This comes after Bill Alpert at Barron's wrote that Tesla's Model S "owes its better-than-200-mile range to batteries costing tens of thousands of dollars."
Tesla needs to drastically cut battery costs by 2016 when it plans to launch a car that is more affordable. "If Tesla's next-generation car can't go the distance at half the price, its stock will head much lower," Alpert wrote.
The sub-head of the summed up Alpert's stance. "Tesla's electric car offers a quiet, powerful ride. But unless it comes up with a cheaper, stronger battery, the stock could turn out to be a lemon. From Barron's:
"Stubbornly costly batteries may even cause headaches when today's Tesla's luxury cars arrive on the used-car lot. Folks who buy $90,000 cars tend to replace them every few years, and the bid for a four-year-old Model S may prove disappointing if it's going to need an expensive new battery in a few more years. Musk has astutely met that concern with a financing option guaranteeing resale value, but that just shifts the risk to shareholders.
"As a result, Tesla's balance sheet will sprout a contingent liability for the "residual value" of those cars, and analysts worry that the amount will quickly rise to hundreds of millions of dollars -- on the order of half of the company's book value. The deferred impact of all those used batteries will become clearer in coming years, after Tesla also starts running low on the government-legislated zero-emission-vehicle credits that offset $68 million in expenses in the March 2013 quarter."
Alpert also says time will tell us how much "sustained demand" there is for the car. "No one yet knows what portion of Tesla's initial buyers were "early adopters," unrepresentative of ongoing demand," he wrote.
Tesla's CEO Elon Musk terminated the interview with Barron's after a few questions on battery cost reductions.
Here's a look at Tesla's five chart:
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