I have no doubt that Tesla (TSLA) will eventually become a very big company one day. I also have no doubt that electric cars will one day become mainstream. At the same time however, I also have no doubt that Tesla shareholders will not make money buying Tesla's stock for the next decade. The reason as I have explained in past articles, is that today's valuation has discounted all the good news Tesla will announce (and then some) for many years into future.
But there is another reason why Tesla shareholders might not make any money in the future, and that is that Tesla is not the only company making electric cars.
Meet the new kid on the block, the BMW i3.
The BMW i3 is designed for short-distance city driving. It is by no means a highway car, since its range is about 80-100 miles with a top speed limit of 93 mph. The i3 is more of a concept car than a luxury high performance vehicle that we are used to from BMW. For example, the cabin is built from carbon-fiber reinforced plastic, which BMW says is equally as strong as steel and 30 percent lighter than aluminum. The materials in the interior are made from recycled plastic beverage bottles and fibers, and the leather interior is treated with natural substances like olive leaf extract.
The i3 is not exactly the "Ultimate Driving Machine" as most other BMW cars are, but rather the ultimate urban automobile. It can park in places where no Tesla model S can park and it is particular suited for cities like Amsterdam or Athens, where the smog levels occasionally reach that of LA. Of course, all this innovation and environmental friendliness comes at a cost, with prices starting at around $41,000, when it goes on sale in Q2 of 2014.
However, there are many more companies that offer electric vehicles and many more to come. Among others are Ford (F) with the Ford Focus Electric, the Nissan (OTCPK:NSANY) Leaf, Daimler's (OTCPK:DDAIF) Smart electric and very soon General Motors (GM) is rumored to challenge Tesla with a rival vehicle that can go for 200 miles on a single charge and cost around $30,000.
Tesla today is concept stock with a potentially disruptive technology, at least on the manufacturing end. However, when everyone starts making electric cars and they become mainstream, then the concept element will no longer be there.
What this means for investors, is that Tesla will no longer be valued as a concept stock, at concept valuations, because the electric-only concept will be mainstream.
So be my guest to day-trade and swing-trade Tesla up and down, but don't think that this is a long-term buy and hold stock. Because today's concept might soon become mainstream, at mainstream valuations, and if (when it happens) that happens, many people will find themselves still losing money after holding Tesla's stock for a decade.