The faster you move, the more resistance you will face. This statement is true in both the world of physics and the world of business.
And there is no company that knows this fact better than Tesla Motors (NASDAQ: TSLA).
In the world of business, Tesla has stirred up more commotion this year than any other publicly traded company on the market. With record revenues, one year gains of 391%, and metrics that would make any “value investor” feel terribly squeamish, Tesla has the bears strongly expressing their resentment.
And with a float of 27.1 percent, Tesla is still one of the most shorted stocks on the market.
Furthermore, Tesla has brought out a ton of opposition from the auto-industry. Automotive lobbyists have been pushing hard to ban first-party sales in an attempt to shut down Tesla’s business model. Even more ridiculous, General Motors (NYSE: GM) has commissioned an entire task force dedicated solely to analyzing Tesla.
But so far, Tesla has managed to avoid a majority of this friction – Tesla’s business model has proved to be incredibly aerodynamic.
As for the world of physics, Tesla knows a little something about the importance of resistance as well.
I’ll explain what I mean in just a second, but first, let’s take a look at the figure below.
This graph shows power consumption of a vehicle in relation to its speed. Like we said earlier, the faster you go, the more resistance you face. And as you will notice, the majority of that increase in resistance comes from air. At typical highway speeds, air resistance is the single greatest factor in a car’s energy consumption.
And this is exactly why Tesla has worked so hard to increase the aerodynamic properties of its vehicles. The drag coefficient on the Model S is .24, which is about the lowest of any production car on the market.
Tesla is now looking to remove the rear-view mirror and replace it with a live camera feed in order to improve aerodynamics even further. And while that may not seem like that big of a deal, it could actually reduce drag by as much as 6 percent.
Currently, rear-view mirrors are mandated by the Federal Motor Vehicle Safety Standards (FMVSS), but Tesla is reportedly in talks with the National Highway Traffic Safety Administration (NHTSA) to allow an exception for live video feed.
Of course, this design is not going to make or break the Model X, let alone Tesla Motors. However, it is just one more example of the innovative nature that has driven this company to where it is today.
While there are many factors we must consider in order to assess the value of a business, it is ultimately a company’s ability to create high quality products that will determine its success. Tesla’s track record so far is a perfect example of that.
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