Tesla CEO and co-founder Elon Musk unveils the Tesla Motors Model X electric vehicle at the Tesla Design Studio in Hawthorne, California

All it took was five seconds of silence. Elon Musk, the chief executive of Tesla Motors, was asked during a conference call whether his electric car company would move into ride-sharing services, turning it into a potential challenger for taxi app Uber.

Mr Musk, one of the world’s great PR men, paused. Then he refused to answer.

The tactical swerve was a new trick for the techno-utopian, known for enthralling the media and investors with his explosive talk of disrupting entire industries and his market-moving tweets.

“Have you ever heard Elon Musk punt on a strategic question before?” says Adam Jonas, the Morgan Stanley analyst who posed the question.

Two weeks later, on August 17, Mr Jonas raised his share price target for Tesla to $465 — almost twice the current level — and laid out his belief that the company would soon launch “Tesla Mobility”, a new business line in shared, self-driving cars that would triple the company’s revenues by 2029.

Thus another layer of expectation was added to what is already one of the world’s most hyped companies. But well before Mr Musk sets his sights on yet another business to upend, he has a more pressing task: shipping Tesla’s much-delayed third car. That is supposed to happen later this month, when the company is expected to release the Model X, a sport utility vehicle with eye-catching “falcon-wing” doors and an expected starting price of $90,000.

Even if the Model X is a hit, Tesla’s stratospheric valuation — almost $1m for each car it sold last year — demands an even higher level of ambition.

Mr Musk’s vision has Tesla becoming not just a maker of niche, cool, expensive cars beloved by Californians, but a mass-market producer of electric vehicles that are long-range, affordable and stylish. At the same time, it will use its battery technology to build a complementary business of selling power storage units for homes and businesses.

Both goals hinge on the success of a 1,000-acre, $5bn lithium ion battery factory under construction in the Nevada desert, known as the Gigafactory, that Tesla says will help drive down costs.

Unless you are a traditional carmaker, the Musk vision is thrilling. Tesla bulls hail Mr Musk as the next Henry Ford — or “Steve Jobs with a South African accent”, as one business school professor puts it. The bears say Tesla has not made the leap from tech start-up to car company.

“The risks of what Tesla is doing are extraordinary,” says Max Warburton, a respected car industry analyst. “It’s not only the most vertically integrated tech company you’ve ever seen. It’s also the most vertically integrated car company since Ford in the 1920s.”

Top marks: 103 out of 100

The US’s youngest listed carmaker has achieved remarkable feats in its 12 years. The Model S, Tesla’s second product after a two-seater sports car, is good. So good, in fact, that the latest version received a record rating from Consumer Reports in the US: 103 points out of a possible 100. The magazine called the saloon an “automotive milepost” and the best car it had ever reviewed.

But Tesla’s finances are a more challenging proposition. By the end of last year, it had spent $3.3bn on capital expenditure and research and development — or $40,000 per car sold so far — according to FT research. It is burning cash at an increasing rate; in the first six months of this year it spent $760m.

Cash flow problems are nothing new. Before the Palo Alto-based company became an “it” stock, it was charted by a blog called “Tesla Death Watch”. The company has come close to bankruptcy on several occasions — only to find that next cash injection at the eleventh hour.

“Money has always arrived at the right time — probably because Elon Musk has been able to inspire people at the right time,” says Paul Nieuwenhuis of the Centre for Automotive Industry Research at Cardiff Business School.

More money arrived last month when the company sold 3.1m shares to raise $740m. That is just the start of what it will need. Tesla is expected to sell as many as 55,000 cars this year, about a quarter of Porsche’s annual sales. But Mr Musk, who is Tesla’s biggest shareholder with a stake of 26.7 per cent, wants the company to achieve annual sales of 500,000 cars by 2020.

At the Detroit motor show in January, he said the company was capable of selling BMW-style volumes of “a few million” cars by 2025. “Our mission is fundamentally to transition the world to electric cars,” he said. “So if we don’t make a lot of cars, we’re not doing the best that we can.” Tesla’s mass-market offering, called the Model 3, is due to start production in about two years and sell for $35,000. That is half the list price of a Model S, and not far off the average price of a new car in the US.

Tesla expects to spend $1.5bn in capital expenditure this year. Mr Jonas forecasts a total of $14.4bn in capex and R&D costs between this year and 2020, for another plant, tooling and the Gigafactory. “And I’m prepared for more,” he says. It sounds hefty, but that is only about half Tesla’s current market capitalisation spent over five years. Ford, by contrast, spends the equivalent of its entire market value over a similar period.

But that comparison relies on the Tesla shares staying up. The stock price is riding high — up about a third since a tweet from Mr Musk flagging the energy storage business. But some market watchers worry the feel-good sentiment has got ahead of itself and pushed the sceptics to the sidelines.

“This creates an imbalance where only the bullish sentiments get expressed in the market,” says Brian Johnson, an analyst at Barclays.

“Do I want to be short when they release the sketches of the Model 3 and host the press conference?”

Tesla bears similarities with every company Mr Musk, a South African-born serial entrepreneur has helped to start.

From Zip 2, his first internet venture, to X.com, the financial technology company that became PayPal, his companies are characterised by dreams of turning entire industries on their heads, relentless work demands and optimistic deadlines.

“Big vision, big balls, big bets, big claims . . . It’s very much his hallmark way of operating,” says a former employee.

