Tesla to end 'The D' suspense

Tesla CEO Elon Musk with a Model S following a ceremony to mark the first deliveries to customers in Tokyo last month. Photo credit: BLOOMBERG
UPDATED: 10/9/14 11:17 am ET - adds Musk comments

Tesla Motors Inc. CEO Elon Musk today will unveil new technology that helps keep drivers from drifting off the road and what analysts predict will be an all-wheel-drive variant of its Model S.

Musk last week tweeted a photo of a Tesla car behind a partially open garage door with a stylized D on it. The post has been retweeted more than 14,000 times and favorited more than 10,000 times.

Analysts including Brian Johnson at Barclays have predicted that Tesla will unveil an all-wheel-drive version of its luxury sedan. The company will also add technologies such cruise control that matches the speed of other vehicles, said a person familiar with the plan.

“One of the things is already there, and people just don’t realize it,” Musk said Wednesday at Vanity Fair magazine’s New Establishment Summit.

While Tesla's stock price has risen almost ninefold during the past two years, skepticism lingers about the company's ability to consistently earn profits and to meet its own production goals.

Musk, however, is "somebody you don't want to bet against," said Andrea James, a senior research analyst at Dougherty & Co.

"In only 2011, he was an unknown quantity among most of Wall Street," James said. "The loss of Steve Jobs left a void for heroic business leadership, and Elon was ripe to step into that role. In some ways he has."

Musk, 43, has played a large part in bolstering the mystique that surrounds Tesla. His presence on Twitter has amassed an audience of over a million, while his teasing tweets about potential new Tesla products send the Internet whirling.

With his flair for stoking speculation about what's to come -- and by developing products that capture consumers' imaginations by using technology in innovative ways -- he has in part filled the shoes left empty by the passing of Apple Inc. co-founder Steve Jobs, James said.

Battery technology

"Tesla has battery technology that's years ahead of the competition," said James, who rates Tesla a buy and projects it will reach $325 within 12 months. "It's not like Tesla created the physical properties of electricity. Tesla figured out how to harness the naturally disruptive potential of electricity."

Real-life billionaire Musk inspired Robert Downey Jr.'s portrayal of industrialist Tony Stark in the "Iron Man" movies. In addition to Tesla, Musk is the principal owner of two other high-tech companies, Space Exploration Technologies Corp. and SolarCity Corp. Closely held SpaceX is the first private rocket maker to deliver cargo to the International Space Station.

More recently, SpaceX and Boeing Co. won a contract worth as much as $6.8 billion to help the U.S. resume manned missions without depending on Russian rockets. Musk, who has a love for science fiction, has said he aims to colonize Mars.

Solar power

Musk also has a stake in solar power as the chairman and biggest shareholder of SolarCity. The San Mateo, Calif.- based company, which installs panels then leases the systems back to the property owners, is credited with transforming the industry by giving investors a way to take advantage of the declining cost of solar cells.

Before SolarCity, SpaceX and Tesla, Musk co-founded PayPal with tech investor Peter Thiel. Musk was the largest shareholder and CEO of PayPal for a time until EBay acquired it for $1.5 billion in 2002. Musk made $180 million, which he poured into his current companies.

Tesla shares have increased more than 15-fold since its June 2010 initial public offering. A year and a half ago, the stock was trading in the $40 range. Then Tesla posted its first profit in May 2013. These days, the stock has traded for more than $200 for most of this year.

The electric-car maker's shares increased 72 percent this year through yesterday, compared with a 6.1 percent gain in the Russell 1000 Index.

Stock skeptics

Tesla is not without its skeptics. Musk himself told CNBC last month that the shares were "kind of high." Adam Jonas, an analyst at Morgan Stanley who has an overweight rating on Tesla, wrote in a September note that he agreed with Musk. Shares slid in response. Jonas wrote that electric vehicles are "failing categorically on a global scale."

Tesla's growth may be limited in China and battery-powered cars still require technological breakthroughs to become mainstream, he said.

"Some people view Tesla as a company that's going to make electric vehicles affordable for the masses. We think that's false," Jonas said. "Tesla is making ridiculously high-performance cars for the wealthy to enjoy."

Battery factory

Seventy-five percent of Tesla's stock price is "based on products the company does not yet make," which contributes to the stock's volatility, he said.

Such products include the Model 3 sedan, which is due by 2017, using batteries made at Tesla's $5.5 billion "Gigafactory" near Reno, Nev.

The factory would have enough scale to cut battery costs by about 30 percent, Musk has said, lowering the overall price of Tesla vehicles. Cheaper batteries will be crucial for the introduction of more-affordable models. The company plans to sell the Model 3 for about half the U.S. price of its flagship Model S.

Standard & Poor's handed Tesla a junk credit rating in May, citing "significant risk" in the gigafactory strategy. Even if Tesla doesn't meet all of its ambitious goals, it will be seen as "the company that got other big automakers moving on electric cars," said Michelle Krebs, senior analyst with Autotrader.com.

Outsized influence

"I know for a fact that the Chevy Volt would not have existed if GM didn't look at Tesla and think, 'If a small company in Silicon Valley can do this, why can't we?'" she said.

After the short-lived run of Roadster production, Tesla introduced the Model S, which won Motor Trend's 2013 "Car of the Year" and was lauded as the best car of the year by Consumer Reports.

The Model S scored 99 out of 100 points, the best since Toyota Motor Corp.'s Lexus LS460L in 2007. The Tesla bought by Consumer Reports "performed better, or just as well overall" as any vehicle it ever tested, the magazine said.

More than a year later, the Model S started exhibiting minor flaws, Consumer Reports said.

The center screen went blank after logging 12,000 miles, reducing access to most functions, the magazine reported. Edmunds.com, an automotive data and pricing company in Santa Monica, Calif., highlighted similar issues.

Nevertheless, Consumer Reports now recommends the Model S, because of "its impressive performance in our tests, strong safety marks, and decent reliability so far."

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