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Tesla: 100% Market Share in Silicon Valley

Tickers in this article: AAPL TSLA

2. The California Climate

The pure electric car experience has a variety of known drawbacks, including initial purchase cost (battery) and relatively long charging times (30 minutes can give you no more than 150 or so miles, typically much less). One drawback that's not discussed as often is the impact of extreme climates.

In particular, an electric car is sensitive to cold weather. Why? In a petrol car, you obtain cabin heat from the engine's excess heat. You just pipe it into the cabin. You get a full effect after only a few short minutes, and it doesn't subtract from the car's efficiency in any meaningful way.

In an electric car, any kind of heat -- seat, steering wheel and cabin air -- will draw from the battery, and therefore subtract from the driving range. In addition, if it's cold outside the car must effectively "heat itself" in order to protect the battery, which will otherwise be partially destroyed if left in extreme temperatures.

This tells us electric cars are particularly inefficient in extremely cold climates. In very hot climates they are also a bit inefficient, but not necessarily much more than regular cars -- at least if you don't have them sitting in the extreme heat for too long.

The bad news here is a car such as Tesla won't sell as well in North Dakota or Finland. The good news is there are plenty of places where the temperature is nearly ideal for electric cars. Over 100 million people live in the U.S. sunbelt alone. One such ideal place is Tesla's home base, the San Francisco Bay area.

Tesla's Market Share in Silicon Valley: 100%

The two points above lead us to my main point with this article: Tesla's market share in Silicon Valley, in and near its home base in Palo Alto.

I have operated on most days for over a month on the central streets of Silicon Valley, where there is the most slow traffic of people going to restaurants, cafes, offices and shopping. I am an observant car nut, constantly scanning every single car that's parked or coming down the street. I can recognize every car model and year.

The $100,000-ish Tesla Model S competes primarily with other $100,000 luxury sedans. What does that mean? It means Mercedes S550 and BMW 750. That's the market segment. A $100,000 luxury sedan doesn't compete with a $40,000 car or a $20,000 car.

So the critical question is this: In the seven or so months since volume production began, what has happened to Tesla's market share in its target segment?

One way to find out is to count these new cars on the street. When you buy a brand-new 2013 model-year car, you get a dealer document that's pasted to the front window, which you exchange for the final license tags within 60 or so days.

As it happens, the last 60 or so days is the relevant time period for Tesla anyway, in this case. So this makes the case easy.