Tesla Motors (NASDAQ:TSLA) is leading the charge against rising oil prices and non-renewable resources. Tesla certainly proved to be a threat to the ICE technology with the Model S. The transition into EVs will be slow, as ICE vehicles have dominated the automobile market since the late 19th century, but Tesla and EVs have gained some momentum.
Prior to the launch of Tesla's Model S, I wrote two articles regarding Tesla's future. In a difficult time for independent EV firms, investors were extremely divided into optimists and pessimists. However, I saw Tesla as a visionary company with an aggressive and differentiated plan. Unlike other EV firms, Tesla seemed to be headed in the right direction with its technology; Tesla's Roadster enjoyed a superior range and performance compared to its competitors due to the use of its superior cells, and plans for Model S were promising. At the same time, governments all over the world were aggressively supporting the EV movement with research funds, consumer incentives, and charging infrastructure initiatives. The main obstacle of Tesla was the financial burden of innovation; it is undeniably difficult to keep operating without profits. So where does Tesla stand now?
The Model S proved to be very successful, and won the automobile of the year. Tesla has constantly met its goals, even generating profits in December and reaching production goals of 400 vehicles per week. It should reach its goal of 20,000 vehicles this year, if not shatter this number by another 5 to 8 thousand. Tesla's batteries, battery packs, battery management systems, and the integration will continue to improve until any remaining range anxiety or safety issue is eliminated. Most importantly, Elon Musk has announced plans to add to the product line with Model X and BlueStar - each targeting a different sector.
It also doesn't hurt that the EV market is expected to grow rapidly. Pike Research estimates that the EV market will expand to 22 billion dollars by 2020. For at least the near future, Tesla will remain at the top of this market (once innovation slows down and the core technology of EV becomes established across the market, the gap between Tesla and its competitors will be eradicated).
There are aggressive initiatives to set up charging infrastructure as well. A few days ago, the Department of Energy Secretary, Stephan Chu, announced the Workplace Charging Challenge to institute EV charging stations into parking lots. This plan includes 21 partners, including Tesla, Nissan, Plug In America, Google, Verizon and the Rocky Mountain Institute. Even creative supporting systems have surfaced, including Duke's Solar Power EV charging system. We can expect charging electric vehicles to become as easy as pumping fuel into an ICE vehicle in the future.
On the consumer end of the spectrum, Tesla is gaining wide recognition. Consumer Reports conducted a survey on American brand perception of automakers based on seven categories that include quality, safety, performance and design. Despite its limited marketing methods, Tesla made the Top 10 for the first time. Imagine what Tesla can achieve with some aggressive marketing strategies! Tesla is letting the world know that EVs are a reality and not just a dream.
Considering it only made its first profits in December, Tesla is trading at a high price, but the potential growth of Tesla is still underestimated even at this level. Once Model X and BlueStar are added to the product line, it is only a matter of time until Tesla does some real disruption, which is the ultimate goal for Tesla and its investors. Buy and hold Tesla, and it will prove to be extremely profitable.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TSLA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.