It’s tough being a trailblazer. To that end, one has to be supportive of — if not also sympathetic to — Tesla Inc (NASDAQ:TSLA) CEO Elon Musk. Though long-term owners of TSLA stock don’t have a great deal to complain about, many of them have joined the chorus of criticism hurled at him on a regular basis, mostly for overpromising and underdelivering. Repeatedly.
And yet, sympathy and support can only go so far when a grown man makes the same mistake over and over again.
The latest questionable decision? Musk recently explained the company is looking to build another (roughly) 8,800 battery-supercharging stations all over the world by the end of next year. For perspective, there are 1,229 currently in operation and 121 more underway. To reach that goal, the company would need to complete about 15 of these sites every day between now and then.
It seems unlikely to happen.
If we’re all being honest though, it’s also unlikely many people — owners of TSLA stock or not — actually believe that Musk even believes it’s possible. This is just Elon being Elon. We all collectively “get it.”
In the same vein of honesty, however, one can’t help but wonder if Elon Musk has become so caught up in the quest to prove the doubters wrong, distracted by the critics and seeking to create the next splashy headline that he’s looking past another stark reality: Competitors are about to catch up with Tesla — on multiple fronts.
Hey Elon, Look Behind You
As strange as it may sound, there are several parallels between Tesla and Netflix, Inc. (NASDAQ:NFLX).
For years the streaming-video giant was the market leader because it was the only player in the market. That served as an opportunity to collect and connect with consumers, making it the most recognizable and popular name in the streaming game.
Nothing draws out competition like success, though. Having learned from what Netflix did right, and what it didn’t do at all, newcomers have entered the arena. Hulu, Sling TV, Vue from Sony Corp (ADR) (NYSE:SNE) and even Amazon.com, Inc. (NASDAQ:AMZN) are all now grabbing at a piece of this market.
Netflix is still the name to beat, to be clear. The fight is only going to get tougher though. That’s just the sequence/process/cycle for the roll-out of any new kind of product.
Tesla doesn’t face any serious competition — yet. It’s soon going to though, now that it’s proven electric vehicles can be a mainstream product. Unlike Netflix, however, Tesla’s fiscal and developmental sloppiness has left it more vulnerable to competition.
Field of Competitors for TSLA Stock
Yes, this competition includes the likes of Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM). Both make electric vehicles. These aren’t necessarily the competitors that owners of TSLA stock will want to worry about though, as each manufacturer is on the defensive in other ways. The most formidable competition is apt to be a newcomer that was, like Tesla, built from the ground up to make electric vehicles.
A somewhat obscure name like Nio, which makes a very nice electric vehicle that sells for a Tesla-esque $70,000 comes to mind. Nio just filed for a U.S. IPO, suggesting plans to ramp up production.
Meanwhile, Porsche, Audi, BMW and Volkswagen AG (OTCMKTS:VLKAY) — just to name a few — collectively unveiled a batch of electric vehicles in March the likes of which the world has never seen, at least in terms of sheer numbers. Volkswagen, in fact, believes it will be able to produce 1 million cost-effective electric vehicles per year by 2025.
Most of those battery-powered cars also sport Tesla-like price tags, and they’re increasingly being shipped westward as well as eastward.
More Competitors for TSLA Stock Will Emerge
More competitors are sure to emerge too, for one overarching reason — their production costs are falling fast, as their production scales up. A recent report from Bloomberg New Energy Finance suggests that by the mid-2020s sales of combustion-driven cars will taper off and then reverse, as the cost-advantage of EVs will overtake conventional vehicles’ operating and purchase costs.
That’s a cost-saving all makers of electric vehicles will enjoy equally.
It’s not just the low-cost production of cars themselves that will leave Tesla fighting to remain the market leaders. Its lead on the EV battery front is also now threatened. China’s Contemporary Amperex is looking to step up its EV battery game, and though its present target is the utility-level power storage market, deep-pocketed Lockheed Martin Corporation (NYSE:LMT) is working on batteries built on the same lithium found in the batteries that power electric vehicles. A simple tweak could put Lockheed into that all-important aspect of the EV market.
Bottom Line for TSLA Stock
Immediate threats? No, there’s no particular reason to rush out and dump your TSLA stock today. Indeed, if Musk manages things (and himself) right, there may not be any reason to shed your Tesla stock ever.
This is something current and prospective Tesla shareholders will want to keep in the back of their minds though. It would be naive to think other players will simply sit back and reap the benefits of this growing market, even though Tesla is the company that created it.
Meanwhile, if Musk remains more focused on waging a publicized war with the media and launching electric vehicles into space than he does on making sure Tesla makes the best EVs on the market, the rise of competitors — something the company’s never actually faced in earnest — could turn into surprisingly significant trouble for Tesla. Ditto for TSLA stock. There’s little room for error with Tesla’s capitalization and valuation.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
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