Right about now, Tesla Motors Inc (TSLA) stock could use a boost. Shares are down 14% year to date, and a bit more over the past year. Hovering around the $210 level, shares are middling between their 52-week highs and lows.
Tesla shares could use a catalyst, and CEO Elon Musk knows that. He did his best to give TSLA stock a boost last week when he told analysts on a conference call that by 2018 Tesla would be churning out 500,000 vehicles per year, two years ahead of previous guidance.
Investors, noting that the company doesn’t have the best record of execution — the Model X came two years after schedule — and that such a dramatic ramp-up may require a secondary offering to raise capital, didn’t react with unhinged enthusiasm as they are sometimes wont to do.
So before the $35,000 (before taxes) Model 3 hits the roads hard in 2018, what can a TSLA stock owner count on to catalyze shares?
A recent CNBC report suggested the LAPD was considering replacing some of its fleet with Tesla Model S vehicles … but let’s put the brakes on that speculation before we get too carried away.
Why TSLA Stock Won’t Be Driven by the 5-0
Tesla gave the LAPD two Model S P85D vehicles to test in its fleet about a year ago. The 691-horsepower electric vehicle, which goes from 0 to 60 in 3.2 seconds, could be used for pursuit cases, the thinking goes.
Unfortunately for TSLA stock owners, the LAPD itself admitted that, after extensively using the vehicles, they just aren’t practical yet. With a sticker price of $105,670 for the base model, budget would seem to be the primary concern. Another issue? Range, and the availability of recharging stations.
While LAPD Police Administrator Vartan Yegiyan told CNBC that using all-electric vehicles as squad cars could become more practical in the next three-to-five years, even then the impact will likely be negligible for TSLA stock.
The Los Angeles Police Department spends about $30 million on new vehicles each year, which represents about one-third of one percent of the $8.51 billion analysts expect TSLA to do in revenue this year.
Could other police departments buy Teslas, too? Sure. But it’s unlikely they’ll do so without testing the vehicles first, and without extensive electric charging infrastructure in place as well.
Add to that the fact that there’s sure to be heavy competition in the area — Ford Motor Company (F), General Motors Company‘s (GM) Chevrolet and Fiat Chrysler Automobiles NV (FCAU) own the police car market today — and it looks like Tesla’s attempt to find itself a new customer base is unlikely to do anything for TSLA stock owners.
One step at a time, Mr. Musk. Let’s just get the Model 3 on the road first.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
