Tesla Tanks

Last week’s darling of the IPO market, Tesla Motors, looks like it’s got a few dings and dents this week.

The money-losing electric-car maker had dropped below its $17-per-share asking price by 4 p.m. Tuesday, after soaring in its IPO last week. Today the stock dropped $3.09, or 16 percent, to 16.11.

It’s a long fall from the 41 percent Tesla gained on its first day of trading June 29, but it’s not all that surprising. Tesla, the first car company to go public since Ford in 1956, makes a pricey high-performance electric roadster that it sells for $119,000. But it doesn’t expect to make any money until it can roll out its Model S electric sedan, and that’s still to come in the next two years. The sedan won’t be cheap, either. It’s expected to sell for $57,400.

Tesla CEO Elon Musk, though, has said he ultimately wants to make electric cars for the masses. His company has even cut a deal with Toyota, the world’s largest automaker, to develop electric cars together.

The market, though, is apparently not sold on such visions just now.

“The stock did get its pop, and now it’s plagued by the reality of the marketplace. The reality of the marketplace is that people aren’t paying for dreams and visions,” Michael Holland, chairman of Holland & Co. told Bloomberg BusinessWeek.

Tesla Motors has lost $290.2 million since it was founded in 2003. Until now, it has been supported by venture capital firms, as well as by Musk's own personal fortune. He was a founder of PayPal and has run through most of his money betting on the electric-car company.

But Tesla isn’t the only player in what will soon be a crowded electric-car field. It will include startups like rival Fisker Automotive, backed by former Vice President Al Gore, which is unveiling its Karma high-powered, high-priced, plug-in hybrid sedan this summer. The field isn't limited to startups. Automobile mainstays Ford, GM, Nissan, and Toyota are all making electric plays.

Nissan has already sold out its initial run of Leaf all-electric vehicles for this year and has plans to make hundreds of thousands of the vehicles within the next few years. General Motors is rolling out its extended-range gasoline-electric hybrid Chevrolet Volt later this year, with an eye to catching early adopters.

But there are no guarantees of success, and Tesla is clearly playing for very high stakes in a very unstable market, and that reality has apparently sunk in with investors. Even in the prospectus Tesla issued before its IPO, it made clear that it was in a tough market.

“Our growth is highly dependent upon the adoption by consumers of, and we are subject to an elevated risk of any reduced demand for, alternative-fuel vehicles, generally, and electric vehicles in particular. If consumers do not adopt electric vehicles, our business, prospects, financial condition, and operating results will be harmed,” Tesla admitted. “The market for alternative-fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, and changing consumer demands and behaviors.”