Tesla’s Rough Road Ahead

Luxury car manufacturers are always trying to convince themselves that they are recession proof. It’s foolish.

Let’s take a look at Ferrari, they sell an average of 600 new cars a month… in November they sold 92, laid off up to 300 employees and announced plans to idle their Maranello factory for 20 days in December. Despite coming into the summer with a 2 year waiting list, the company is now watching vehicles pile up in markets like the UK and US.

This a perfect storm for Tesla: inability to access credit markets for expansion and vehicle financing, gas prices plummeting distract buyers from the advantages of plug-in vehicles, and taxpayer dollars being funneled to companies like GM. The company also suffers from a self-inflicted wound, the hype that they built up made it impossible to exceed expectations once they started delivering cars, and in many ways this is exactly what Segway did to themselves and they have never recovered.

Tesla shouldn’t fool themselves, retail sales numbers for december are showing luxury goods plummeting 37%, more than any other category. Tesla may need to sell just 1k to break even but they need to sell a lot more than that to invest in R&D in order to drive future sales and given the questions surrounding the viability of this company I think they have a tough road ahead, no pun intended.

A recession might seem like the wrong time to be selling luxury cars of any kind, much less ones that use an all-electric technology unfamiliar to most Americans. But sales of unique, high-end vehicles usually don’t plunge during downturns, according to auto industry analyst Jesse Toprak.

[From Electric car startup downshifts for rough road]

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