In some ways, this works to good effect. A current Tesla supplier recounts how a problem was discovered on a Friday. Mr Musk demanded the engineers work over the weekend, issue hourly updates and have the problem fixed by Monday. “If it was Ford, you’ve got labour unions. This would have taken two years,” says the supplier. “Elon’s not bound by traditional business models. He looks at the world as limitless.”

Missed deadlines

But this can also cause problems. The Model X was meant to start production in 2013, but is only now inching over the finish line. That is fine if you are a maker of niche premium electric cars, and, as one industry chief executive puts it, “as long as it’s a knockout and you’ve got the cash flow to sustain it”.

But Tesla’s record of missed deadlines could be exposed by mass-market volumes and the challenges of running a multi-car company. Tesla has said lower deliveries of the Model X this year could mean it will miss a year-end target for becoming free cash flow-positive. Analysts say the cash produced by the current business could fall well short of paying for the new-generation Model 3.

As it embarks on the next phase of its expansion, Mr Musk’s ability to sustain Wall Street’s confidence has become essential to the company’s chances of success. “He’s a fabulous promoter. He’s held the stock price up remarkably well given the finances of the company,” says Jeffrey Pfeffer at Stanford Graduate School of Business.

The lofty share price is now one of Tesla’s most important assets, opening the way to raising the massive amounts that will be needed without diluting existing investors excessively.

But Mr Musk may have set the stage for a sharper reversal if and when the stock price starts to slip: he has used some of his own stock in the company as security to borrow from a number of banks (when a figure was last disclosed, a year ago, he had borrowed $275m from just Goldman Sachs). If the stock price falls, Mr Musk might be forced to sell to cover his loans, adding to downward pressure on the stock, according to the company’s official filings.

The 44-year-old has also represented a sometimes controversial figure at the centre of Tesla’s fortunes. Both loved and feared by employees, he inspires intense loyalty while at the same time handing ammunition to the doubters with his more far-fetched ambitions.

His attentions are also divided. Not only is Mr Musk trying to lead an electric transport revolution. He is also in charge of SpaceX — a profitable rocket company handling billions of dollars in contracts from Nasa and the Pentagon — and chairman of Solar City, a domestic solar panel installer.

‘Watching like a hawk’

Few would doubt that Tesla has shaken one of the world’s biggest industries with its unusual approach — no advertising, no franchised dealerships, no discounting — despite industry executives who claim in public that it is not a serious rival.

“There’s nobody out there at a senior level that thinks Tesla isn’t serious,” says an adviser to the leading carmakers. “They know this is a business hell-bent on disruption, and they’re watching it like a hawk.”

Tesla has distinct advantages in electric cars over its auto industry rivals, who have billions invested in the internal combustion engine. But few think the company can carry off its approach in the mass-market, partly because of its vertical integration.

Tesla is trying to reverse an outsourcing trend that has been at play in the industry for three decades or more. Volkswagen and Toyota rely on suppliers for around 75 per cent of their cars. But Tesla builds many of its parts in-house. That brings control, but also adds devilish complexity.

Tesla’s vertical integration extends to the job of refuelling its cars. It is trying to address the dreaded “range anxiety” by building a network of free-to-use superchargers that make it possible to drive from Mountain View to Massachusetts in the US, Manchester to Rome in Europe and across major cities in China.

The company’s 200-or-so stores, many of them in shopping malls, could struggle to support annual sales of 500,000, meaning the company may have to embrace franchised dealers.

This ambition and integration is slowing Tesla down just as the auto industry is stirring, critics say. “You can’t go this slowly at a time when the competition has stripped down the car, worked out the battery and are preparing to serve up rivals,” says Mr Warburton.

Next week’s Frankfurt motor show will reveal the industry’s deeper commitment to electric vehicles, not least in the shape of an Audi SUV concept car capable of 310 miles on battery power. Other rivals — such as General Motors with its 200-mile car due in 2018 — are also preparing their move into mass-market electric vehicles.

But Tesla’s real competition may not be the mighty German carmakers or the Americans 2,000 miles away in Detroit.

It could just as well be near neighbours — Google, Apple and Uber, which are already engaged in a war for the best automotive talent. The car industry is hurtling towards new, uncertain fields of competing fuel sources, autonomous technologies and business models. And the tech giants want in. The result is likely to be a war of competing technologies as the new entrants fight to supplant the internal combustion engine.

The world’s biggest automaker, Toyota, has put its faith in hydrogen technology — dismissed by Mr Musk as “fool cells”. But even the Tesla battery has not become the standard. Rivals extol the virtues of other battery technologies, such as sodium-ion. Tesla could find itself marginalised if it turns out to have backed the wrong horse.

“This is where the platform standards and dynamics come in, since every major automaker will have [electric vehicles] fairly soon, if they don’t already,” says Michael Cusumano, a professor of management at MIT’s Sloan School of Management.

Tesla’s success will depend in part on which platforms win out. Either it establishes the blueprint for lithium-powered vehicles — perhaps even shared ones — or it could go the way of another car company with fancy doors. “My guess is that there is so much cash and hype behind Tesla that it will survive for a decade, and then run out of cash,” says Mr Cusumano. “Reminds me of DeLorean’s venture.”

Copyright The Financial Times Limited 2018. All rights reserved.