A young man admiring a new car © i love images, Cultura, Getty Images

Oh boy, did shares of Tesla Motors (TSLA) ever go wild in early May, when the maker of all-electric cars reported its first quarterly profit ever.

The news came as Consumer Reports gave the company's $70,000 Model S a near-perfect rating. The result: The stock price jumped 65% in a bit more than a week.

Tesla was North America's top-seller of rechargeable vehicles in the first quarter, beating both General Motors' (GM) plug-in Volt and Nissan's (NSANY) battery-powered Leaf. LMC Automotive, a market research firm, estimated that Tesla also outsold the Mercedes S-class, the BMW 7 Series and the Audi A8 in the first quarter. 

The clamor for Tesla shares was so great that the company, which had said it didn't need to raise cash, promptly floated a $1 billion stock and bond issue. Moreover, Tesla surprised and delighted a lot of critics when it paid off the last of $465 million in loans the company owed the government, years ahead of schedule.

Suddenly Tesla – once a punch line for critics of electric cars, including Mitt Romney – looked like a power player. There was talk the company should take over Fiat (FIATY), the Italian automaker that controls Chrysler.

So is Tesla the next Ford Motor (F) or General Motors? Does it offer investors the chance to buy a young company that could grow into the next major international automaker? Yes, but – take a deep breath.

Just getting started

First off, Tesla has a long way to go before it is Ford, GM or even Chrysler. Tesla's revenue was just $413.3 million in 2012. Based on its first-quarter revenue of $562 million, 2013 revenue looks like it could hit $2.2 billion; the consensus estimate is $1.93 billion. Whatever the amount, GM had $36.9 billion in revenue in the first quarter alone.

Second, this is a tough business. The road to auto glory is littered with Packards and Pierce Arrows, car companies that competed with William Durant of GM and Henry Ford early on and had some success but ultimately went belly-up. Even if the electric car does to internal combustion what the horseless carriage did to buggies, not every electric-car maker will make it.

Moreover, there's no guarantee Tesla will remain an independent. Durant lost control of GM to investors led by the DuPont family.

And third, the big auto makers believe they really need the mass market to be profitable. While Tesla is expanding from two vehicles to three – its Model X is the Tesla version of a sport-utility vehicle – they start above $60,000.
It has shown no interest in building moderately priced vehicles for average buyers. There's no Tesla equivalent to a Chevrolet Impala or a Toyota Corolla.

Why Tesla works

Tesla does have several things going for it.

One is a big thing: It's way cool, the way Apple (AAPL) was after it came out with the iPhone and the iPad. If someone drives up in a Model S or a Tesla Roadster, people notice. For one thing, the driver sends out a clear signal that he has the nickels to afford the vehicle. That elite buyer is the first point of differentiation.

Second is the business model. Tesla doesn't sell its product through dealerships. You go to a showroom. You check it out, maybe take a test drive. You put down a deposit for a car that will be delivered two to three months later. Among other nifty features is a 17-inch touch-screen control panel.

And you pay full price, starting at $62,400 – after a $7,500 federal energy tax credit.

Buying the Model S Performance model gives you a car that can go from zero to 60 mph in 4.2 seconds. A Tesla is not meant to be a vehicle for the earnest, responsible do-gooder. This is a car to show off.

Third, Tesla has a wildly charismatic CEO in Elon Musk, who not only co-founded this company but was also behind PayPal and SpaceX, the space transport company. Musk knows how to generate publicity. When a New York Times reporter had big-time problems test-driving a Tesla from Washington to Connecticut, Musk accused the reporter of fabricating the narrative. The story played out for days before everyone cooled off, which gave Tesla tons of free publicity.

Fourth is the name: Tesla is named for Nicola Tesla, the Serbian-American inventor best-known for his work on developing alternating electrical current systems. Popular in certain circles as a mad scientist of world-shaking brilliance, he's way cool.

But Tesla the company also faces hurdles.

Auto dealers are not Tesla's friends

First off, its direct-to-consumer business model has made enemies of auto dealers, who buy their inventories from the automakers and then sell them to retail customers. The system has been in place since the early 1900s; a pioneer dealer was Charles Howard, the San Francisco businessman who owned the racehorse Seabiscuit.

Dealers are protected in many states by laws that prohibit manufacturers from selling cars directly to consumers.

In Texas, that means you can go to either of the two Tesla showrooms and look at a car. But you can't drive it, and the law says Tesla staff can't tell you the vehicle's price. If you live in Texas and want to buy one, you can go online for the price information and wait for a delivery, or travel to a state where Tesla has its own dealerships, talk price and drive your vehicle back.

A bid to amend the law looks like it will fail.

North Carolina's dealers, meanwhile, argue Tesla is engaging in unfair competition. So, at their behest, the North Carolina Senate has approved a bill banning online car sales in the Tar Heel state altogether. The bill affects only Tesla, which has sold more than 80 cars to North Carolina residents and has orders for an additional 60. If the bill, now pending in the North Carolina House, becomes law, a Tesla buyer would have to travel elsewhere to order and buy one.