Will Tesla Motors Inc. (TSLA) see the same fate as DeLorean Motor Company?

Aug 29, 2013 -

Is Tesla Motors Inc. the next DeLorean Motor Company? 

Background

John DeLorean founded DeLorean Motor Company (DMC) in 1975. DMC produced the DMC-12 sports car that featured gull-wing doors and stainless steel body. It was also featured in the Back to the Future movies in which Doctor Emmett Brown turned the car into a time machine. Eventually the company declared bankruptcy in 1982 as a result of lack of demand, cost overruns, and unfavorable foreign exchange rates. John DeLorean passed away in 1995 due to stroke complications.

Since then, Stephen Wynne, a Liverpool born mechanic, started a separate company using the "DeLorean Motor Company" name. They are in the business of restoring DeLoreans with existing parts from the original manufacturer. Recently they announced that they would start selling custom-made electric DeLoreans this year. 

How do the founders compare? 

DeLorean was an American engineer who climbed the ranks in the U.S. automobile industry at an astounding pace. He began working under an engineer at Packard Motor Company and eventually made his move to General Motors climbing up to a VP of car and truck production position. At this time he was the youngest to ever do so. He also had develop cars such as the Pontiac GTO, Firebird, Grand Prix and Chevrolet Vega. 

However, he resigned from GM to start DeLorean Motors. To raise capital he went to car dealerships and asked for support. In addition, he reached out to countries will high unemployment rates and pitched his dream of creating a stainless steel car. Eventually he ended up getting substantial funds from Ireland and employed over 2000 workers. 

Contrary to popular belief, Elon Musk did not start Tesla Motors on his own. His co-founder is Martin Eberhard, who provided the initial vision as CEO. Although he is no longer directly involved with Tesla, Martin is still a shareholder. 

Elon has a different background than that of DeLorean. Elon started a number of online companies including what eventually became Paypal before dipping into the car business. In addition, he has his foot in space travel, solar power, and Hyperloop. Hyperlook is based on the concept of tubes used to transport mail or packages via subsonic air between buildings. However his hope is to have it transport people.

Both founders were/are successful in their own respective fields. Successful people are usually successful no matter what industry they are in. The fact that Elon has dabbled in more industries does not give him a significant edge over DeLorean. Also, DeLorean did not have the opportunities Elon had in that the internet did not take off until 10-15 years ago. 

Winner: Even

How do the revolutionary cars compare?

Elon competes against large established car companies such as GM, Ford, Toyota, Nissan, and Honda. DeLorean faced similar challenges going up against big juggernaut car companies. The appeal of a DeLorean is the design and unique stainless steel body. Similarly, Tesla Motors cars appeal to the eco-friendly and luxury car enthusiast. Tesla has become by far the largest company focusing solely on electric vehicles. While DeLorean's stainless steel car was the first of it's kind. DeLorean never made it past one car model. Tesla is on to its second and going on to its third car model. 

Even with the time that has passed, we can still say that DeLorean's car was ahead of its time. As we still see gulled wing car doors in today's designs. In fact, Tesla's Model X will include "Falcon Wings" which is similar to that of the DeLorean.



Winner: Slight edge goes to Tesla

Did both companies become publicly traded?

As most of us are aware, Tesla (TSLA) is a publicly traded company on the Nasdaq. It has been since 2010. The stock didn't move much in the two years before 2013, but has since exploded in easily more than quadrupling its price. It currently trades at 161.84 as of 8/23/2013. It's current share price puts the company's market capitalization at 19.66B or just under 40% of GM's market capitalization. In addition, Tesla is the first American car maker to go public since Ford in 1956. 

Interesting enough, DeLorean Motors tried to go public in 1982, however was forced to cancel its stock issue which would've raised about $27M. The SEC questioned the company's viability and was thus forced to cancel its stock issuance. 

Winner: Tesla



Disclosure: I own TSLA shares as of the date this article was published.
 
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