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  • Tesla Is Here To Stay 0 comments
    Sep 10, 2013 1:52 PM | about stocks: TSLA

    There is a lot of investment advice for those that look into it. Since the first day of trading, a lot of so called experts have tried to beat the market. The basics are simple: buy low, sell high. But trading proves to be more complicated than that and acts more like a gambling game where winners and losers are choosen by luck and a little bit of skill.

    There is a lot of factors which affect a company stock price that it cannot control. Political struggle in Syria affects stocks all across the board and you can't read about that when you research about a company. There's also the string of news that get reported. Good news may rise the price while bad news may spook nervous investors away. But there is a lot a company can do to rise it's stock price.

    Tesla has created a unique product. Yes, it has been done before. But the technology just wasn't there a hundred years ago. Yes, GM had previously developed an electric car, the EV1 but it was prematurely killed for reasons that no one can really explain. I recommend watching "Who killed the electric car?" if you haven't so you can get a grasp of how electric cars were received in 1996-1999. Tesla builds itself over the legacy and research of the EV1.

    When looking for a company to invest in, the single best advice is to find a great company that will be worth more in the future than in the present. Buying stocks means buying growth. Tesla's strategy has been really smart. They started with the luxury sedan. Starting from the top allows them to create a solid car and then add the sticker price later. Previous attempts in electric cars have failed because they start with the sticker price first and try to make a great car under that price. But by starting from the luxury car, Tesla has limited itself to a niche market. Not everyone can afford a Tesla Model S.

    Tesla has paved the way for future cars. Model X, their CUV, is expected to start production late in 2014. Their economic car is expected to start production in 2017. Right now Tesla has only one car and it is selling well in that category. It is not selling as much car as the big three but it is doing well in the luxury category. By 2017, Tesla will compete on 3 fronts: luxury, CUV and the economic car. At that point, Tesla may become a major player.

    A lot of discussion has started about the current valuation of Tesla. Musk clearly said, "they are obviously giving us a lot of credit for future execution". And that's exactly right. Experts have been pitching in about their valuation models. Recently, Professor Damodaran made a lot of buzz, but his model doesn't contemplate Model X, the future economic model or any new model Tesla may develop in the future. It is my opinion that Tesla will be a major disruptor that will either become the major player in automobiles or will force other automobiles to follow suit. Tesla however is faced with real challenges and real competition.

    Assuming that Tesla forced others to follow suit with EV cars, GM is the best suited to take over. GM has had the experience of creating a great EV car, the EV1. It has the experience and research to outperform Tesla.

    At the end of the day, the electric car is here to stay and it is here to take over. Rising oil prices and worries about contamination and global warming will boost the move to this kind of technology. China was passing new incentives to reduce contamination in the air. Like the EV1, there will be a lot of pressure to stay as we are with ICEs but unlike GM in the past, Tesla will not yield to ICEs because they have branded themselves as electric.

    Disclosure: I am long TSLA.

    Additional disclosure: This article isn't meant to be investing advice. Investing is your decision and what you do with your money is solely your responsibility. Read, Analyze and decide before taking any positions.

    Stocks: TSLA
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