3 Things Investors Love to Hate About Tesla Motors

"If your hate could be turned into electricity, it would light up the whole world." -- Nikola Tesla 

Tesla Motors was one of the best-performing stocks on the public market in 2013. In fact, shares of Tesla have surged more than 616% in the past year alone, and the stock is back in the fast lane so far in 2014. Still, shareholders aren't the only ones enjoying the ride these days. Tesla Model S owners around the world have also created a cult following for the electric-vehicle maker's cars. That's quite remarkable for a company that primarily relies on word-of-mouth marketing.

TSLA 1 Year Price Returns Chart

TSLA One-Year Price Returns data by YCharts.

In a post on Tesla's blog titled "Finally Something to Hate About the Model S!," a Tesla customer says that after having his performance Model S for six months he finally found something to hate about it. He writes, "Owning the Model S has made me dislike my Ferrari and every other car I once loved. I paid nearly $250,000 for the Ferrari and now I don't really want to drive it." He isn't alone. Thousands of other Tesla customers have shared similar stories since the car's debut in June 2012.

Source: Tesla Motors

It's not surprising, then, that Tesla's Model S sedan recently received the highest customer satisfaction score of any car ever surveyed by Consumer Reports. In its annual auto issue, Consumer Reports gave Tesla a score of 99 out of 100. This California-based company is not your typical automaker, nor is it your average auto stock. However, all of Tesla's success to date has done little to quell the short interest in the stock.

As it stands, Tesla's stock has a short float north of 33%. This means that short sellers, or investors betting against the stock, have sold short about 28.92 million shares or more than 33% of Tesla's total stock today. This is a huge short interest for an automaker. For comparison, shares of General Motors currently have a short float of just 2.21%. Sure, investors are short roughly 24.73 million shares of General Motors today. However, GM has a whopping 1.39 billion shares outstanding, compared to Tesla with just 122.80 million total shares today.

This is because investors love to hate Tesla, even despite the company's wild success thus far.

Production takes a backseat to valuation
Throwing GM into the mix offers a segue into one of the top things investors hate about Tesla Motors: its current production rate relative to its value in the stock market. Tesla delivered a record 6,892 Model S sedans in the fourth quarter, bringing its full-year production rate to 22,477 cars in fiscal 2013. However, that doesn't hold a flame to General Motors' output of 9.71 million vehicles last year. In spite of that, Tesla commands a market cap of $31.4 billion, which is more than half of GM's $60 billion market cap today.

The price of performance
One of the next most hated things about Tesla is the hefty price of owning one of its performance electric cars. With Tesla's Model S starting at a price point of about $70,000, most drivers can't afford to get behind the wheel. However, this hasn't slowed down demand for the company's ride. In fact, customer deposits, or reservations as they used to be called, were up 16% in Tesla's fourth quarter.

Moreover, investors should see demand continue to grow in the quarters to come, as Tesla expands distribution to new markets overseas, such as China. Tesla chief executive Elon Musk has already publicly said that the company will not charge Chinese customers a premium for its cars, unlike the traditional automakers that sell in China.

Lack of EV infrastructure
A lack of electric-vehicle infrastructure in the United States is another major sticking point for Tesla. The company's critics love to argue that driving long distances is virtually impossible in an electric car because of the lack of charging stations. This argument is understandable if you consider the inferior battery technology of rival EVs such as the Ford Focus Electric, for example, which gets just 76 miles of range and costs $39,200.

However, Tesla's Model S boasts a range of 208 miles today. Not to mention that Tesla is creating tremendous value for its drivers by installing Supercharger stations throughout the U.S. The company's Supercharger network now enables Tesla drivers to travel for free along major highways throughout the U.S., Canada, and Europe.

Source: Tesla Motors Supercharger location map.

While gas stations still far outnumber EV-charging stations and will for some time, Tesla is making meaningful inroads in increasing the world's electric infrastructure. Furthermore, Tesla plans to have its Superchargers cover 80% of the U.S. population and parts of Canada by the end of this year.

