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A Tesla Model 3 automobile is on display. (Photo by Chesnot / Getty Images)
One of the strongest arguments Tesla bears have made it to Ford, Mercedes, Honda and Toyota to eventually release a "Tesla-killer." Gorden Lam, one of my managers, does not see this happening anytime soon. Tesla has no real competitors at this time. If one does not emerge soon, Tesla looks poised to dominate the auto industry in a few years.
Where's The Competition?
Five years ago, Citron Research shorted Tesla because they foresaw that:
By the time this (Tesla's) product is going to market, there will be many other 200-mile range plug-ins that have been out for years.
Earlier this week, when they say "Tesla is destroying the competition".
But what is the competition? Is it electric cars? Is it luxury cars? Is it all cars?
From the quote above, it seems that five years ago 200-mile range plug-ins. However, it is clear that Tesla is attracting customers, not just the all-electric luxury car market.
This is the future of the future, which is not so much driven by internal combustion engines (ICE).
As Tesla's production ramps up, it will be possible to make a profit on the price of ICE cars across the board.
On Wednesday's earnings call, Elon Musk said Tesla could increase production from 5,000 to 7,000 cars / week without much capex spending. Think about that! Tesla can make 40% more expensive.
Musk did not say this, but I think it's about 40%. When that happens, I think Tesla will be able to compete profitably for mainstream car buyers.
How Will Competitors React?
Like Citron Research, I am surprised at how ineffective the leading companies have been in developing a "Tesla-killer."
Rather than compete with Tesla, Ford seems to be running away. In April, Ford announced they were dropping their cross-country and SUVs. This strategy makes sense from an accountants point of view as these are Ford's most profitable products.
However, there is no reason for a SUV, Ford's decision to focus on their high-margin products only with Tesla for the time being.
Mercedes and Volvo have shown that they are years away from production.
GM is currently selling the Chevy Bolt, which is a competitor. However, Gorden Lam points out that sales of the Bolt plunged 40% in September while Tesla's Model 3 was the fifth best selling car. The customers have spoken. Honestly take a look at both cars. Which one you would rather own?
The Award-winning Chevy Bolt EV is presented during the four-day auto trade show AutoMobility. (Photo by David McNew / Getty Images)
It's almost as if GM does not want to sell too many Bolts. This would make sense if the Bolt is a money-loser and GM only sells it to get ZEV credits.
I do not know what GM is thinking, but the Bolt is not a Tesla-killer.
The Clock Is Ticking
If it turns out customers prefer to fuel their gasoline, they are woefully unprepared.
In order to compete, they will have to overcome two big hurdles.
First, they need to find a source of batteries for their cars that are competitive with Tesla makes. Musk said in the last call that Tesla batteries have the lowest cost per kilowatt hour. This could be hyperbole, but the fact is that a competitor would have to match Tesla's cost per kilowatt hour or so to a big advantage to Tesla.
Second, they need to provide customers a way to load their cars on long trips. Otherwise, customers will need a second car for long trips.
One reason you will not be able to do this is because you will be able to cannibalize your existing business.
It takes a strong leader to convince everyone with a stake in the company to make major investments in a business in which you can not and should not be able to make your existing profits.
I do not think the CEOs of the other companies are able to take this step. Musk was able to do it because Tesla did not have ICE because profits to cannibalize.
We've Seen This Before
Nokia, Motorola, Blackberry and Sony Ericsson would make Apple's short work.
In time, the leaders of the mobile phone industry have almost completely changed. The process took years to unfold, and generated a lot of wealth.
The situation is repeating itself with Tesla right now. There are lots of people in the world today who will eventually be put to the test by Tesla. They have the resources to do it but they are not very fast.
Until we see a serious competitor to the Model 3 come to market, I'm betting on Tesla.
If you would like it when Gorden Lam updates his views, click here.
If you would like to know when I write about Tesla or other stocks you are here, click here.
