Tesla's stock was down 2.5% to below $99.33 in the first minutes of trading today. This is well off its closing high of $110.33.
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.
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