Should I buy Tesla stock? (NASDAQ:TSLA)

Yes, their stock looks overpriced, but here are three reasons why I say still Tesla’s a buy.

At a time when car manufacturers are building boxy-looking electric vehicles that have the sex appeal of a Rubix Cube with its stickers torn off, Tesla Motors, Inc. (NASDAQ:TSLA) makes sleek, lust-worthy, high-end speed demons.

The luxury electric car maker epitomizes a sexy stock with its David-versus-Goliath attitude and tech start-up management style. That’s not to mention the fact that the company’s at the cutting edge of an industry that just might revolutionize the way Americans travel.

Still, I keep teetering back and forth on whether or not I should buy into Tesla. It’s hard to believe the founder of PayPal could decide to take on monolithic heavyweights like General Motors (NYSE:GM), Ford (NYSE:F) and Toyota Motor (NYSE:TM) and actually get in a few punches. There are a raft of start ups to deal with, too (like Warren Buffet’s pick, BYD Auto).

And yet, Tesla seems to be doing everything right. Their designs are strikingly beautiful. Their partnerships have been designed to make them an integral part of the supply chain for larger companies, and they’re attracting capital from the same companies they’re supposed to be competing with. There just might be something to this stock, after all. Indeed, here are three reasons why I say Tesla’s a buy:

1) Innovative technology. Tesla’s batteries are actually groups of batteries. Rather than building one massive unit, they link together thousands of small lithium-ion batteries (much like laptop batteries) in every car. According to the Mercury News, this keeps their costs lower than the larger lithium batteries used in the Nissan Leaf and the Chevy Volt. Lower costs per car means more profits despite what might be a lower sales volume than their competitors will snag. Indeed, Tesla’s battery costs per kilowatt hour are estimated to be a quarter of the cost of equivalent power for the Leaf and the Volt.

2) Great management. Tesla’s co-founder Elon Musk nearly bankrupted himself trying to get Tesla’s first cars to the market. He’s got the proverbial “skin in the game,” and that means he’s going to do everything in his power to see the company succeed. This wouldn’t mean much if Musk didn’t have a track record for creating game-changing companies. He did just that in 1999 when he helped launch PayPal was acquired by eBay Inc. (NASDAQ:EBAY) for $1.5 billion just two years later.

3) Well-placed partnerships. You’d think Toyota wouldn’t want to give a penny to Tesla, but they’ve actually hired the company to produce the electric components for their upcoming RAV4 electric SUV. Tesla will generate some $60 million in revenue from the deal, and the company will be able to refine their manufacturing process as they turn out the batteries, motors and other components for the RAV4.

This has been part of Musk’s plan from the very start: if Tesla can become not just a manufacturer of EVs, but a electric powertrain supplier for some of the world’s biggest carmakers, it’ll have its fingers in a much larger piece of the pie, and I suspect that will pay off in the end.


Be like Buffet: How to invest in BYD Auto

What was once an obscure Chinese battery making company, BYD Co Ltd. (PINK:BYDDF) has morphed into one of the world’s largest manufacturers of cellphone batteries and an automotive powerhouse that’s building electric vehicles to compete with Toyota (TM) and Tesla (TSLA).

BYD Auto E6 Electric Car

You might not of heard of BYD Auto yet, but my guess is you will by 2012. What was once an obscure Chinese battery making company, BYD Co Ltd. (PINK:BYDDF) has morphed into one of the world’s largest manufacturers of cellphone batteries and an automotive powerhouse that’s competing with Toyota Motor Corporation (NYSE:TM), Volkswagen AG (PINK:VLKAY) and Tesla Motors Inc. (NASDAQ:TSLA).

The Oracle of Omaha himself Warren Buffet was so impressed by the company’s CEO Wang Chuan-Fu that he broke several of his cardinal rules of investing (i.e. “invest in a business that even a fool can run, because someday a fool will”) when he dumped $230 million into the company in 2008. That entitled Buffet’s Berkshire Hathaway Inc. (NYSE:BRK.B) to a 10 percent stake in BYD.

BYD’s leap from a cellphone battery maker to a hybrid/electric car manufacturer is about as unlikely as Buffet investing in a Chinese business that he doesn’t understand. It seems to be working out for both parties, though. In 2003, BYD bought what CNN calls a “Chinese state-owned car company that was all but defunct,” and within five years the company was manufacturing the F3 – China’s bestselling sedan in 2009.

Now, BYD plans to start selling electric cars in the U.S. during the first quarter of 2012. Their first model? The boxy e6, which will retail somewhere around $42,000. The all-electric car has a range of more than 185 miles and a top speed of 87 MPH. It will hit showrooms around the same time as Tesla’s Model S sedan, which will retail at $57,400. Admittedly, the e6 isn’t as sexy or as fast as the Model S, but it’ll do the same job for less money – and that’ll likely appeal to the green folks who are drawn to electric cars in the first place.

If you plan to buy stock in BYD Auto, I’d recommend doing before the press starts picking up on the company this fall. Here are three ways to invest in BYD:

1) Buy BYD shares directly on the Hong Kong Stock Exchange. The stock’s Listed as BYD Company Limited (HKG:1211).

2) Buy BYD Auto shares over the counter. BYD Company Limited trades on the Pink Sheets under ticker BYDDF.

3) Invest in an ETF or ETN that counts BYD Auto among its holdings. The Guggenheim China Technology ETF (NYSE:CQQQ) currently lists BYD Auto among its Top 10 holdings with 3.71 percent of its capital allocated to the car and battery maker.