FOR a global green car industry still struggling for commercial viability, the success of luxury electric carmaker Tesla Motors is a silver lining.

Whether it be concerns about mileage, costs or recharging, investors and consumer have long been giving the cold shoulder to alternatives to the internal combustion engine.

Small wonder then that Tesla electrified the market last month when it announced its first-ever quarterly profit. Share prices of the Palo Alto, California-based electric car company nearly doubled. The company, which has been in existence for 10 years, reported first-quarter profit of US$11.2 million.

The result was largely due to the US$68 million sale of zero-emission vehicle credits to carmakers that didn't sell enough green cars, according to the regulations of California and 12 other states in the US. Nonetheless, the announcement captured the public eye.

In the first three months of this year, sales of Tesla's latest and currently only offer, the US$62,400-plus Model S, surpassed forecasts of 4,500 units to reach 4,900. That included 4,750 units delivered in the US, which had Tesla outperforming traditional carmakers Mercedes-Benz, BMW and Audi in the large luxury sedan segment and also outpacing best-selling mass-market green cars Chevrolet Volt and Nissan Leaf.

Creative technology

Comparisons are drawn frequently between Tesla and Apple for the game-changing, creative impact their technologies have on their respective industries. However, there is another angle to consider in the success of Model S - market positioning.

As market observers are fond of pointing out, one big reason electric cars haven't caught on is the high cost of their batteries, which account for nearly one-third of the price. Many electric carmakers have gone on the hack-and-slash route, searching for a delicate balance between the cost of manufacturing and mileage performance. That often leads to a marketing dead-end filled with small or mid-size cars carrying sticker tags higher than combustion-engine rivals.

No wonder ordinary consumers are showing little interest and high-end buyers are turning up their noses, independent auto analyst Zhong Shi said.

Tesla has chosen to extricate itself from this dilemma by focusing on making expensive cars with an upscale image.

When cost is set aside, more batteries bring better mileage, said Hou Yankun, head of Asia Autos at UBS Securities.

The Tesla Model S runs on lithium-ion batteries - the kind commonly found in laptop computers. But when thousands of them work together in a complex pack under a smart management system, they can power the car up to 300 miles on a single charge. That is far longer than the usual 100-mile range available in most mass-market green cars designed for the budget-minded.

To offset the weight of batteries and ensure safety, Tesla uses lightweight materials for some parts of the car. Again, cost is secondary.

Tesla has a very good reason to focus on luxury because electric cars have big potential in that end of the market, due to technology characteristics, Hou said.

"First, their high torque enables rapid acceleration," he said, "and their engines are very quiet, which are among the basic requirements for premium models."

Holding an official zero-to-60-miles-per-hour acceleration record of 4.2 seconds, the performance variant of the Model S reportedly could pull that off in just 3.9 seconds, outgunning big horsepower vehicles like the Dodge Viper SRT10 in drag races.

Acceleration is only part of the "cool" experience the Tesla offers.

Inside the Model S, there are no complex gauges, buttons or switches. In place of the traditional control panel is a 17-inch futuristic LCD touchscreen that puts media, communications, cabin and vehicle controls all at one's fingertips.

The reason that such advanced technology can be added to improve the driving experience is that there are people willing to pay extremely high prices for such a car, Zhong said.

"It is a car developed for the rich," according to Cui Dongshu, deputy secretary-general of the China Association of Automobile Manufacturers. "Its super big user interface, super fast acceleration, super long mileage and super zero emission are all assets for show-off."

'Green chic'

Tesla's early customers in the US were mostly celebrities like Brad Pitt and business moguls like Sergey Brin, the co-founder of Google. But now, white-collar workers earning handsome incomes in large firms are also placing orders for Tesla, which is becoming a symbol for "green chic."

Could this marketing strategy work in China?

Tesla is preparing to open its first dealership in Beijing. At the onset, it seems brand image here will be more related to its concept as an electric car forerunner rather than a serious player in the luxury car market.

"China's wealthy people make status purchases," said Cui. "They feel it would be odd to buy a car purely for environmental reasons. The lackluster performance of Toyota Prius hybrids in this country is a case in point. Not many Chinese consumers take into account eco-friendliness when it comes to car purchases."

Hou said it will be interesting to see what kind of reaction Tesla gets. It will be going head-to-head against major companies with big research and development budgets. In the second half of this year, for example, BMW is set to roll out its first mass-production electric car, the BMW i3, which is very similar to Telsa's model, he said.

For its part, Tesla is apparently thinking seriously about making more affordable electric cars, priced from about US$30,000, in the next three to five years, to increase sales and influence. If it does so, the company will have to tackle the old cost-effectiveness problem that's troubled the green car mass market from the start.

"I don't think electric car technologies can compete with traditional internal-combustion engines in the next decade," said Hou.

Popularization of electric cars depends either on awakening the environmental conscious of consumers or on government subsidies, he added. The first condition is not likely; the second is not sustainable, he said.

In the US a US$7,500 tax credit is attached to the purchase of every electric car. It may not be a deal-sealer for those who can afford Tesla Model S, but without it, could the company scale up its sales and sustain its profits by moving beyond its role of making cars only for the rich?