Tesla Earnings Ahead of Tesla Model X Launch

24/7 Wall St.

Tesla Motors Inc. (TSLA) has a nice bookend to its upcoming earnings, which are likely to be spectacular. The electric car company, or its CEO Elon Musk, leaked that the Tesla Model X crossover will not cost much more than the base model Tesla S. Unfortunately, the manufacturer does not possess the capacity to make more than a few thousand of either car in any given quarter. And it faces competition that, while Tesla may post good short-term earnings, will shred the numbers in the future.

The impressive competition against Tesla is already on the horizon, and in some cases very close. Global luxury car companies cannot afford to have the new electric car manufacturer get too much of a toehold in the U.S. market, and, probably just as importantly, in China.

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BMW has posted an early challenge to Tesla with its $136,000 electric super sports car. The price point may be too high, but BMW has a balance sheet to bring that down, if management decides it can grab a good deal of the market. Porsche already has released a sedan with an electric motor -- the Panamera S E-Hybrid. However, the car still relies on internal combustion for some of its power. But Porsche engineers are inventive, and a direct competitor to Tesla will be released within a year or two.

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The market can expect that Mercedes and Lexus will not allow Tesla to continue to build a brand without huge challenges from them. Even U.S. luxury name plates Cadillac and Lincoln will release electric cars, although they have done so poorly in the traditional market, there is no reason to believe that will improve in the new world.

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All of Tesla's larger competitors have several advantages. Among them are their large dealer networks, which number in the hundreds in the United States. Another is marketing budgets that reach well into the hundreds of millions of dollars. Still another is generations of loyal customers. Finally, most have balance sheets that can support nearly limitless R&D, product development and production capacity.

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Analysts expect that Tesla earnings may be up by more than 100% in the quarter that is about to be announced. That kind of performance will not last long. There are too many companies that have a strong chance of taking away most of Tesla's growth.

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