Yesterday Tesla, the electric vehicle (EV) start-up, reported a third-quarter loss of $34.9-million compared with a loss of $4.6-million in the same period last year (all figures in U.S. dollars). Apparently investors love EV companies that lose money: the stock went up 19.2 per cent, closing at $29.36.
It's a strange world when a small, unproven, never-profitable, speculative investment like Tesla becomes more valuable on bad news. But this is the weird capitalist world in which we live. I mean, Tesla's sales went down to $31.2-million from $45.5-million in the third quarter a year ago - and the stock went nuts.
To be fair, chief executive officer Elon Musk told Bloomberg News, "Attaining quarterly profitability isn't a goal. We're very focused on long-term profitability."
Long term appears to mean at least two years from now. Tesla, Musk said, plans to "spend heavily" over the next nine quarters to get the Model S EV sedan ($57,400) into production by mid-2012. Tesla is also working with both Toyota and Daimler in its efforts to become an EV company with lots of juice.
Still, there are many question marks about the future of EVs. J.D. Power and Associates, for instance, doesn't think gasoline-electric hybrids and battery electric cars will catch on in a big way over the next decade and offers plenty of reasons why.
In the big picture, at present fuel is cheap (about $82 (U.S.) a barrel today), "green" technologies remain in their infancy (and very expensive) and governments have not put in place co-ordinated policies designed to push buyers into hybrids and battery cars - and they're not likely to do so during this decade in any substantial way.
"Based on our research of consumer attitudes toward these technologies - and barring significant changes to public policy, including tax incentives and higher fuel economy standards - we don't anticipate a mass migration to green vehicles in the coming decade," says John Humphrey, senior vice president of automotive operations at J.D. Power.
The report, "Green Drive 2020," says the biggest obstacle to green vehicles is cost.
"While many consumers around the world say they are interested in HEVs and BEVs for the expected fuel savings and positive environmental impact they provide, their interest declines significantly when they learn of the price premium that comes with purchasing these vehicles," says the report, citing the typical $5,000 (U.S.) price premium for a hybrid.
Potential customers say they are unable to determine the overall cost of ownership of hybrids and battery cars - from the value of fuel savings to the resale value of green cars.
This latest J.D. Power report raises the obvious question: are hybrids just hype and are battery cars nothing more than a waste of money for car makers, given the tiny potential market for green vehicles? Makes you wonder if the Chevrolet Volt and Nissan LEAF really are nothing more than marketing exercises, rather than real products aimed at real customers, designed to deliver real profits.
And it certainly makes one wonder why Tesla's share price took a jump on news of significant losses and a big revenue decline. What do these investors know that does not seem particularly obvious?
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