The Innovator of Electric Cars

Tesla Motors
Tesla Motors

One of the most groundbreaking vehicles on the road today comes from Tesla Motors. Taking their name from Nikola Tesla, this car-manufacturing firm created the first commercially viable production electric car.

The man moving Tesla Motors into the electric car revolution, is Elon Musk. He is the co-founder and head of product design for the company. His best contribution to date is inarguably the Tesla Roadster. To make this cutting edge technology, this visionary’s history contributed to realizing his vision of changing the world.

Born in the United States of South African and Canadian parents, he bought his first computer at age of 10, that he taught himself to program. At 12, he sold his first commercial software, a game called blaster for $500. After completing his early studies in Pretoria, South Africa, he went to the United States to avoid mandatory military service. He justified his move by saying, “I don’t have an issue with serving in the military per se, but serving in the South African Army suppressing black people just didn’t seem like a really good way to spend time.”

Musk said that he chose the United States because “it is where great things are possible.” He first went to Canada, to his mother’s hometown of Regina, Saskatchewan, when he landed a scholarship to study business and physics at the University of Pennsylvania Wharton School. He obtained his first undergraduate degree in business and the next year his physics degree. He then went to Stanford for the graduate program in applied physics and materials science but dropped out after two days.

His first foray into commercial success was the creation of Zip2, an online content publishing software for news organizations. He created this business with his brother Kimbal Musk, where it was later purchased for U.S.$307 million in cash and U.S.$34 million in stock options to Compaq’s AltaVista. The proceeds from this sale were used to create X.com, the first online financial services and e-mail payment company, this later expanded to Paypal.com. The company was later brought by eBay for U.S.$1.5 billion on stock.

Despite his success, he still had in his mind the creation of a commercially viable electric car. His main reason he went to Stanford was to create ultracapacitors that would be able to energy to power an electric car. He was initially diverted into other business interests but he kept coming back to Tesla Motors. During the 2008 financial crisis, he provided the funding to keep the company afloat.

The gem in the Tesla Motors showroom is still the Tesla Roadster. His company has been able to deliver 1800 vehicles to over 30 countries. It is now deep in development for its first four door Model S Sedan and has recently unveiled its plans to produce the Model X, specifically for the SUV/Minivan market.

Aside from creating its own vehicle line, Tesla Motors has existing partnerships to create electric power train systems for Daimler for its Smart EV and Mercedes A Class line. Also in its fold is Toyota, where Tesla would create power trains for the first fully electric RAV 4.

Musk’s work on electric cars has been compared to Henry Ford in the early automobile era. The advances spearheaded by Musk on electric power trains has become the market standard and his high end Roadster is still considered the top of the line electric vehicle in its class. He is now in the midst of making the electric vehicle affordable to the common person. Elon Musk is a true electric car innovator, probably the best of his generation.

Tesla Motors Floatation

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Despite the fact that Tesla Motors, one of the best-known electric car manufacturers in the world, has yet to make a profit, the company will be floating on the U.S. stock market today with a value of US$1.25 billion. The company is offering 13.3 million shares at a price of US$17 each, which will see the company raise around US$260 million. Of the 13.3 million shares on offer there are only 1.4 million from existing shareholders who will retain a significant stake in the company going forward.

Share issue

The Tesla Motors share issue is something which has been ongoing for some time and been eagerly awaited by those in the marketplace. The electric car industry is one which has caught the eye of investors around the world and has seen the company increase its indicative share price range from US$14- US$16 up to the final figure of US$17 a share. There has been massive interest in the company and the share price is expected to do well in early trading.

This is the first U.S. automotive company to float on the stock market since Ford back in 1956 which perfectly reflects what a unique opportunity many people believe that an investment Tesla Motors could become.

Investing for the future

The US$260 million which the company is to raise will be used to reinvest into future production lines and indeed there is speculation we could see the emergence of a competitor to the Tesla Roadster, which has become the most sought after and most popular electric car of all time. This despite the fact that the Tesla Roadster will cost you in excess of USD100,000 - and there is a waiting list for new off the production line vehicles.

When you consider the company took a US$29.5 million hit in the first quarter of 2010, higher than analyst expectations of US$16 million, and has so far lost over US$300 million since inception, this may well seem like a crazy investment. However, the company has reinvested heavily into its production line and its technology and many believe the company is well-positioned to take advantage of the ever-increasing electric car market both in the U.S. and around the world.

Future car releases

Tesla Motors has already confirmed it is looking to put together a mass-market Model S sedan which would have a price tag of around US$50,000 and qualify for various tax perks from the U.S. government. The income from the mass market car would allow the company to stem further losses in the short term from the Tesla Roadster model and put the company's finances on a firmer footing. It will be this ability to take in the mass market and also remain a major player in the niche electric sports car market which would offer investors a potentially unique opportunity.

The beauty of the situation for Tesla Motors is the very fact the company has invested massive amounts of money in its sports car technology which could be used in a mass-market vehicle such as a Model S sedan, thereby reducing both the cost of the vehicle and the length of time required to produce the car.

Tax incentives

There is no doubt that the U.S. government and other governments around the world are now looking towards the electric car market as a potential saviour for the future. The price of oil continues to fluctuate enormously and the recent BP oil slick in the Gulf of Mexico has caused damaging headlines around the world, which will taint the oil industry for many years to come. As a consequence, we are likely to see more tax incentives introduced to electric car manufacturers and consumers in the short to medium term.

There have also been significant developments in the electric car battery sector, but again, government grants and government tax incentives have been duly noted. Many believe that developments in the battery market are the key to the introduction of mass-market highly successful electric vehicles because of their relatively high cost against the overall cost of an electric vehicle and their relatively short lifespan.

The history of Tesla Motors

When you consider that Tesla Motors was not incorporated until 1 July 2003, this is a company which appears to have arrived on the electric car scene at an opportune moment. The company has come on in leaps and bounds since its incorporation and from relatively small funding the company has grown and attracted more and more investment along the way. Private financing prior to the IPO in America was in the region of US$105 million, which is a relatively small amount of money in the multinational markets of today.

There is no doubt that the launch of the Tesla Roadster electric sports car has put the company on the map. There are many celebrities around the world waiting for delivery of their Tesla Roadster and indeed many are already hitting the highways after joining the list at a very early stage. It is this immensely powerful advertising which has caught the eye of more and more people and given the company something of a cult status in the electric car market.

The future of Tesla Motors

The share flotation of Tesla Motors marks a new and potentially very significant stage of the company's development. The advertising and promotion which will come with the floatation would actually cost millions of dollars as the company's name has been plastered across the Internet over the last few days. So far the management of Tesla Motors have invested wisely in this relatively new vehicle and there are high hopes for the future.

Conclusion

When you consider the difficult economic environment in the U.S. and around the world, it is no mean feat for the company to attract massive attention. The initial share price range of US$14- US$16 has been superseded because of increased demand and the shares will now go on sale at US$17 each - there has even been an increase in the number of shares on offer because of investor demand.

There's also the potential for Tesla Motors to put the electric vehicle market on the map and for other companies to follow in due course now that a move to a respected and renowned investment market is almost complete.