The lack of EV infrastructure, current production levels, and the price of its cars remain the cornerstones of the bear case against Tesla today. Nevertheless, Tesla's critics should remember that the company is still in the early stages of its growth story, despite the stock's quick rise over the past year. 

More momentum stock picks for Tesla haters
Whether you love it or hate it, Tesla continues to prove the critics wrong. But, if you missed out on the Tesla rally, don't worry. Now you can get The Motley Fool's top six momentum stock picks for the year ahead in this free report. Click here now to get access to the report now, while it is still available -- it's free. 

The article 3 Things Investors Love to Hate About Tesla Motors originally appeared on Fool.com.

Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends and owns shares of Tesla Motors and Ford. It also recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Michael John

It's hard to separate the accomplishments of this company from its valuation but it has to be done. For every real accomplishment, there is so much hype. Remember: the Model S was originally supposed to cost $50,000. Is it a great car? Yes. Is it $50K? No. The giga announcement and these new details on the Model E seem more like an admission that Li-Ion battery prices are nowhere near where they need to be (that is, less than $200/KwH) than a real opportunity. There is a great article at the truthorfinance site (just google 'truthorfinance tesla)' that rips apart the current assumptions on Tesla. Worth a read to get both sides. Hopefully whatever state "wins" the tesla factory won't end up like Delaware did after Fisker promised so many miles of blue sky and left state taxpayers holding the bag on the GM facility in Wilmington

March 06 2014 at 9:51 PM Report abuse rate up rate down Reply

The Tesla model S. is unsafe. Almost 30,000 model Ss have been recalled for defective adapters that are a fire hazard. Despite Tesla (Elon Musk) promising that the connectors would be mailed out in two weeks, almost 2 months later customers have not received the replacement adapters with the thermal fuse. Customers have complained that they have not been notified by mail of the safety hazards. As part of the Tesla model S. recall, Tesla issued a software update that was supposed to be a "fix", that the fix did not work, charge connectors have continued to overheat, melt and burn. Tesla's charge connections have been known to overheat, melt and burn for about a year, possibly more. Yet the problems haven't been resolved. It wasn't until people took their complaints to the media and the government; that a recall was issued. Tesla has been dragging its feet on safety.

There was a garage fire in Orange County California, the fire department ruled that a Tesla charger connection was a possible source of the .

Two Teslas had their traction batteries catch on fire after only running over road debris. One Tesla caught on fire and EXPLODED after being in an accident in Mexico. Lithium traction batteries are more likely to catch fire and explode after being punctured then gasoline tanks.

The most recent Tesla fire to hit the news, is one in Toronto Canada. Allegedly the fire department said the Tesla was the source of the fire. Allegedly the charger was not plugged in and the charger and traction battery is not thought to be the source of the fire. Reportedly Tesla sent seven employees to investigate garage fire in Toronto. So far the fire department and Tesla has been tightlipped about a specific cause. I would put more weight on the fire department's findings, because some of Tesla's previous findings seem prejudice and misleading.

Many Tesla owners have reported that Tesla friction brakes sometimes malfunction in wet conditions. Reportedly after rain, snow or car washing Tesla friction brakes can sometimes be ineffective. Reportedly sometimes the friction brakes take several seconds to respond. Reportedly there has been at least one accident that Tesla brakes were ineffective.

If someone dies from Tesla's defective designs, will Tesla and Tesla fan boys wake up and smell the coffee? Tesla needs to start being proactive. Tesla needs to start taking safety seriously. Tesla needs to catch up with technology.

The Tesla Mafia. Tesla, Tesla fan boys and Tesla shills often slander, lie, bully, and censor safety advocates, critics and skeptics of Tesla. Tesla, Tesla fan boys and Tesla shills hate knowledge and truths that incriminate Tesla.

March 06 2014 at 3:35 PM Report abuse -1 rate up rate down Reply