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Tesla Is Facing Headwinds, Time for a Road Trip

The electric vehicle maker kicks off a cross-country tour to display two new versions of its luxury sedan.
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/ Source: The Detroit Bureau

As the brothers from Animal House's Delta Tau Chi frat all knew, in times of trouble there’s nothing better than a road trip. Apparently, that lesson isn’t lost on Tesla Motors, which this weekend is launching its “Double Black Dual Motor Tour” to 10 cities across the U.S.

The road trip is meant to show off what the California battery-carmaker describes as the “exhilarating performance and unprecedented acceleration” of two new versions of its high-line luxury sedan, the Model S.

But it also comes at a time when Tesla is facing some mounting problems, including a sharp slump in its once high-flying stock price, delays in its product program, fierce resistance to its plan to set up a nationwide network of factory-owned dealerships – and even a new threat from General Motors which could beat Tesla to market with a more affordable, long-range battery-electric vehicle.

The Double Black Tour will take Tesla to some of the few solid markets in the country for electric cars at a time when cheap gas has pulled the rug out from under the plug-based vehicle market. Stops along the way include San Francisco, Los Angeles, Dallas, Miami and New York City. All told, roughly two-thirds of all plug-based products are sold in the regions along the route.

Tesla’s Model S sedan – which can cost more than $100,000 when fully loaded – is one of the struggling market’s top sellers. And the Silicon Valley carmaker is hoping to increase its appeal with the debut of the 85D which adds all-wheel-drive, and the P85D which also boosts performance. Launching from 0 to 60 in just 3.2 seconds, the latter model is about as fast as a McLaren P1 supercar, Tesla CEO Elon Musk likes to boast.

At a starting price of $105,000, it’s questionable just how much more volume the new P85D will deliver for Tesla. All told, the maker delivered 31,623 vehicles worldwide last year, up about 10 percent from 2013 sales.

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Slower demand overseas

But it had been expecting to end the year on a bit stronger note. The problem, Musk has acknowledged, is that demand has been running slower than expected overseas, especially in China, despite that country’s government-led push to increase demand for EVs. That news was a key reason why Tesla stock tumbled from a 52-week high of $291.42 to less than $200 before rebounding slightly in recent weeks.

"We are here to stay."

"We're bringing out all-electric cars in a gasoline car industry. It's a pretty challenging mission," said Tesla spokeswoman Jamee Hawn. She said that Chinese consumers had a misperception about the availability of charging stations, which are becoming more available. "That's why we're bringing superchargers to the big cities."

It also didn’t help that Musk told a Detroit audience last month that Tesla wouldn’t deliver a profit under generally accepted accounting procedures before 2020. Much of its revenue stream is being directed towards new products. But even there the company is struggling. Its next vehicle, the Model X SUV, is now expected to debut in the third quarter of 2015, more than two years behind schedule.

And that leaves uncertain the timetable for Tesla’s first mainstream offering, dubbed the Model III, that is expected to come in somewhere around $35,000. General Motors hopes to get ahead of its upstart competitor. reported Friday that the Detroit maker’s Chevrolet Bolt concept vehicle, unveiled at the recent Detroit Auto Show, will go into production in October 2016. It also will target a $30,000 price tag and, with a planned 200-mile range, could overcome the so-called “range anxiety” analysts blame for holding back battery-car sales.

Tesla has other problems, including the limited success it has had setting up factory-owned showrooms. A number of states have blocked that move in favor of the traditional, franchise approach. Tesla lobbyists are pressing hard in Arizona to win approval of a bill that would permit it to move ahead with its distribution plans.

Tesla still hasn’t lost its luster entirely. Morgan Stanley on Friday ranked the maker fourth in North America on its Global Automotive Stock list. Analyst Adam Jonas declared it “the world’s most important auto company,” though he also noted there are headwinds, including cheap oil and slow Chinese sales.

Tesla has to hope that tweaks to the Model S, and publicity campaigns like the Double Black Tour, can keep momentum on the upswing until it can launch the Model X and prove it has more than one trick up its sleeve.

"We are here to stay," said Tesla's Hawn.

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