How Tesla Pushes for the Impossible

Tesla. The company name evokes very different yet equally strong responses from critics and fans. Critics argue Tesla loses money on each car sold. Indeed, with losses of $290 million in 2014 and $888 million in 2015, it’s unclear when the company will eventually hit profitability. Critics also point to the fact that co-founder and visionary CEO Elon Musk often oversells what the company can do in the short run. The company has missed stated goals and new vehicle launch deadlines. Moreover, the company has sometimes struggled with its innovations, like getting the Model X doors to work just right. On the other hand, proponents ignore the short term losses and point out that Tesla produces highly desirable electric vehicles—cars that go faster, go further (than other electric vehicles) and are safer than internal combustion engine (ICE) vehicles. They point out the astonishing fact that Tesla reeled in nearly 400,000 reservations for its Model 3 in a single week – pre-orders that will rack up over $16 billion of vehicle sales. A single tweet from Musk teasing a product announcement sent Tesla shares surging yesterday. Investors continue to back Tesla with a lofty market cap of over $30 billion, which translates into a significant innovation premium.

It’s this innovation premium that helped Tesla race to the top of our Forbes Most Innovative companies list in 2015 – and stay there. It maintains its #1 position for the 2016 ranking. Tesla’s next challenge is whether or not it can become profitable and deliver on its huge market value. And will Tesla ultimately be the catalyst behind transforming the auto industry from ICE vehicles to electric vehicles? Our analysis signals it can and likely will.

Read the full article co-authored with Jeff Dyer at Forbes.com.