Could Tesla Lead Electric Car Business? Maybe

Tesla Motors (TSLA), the luxury electric car maker, just released teaser videos of its upcoming Model S sedan. The Silicon Valley electric car startup's videos offer advance looks of three pre-production models that will go on sale next year.

Will this finally put an end to the Tesla skepticism? Yes, it should--not just because the video teasers reveal an appealing car, but because Tesla has proven it's got a sound strategy in place.

Why the skepticism?
Some observers, myself included, have suggested that the company should get out of the car business and stick to its still-profitable powertrain business.

When Tesla was running out of money in 2008 and having trouble producing enough of its original, $100,000 Roadster -- the first electric since the infamous EV1 that had captured the popular imagination -- Tesla noted its powertrain business was profitable. Thereafter, some (okay, I was among them) argued that Tesla would have to shift strategy and supply electric drivetrains to other, larger car makers. Then Daimler took a 10 percent stake in Tesla in 2009, in the the throes of the financial crisis. Skepticism remained strong after Tesla inked a $100 million agreement in 2010 to provide electric drivetrains to Toyota (TM).

Here's the Motley Fool's take from late last month:

I like these deals because I don't think Tesla can survive as an auto manufacturer. Sure, I understand why it had to build the Roadster. Someone needed to establish that EVs can be more than glorified golf carts. But now that Tesla's proved it possible, its major-league rivals have started to put serious money of their own into EVs...

Ideally, [Tesla] would move away from manufacturing vehicles -- though I suppose having a halo car to boost the brand name wouldn't hurt -- and focus on building strategic partnerships with automakers. This should allow Tesla to grow, without taking on the expenses and risks inherent in building a successful car brand.

• Leverage its technology to cover its operating costs and force old-school carmakers to become dependent on it
• Move forward on its car-building objectives so that, eventually, it can become a BMW of EVs -- with the same whopping (if occasional) 15 percent profit margins that BMW just turned in

Roadster: Still the Best
Tesla still has the best EV on the road. Sure, the Roadster is way more expensive than the Chevy Volt or Nissan Leaf -- but it's also a much, much better car. It's not unreasonable to assume that Tesla will soon have the best electric luxury sedan on the road, and in a few more years, the best electric mass-market crossover SUV on the market.

The Roadster indeed proved that an EV could be way sexy. The Model S could demonstrate that EVs can be way luxurious (neither the Volt nor the Leaf fits that description). And the video that Tesla released is fairly brief, it does make the Model S look like a fairly sweet machine -- a kind of Porsche Panamera for people who want to save the planet.
This should change minds and take customers away from BMW, Mercedes, and Audi.
Meanwhile, Tesla will continue to be producing superior drivetrains. Why can't it become if not dominant, then at least highly influential in both businesses?

Hey, even though the company's shares are down from their highs, they're well above their lows. And a $2.6 billion market cap, with basically one car in production, Tesla is worth five percent of Ford's (F) total market value. As a car company, it's probably never been in better shape.

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• Comeback of American Nukes Loses An Advocate: Electric Car Buyers