Tesla Has No Threats... For Now

| About: Tesla Motors (TSLA)

Anyone following Tesla (NASDAQ:TSLA) already knows excellent Q1 2013 earnings were reported, with substantially higher revenue than expected and even an overall net profit. Prior to these results, much doubt was cast over TSLA and the electric vehicle industry in general, but now there is substantially more optimism surrounding the industry and TSLA's future. I would agree that there is a promising future for electric vehicles, but am interested in whether TSLA will face any meaningful increased competition from larger auto manufacturers in the future.

Current Competition

While large auto makers have dabbled in the electric vehicle, they have made up a small portion of their revenues, and cannot be considered especially successful. Tesla's Model S has been the star of the industry, because it crushes all the competition currently out there. The car has received excellent reviews, with perhaps the most notable review being from Consumer Reports, which gave the car a 99 out of 100 rating (outscoring every other car). Other reviews and owner-accounts I've heard about the Model S have also been extremely positive, with the only real negative press coming from dubious sources (one negative review from the New York Times was debunked by TSLA CEO Elon Musk as being false, while Top Gear had also shamefully misrepresented TSLA's other model, the roadster, by pretending it ran out of energy). The Model S is fast, powerful and reliable, and it has an excellent range of 300 miles which is more than enough for most people.

When we look through the competition for the Model S from the biggest auto manufacturers, it's clear why TSLA sold better than anyone else in this industry during Q1 2013:

  • The Chevrolet Volt was the second best performing electric car in North America during Q1 2013, selling 4,421 units. While reviews are positive (though not as strong as the Model S), the car faces a serious limitation in that it has a range of only 35 miles compared to the Model S' 300 miles, and its performance is also abysmal when compared to the Model S.
  • The Nissan Leaf has less power than the Volt (at 110 horsepower), but has a higher range of somewhere around 75 miles to 84 miles (though that range is still dismally short of the Model S). Like with the Volt, reviews for the Leaf have been positive, but it's failed to generate huge widespread praise and enthusiasm in the same way the Model S has. The only advantage of the Leaf is that it is substantially cheaper, but even at a cheaper price point it has failed to sell as well as the Model S. Both the Leaf and Volt have sold over 50,000 units worldwide.
  • The Focus EV from Ford (NYSE:F) has a very similar range to the Leaf and reasonable power, though it's slightly more expensive than the Leaf, and certainly far more expensive than the standard gas-powered Focus. The vast majority of customers still prefer to go with the cheaper, conventional Ford Focus model.
  • The Mitsubishi iMiEV has been called "a glorified golf cart of limited use" by Consumer Reports (the same group that praised the Model S). It has an incredibly weak performance (63 horsepower), though it does come at a fairly attractive price point (less than $30,000 in the USA), and over 22,000 units were sold worldwide as of December 2012.
  • The only electric car that has been made so far that really holds a candle to the Model S and Tesla's sportier roadster is the Fisker Karma, which looks attractive, is powerful and has a high range. Unfortunately, the Karma was not a success, and Fisker is now in serious danger of bankruptcy. The Karma broke down during attest from Consumer Reports, and seems to catch on fire very easily (sixteen models burned during Hurricane Sandy, and Fisker previously had to pull all cars due to the fire risk).

Future Competition

We can see that Tesla's Model S and its more expensive, stylish Roadster model are currently well ahead of the competition, and it should be expected that we'll see better electric cars released in future to present TSLA with a real challenge. But interestingly, even as the electric car industry becomes more competitive, TSLA may stand to benefit in some ways. In a recent CNN interview, Elon Musk says "I hope we are surrounded by electric cars from other manufacturers" and "I look forward to the day when every car on the road is electric." As more manufacturers become increasingly more involved in the electric car industry, infrastructure (in the way of batteries, charging stations, dealers and mechanics) will improve, and provide a better product for TSLA customers. And to facilitate a faster growth in the electric car industry, TSLA has shown a willingness to license its technology to competitors, such as Mercedes-Benz.

As the electric car industry matures, it's expected that TSLA will release newer models, as Elon Musk's original idea was to come out with a high-priced model at first (as has happened now) and eventually release a low-priced, common electric car that will be practical and affordable for the typical American. There's already plenty of competition in that area (though I expect TSLA to come out with something substantially better). For now, though, it's worth taking a look at some of the higher-end electric cars coming in future that will provide reasonable competition for TSLA's current Model S and past Roadster model:

  • The Panamera E-Hybrid, which was recently unveiled in April, looks like it may provide reasonable competition to the Model S, as it has very similar specifications in terms of power and price.
  • The Audi e-tron was first shown 2009. A few different concept models have been shown, including the R8-etron, which is expected to have a range of 124 miles, and potentially come at an initial price of up to $200,000. Also interesting is the e-tron Spider, which may compete with the Tesla Roadster.
  • The BMW i-8, first shown in 2011 and expected to cost around $122,800. In all-electric mode, the i-8 will apparently only last 22 miles before it needs recharging.


It's still difficult to see TSLA being taken off its perch as the main electric car manufacturer in the near future, and I expect the electric car industry to continue to grow in the years ahead. In some ways TSLA may be compared with Apple (NASDAQ:AAPL), as both companies have led their respective industries by innovating heavily and putting together a product that is of outstanding quality compared to everything else available (if anything, this even more the case with TSLA than AAPL). I still do not plan to buy TSLA due to its substantial rise recently, but will be watching from the sidelines.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.