The success of the upcoming initial public offering (IPO) from electric car manufacturer Tesla Motors rests on the company's ability to break out of its sports car niche and into the wider automotive market.That appears to be the consensus from commentators and analysts following the announcement by the company last week that it will launch its long-anticipated IPO on 29 June.

The California-based company expects to sell 11.1 million shares at between $14 (£9.40) and $16 a share, rising to $178m.

Tesla, which has applied to list on the Nasdaq under the symbol TSLA, currently sells only one sports car model – the Tesla Roadster – for about $100,000. However, it is developing a sedan model called the Model S, which will sell for about $50,000, and has spent the past few weeks informing investors of its plan to build a range of electric vehicles.

"The Model S, which is planned to compete in the premium vehicle market, is intended to have a significantly broader customer base than the Tesla Roadster, " the company said its filing to the SEC. "We currently intend to begin volume production of the Model S in 2012 with a target annual production of up to approximately 20,000 cars per year."

It is this move into the mainstream market which will ultimately hold sway over whether or not the planned IPO is a success, according to commentators. " Anyone betting on Tesla stock is gambling on the success of the forthcoming Model S," said a report in the Wall Street Journal this week.

But Tesla itself warns that the car is at "an early stage of development" and will not be in production until 2012.

However, if it can successfully deliver a mass-market electric vehicle, the company could find itself tapping into a fast-expanding market. According to analysts Frost & Sullivan, the market for electric-based vehicles, which includes electric vehicles, hybrid electric vehicles and plug-in hybrid electric vehicles, is expected to grow to about 10.6 million units worldwide, or 14 per cent of new vehicles sold by 2015. This compares to sales of about 1.75 million units or three per cent of new vehicles sold in 2008.

The company's SEC filing states that the Model S should benefit from a $7,500 federal tax credit in the US, but even without the break the company maintains that it is competitively priced.

"The Model S is the premium sedan evolved," said Tesla vice president of manufacturing Gilbert Passin in a recent blog post. "It will raise the bar of vehicle efficiency, meet the highest standards for safety, and provide more cargo space than any other sedan. It will be as beautiful as it is functional."

In March this year, Tesla signed a deal with Lotus to allow the electric car firm to continue to sell the Roadster model until the Model S is released. The company had signalled that it would halt production of the Roadster during 2011 to focus on the development of the Model S.

As well as the Model S, Tesla has also outlined several new models which will be based on the same underlying engineering.

These will include a cabriolet, a van and a crossover/SUV. The company made reference to these models in its SEC filing, but it is not clear when they will go into production. "By developing our future vehicles from this common platform, we believe we can reduce their development time and, as a result, reduce the required additional capital investment," the company states.

Tesla has also whetted appetites for a cheaper car designed to appeal to an even broader market than the Model S. The firm said it hopes to have that model on the market by around 2015.

"In May 2010, we publicly announced our intent to develop a third-generation electric vehicle to be produced at our planned manufacturing facility in Fremont, California," the company said in its filing. "We intend to offer this vehicle at a lower price point and expect to produce it at higher volumes than our planned Model S."

Tesla was incorporated in 2003 and began selling the Roadster in 2008. The company claims to have about 640 employees at present. The company's chief executive Elon Musk founded PayPal before selling it to eBay in 2002.

Source:  www.businessgreen.com