good ideas with at least the potential of widespread acceptance, all without the taxpayer accepting all the risk.

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  10. Dear TSport,

    Where do you come up with this silly stuff? 1/10 the amount of energy consumed by a ICE?

    Power’s got to come from somewhere, sport, and it still looks like coal or oil to me.

    A shame you feel-good liberal investors don’t get behind nuclear again. Now THAT is a power source that’s both green AND practical!

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