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A Tesla Model 3 automobile is on display. (Photo by Chesnot / Getty Images)
One of the strongest arguments Tesla bears have made it to Ford, Mercedes, Honda and Toyota to eventually release a "Tesla-killer." Gorden Lam, one of my managers, does not see this happening anytime soon. Tesla has no real competitors at this time. If one does not emerge soon, Tesla looks poised to dominate the auto industry in a few years.
Where's The Competition?
Five years ago, Citron Research shorted Tesla because they foresaw that:
By the time this (Tesla's) product is going to market, there will be many other 200-mile range plug-ins that have been out for years.
Earlier this week, when they say "Tesla is destroying the competition".
But what is the competition? Is it electric cars? Is it luxury cars? Is it all cars?
From the quote above, it seems that five years ago 200-mile range plug-ins. However, it is clear that Tesla is attracting customers, not just the all-electric luxury car market.
This is the future of the future, which is not so much driven by internal combustion engines (ICE).
As Tesla's production ramps up, it will be possible to make a profit on the price of ICE cars across the board.
On Wednesday's earnings call, Elon Musk said Tesla could increase production from 5,000 to 7,000 cars / week without much capex spending. Think about that! Tesla can make 40% more expensive.
Musk did not say this, but I think it's about 40%. When that happens, I think Tesla will be able to compete profitably for mainstream car buyers.
How Will Competitors React?
Like Citron Research, I am surprised at how ineffective the leading companies have been in developing a "Tesla-killer."
Rather than compete with Tesla, Ford seems to be running away. In April, Ford announced they were dropping their cross-country and SUVs. This strategy makes sense from an accountants point of view as these are Ford's most profitable products.
However, there is no reason for a SUV, Ford's decision to focus on their high-margin products only with Tesla for the time being.
Mercedes and Volvo have shown that they are years away from production.
GM is currently selling the Chevy Bolt, which is a competitor. However, Gorden Lam points out that sales of the Bolt plunged 40% in September while Tesla's Model 3 was the fifth best selling car. The customers have spoken. Honestly take a look at both cars. Which one you would rather own?
The Award-winning Chevy Bolt EV is presented during the four-day auto trade show AutoMobility. (Photo by David McNew / Getty Images)
It's almost as if GM does not want to sell too many Bolts. This would make sense if the Bolt is a money-loser and GM only sells it to get ZEV credits.
I do not know what GM is thinking, but the Bolt is not a Tesla-killer.
The Clock Is Ticking
If it turns out customers prefer to fuel their gasoline, they are woefully unprepared.
In order to compete, they will have to overcome two big hurdles.
First, they need to find a source of batteries for their cars that are competitive with Tesla makes. Musk said in the last call that Tesla batteries have the lowest cost per kilowatt hour. This could be hyperbole, but the fact is that a competitor would have to match Tesla's cost per kilowatt hour or so to a big advantage to Tesla.
Second, they need to provide customers a way to load their cars on long trips. Otherwise, customers will need a second car for long trips.
One reason you will not be able to do this is because you will be able to cannibalize your existing business.
It takes a strong leader to convince everyone with a stake in the company to make major investments in a business in which you can not and should not be able to make your existing profits.
I do not think the CEOs of the other companies are able to take this step. Musk was able to do it because Tesla did not have ICE because profits to cannibalize.
We've Seen This Before
Nokia, Motorola, Blackberry and Sony Ericsson would make Apple's short work.
In time, the leaders of the mobile phone industry have almost completely changed. The process took years to unfold, and generated a lot of wealth.
The situation is repeating itself with Tesla right now. There are lots of people in the world today who will eventually be put to the test by Tesla. They have the resources to do it but they are not very fast.
Until we see a serious competitor to the Model 3 come to market, I'm betting on Tesla.
If you would like it when Gorden Lam updates his views, click here.
If you would like to know when I write about Tesla or other stocks you are here, click here.
