Three of the "next generation Teslas" (NASDAQ:TSLA) are making moves as they prepare to launch their first cars between now and the end of 2019. I find that most investors don't know about these companies.
So without further ado, let's dig right in!
With at least 2,000 employees worldwide and 260 out of those in Silicon Valley, NextEV now appears to be the largest outfit. The company continues to grow its employee base rapidly.
The company's first car will be launched next month, in November - and in Europe. This car is more of a showcase as the company will make very few of them. Think not much more than 10 copies. All have already been pre-sold.
Here is a picture of this first low-volume car here.
Basically, it's an extremely fast electric car with 1,360 horsepower and the ability to compete on a racetrack. It is made to be used only in Europe and China as it will not meet U.S. street legal requirements.
The second car NextEV will make will be launched in November 2017. This car will be for China only.
The third car NextEV will make will be launched in November 2018. This car will be for China plus another country or two or three - but not including the U.S.
The fourth car NextEV will make will be launched in November 2019. It will be for global consumption and sold on all major continents - including the U.S.
Today was the day when we first saw a rendering - however crude and unfinished - of Atieva's first car, which we should see in full bloom as early as December this year here.
Atieva has been showing off its development mule, which uses the shell of a Mercedes Metris (Vito in Europe) minivan here.
It is showing 0-60 times of 2.7 seconds in this van, so the final sedan product should be able to be even quicker on that particular metric. Manufacturing should begin in the fourth quarter of 2018.
3. Faraday Future
We recently got a glimpse of Faraday Future's first production car here.
It is not at all clear to me when Faraday Future will be ready to show its major production car. It could be only a couple of months away, or we could see it closer to sometime in 2018. My guess is that it will be less than one year from now.
At some point, there was talk that this car would be in production at the very end of 2017, but this seems extremely unlikely. For starters, the factory - located in Las Vegas, of all places - didn't break ground until early 2016. That would normally imply production to begin in early 2019, which I believe sounds close enough to being realistic. Could we see the initial units make out the door much before the end of 2018? Possibly, but that may entail risks with quality.
Faraday Future recently announced that it had reached 1,000 employees (here).
Implications for Tesla: Probably not good
Obviously, these three companies are all electric car startups. Their valuations are not known. They all seem to have dominant Chinese ownership even though their headquarters are in California. The major "public front person" in each company is not Chinese. At least one company appears to have at least approximately half its employees in China.
There are three aspects to the impact on Tesla here:
1. Sheer competition
Within approximately three years from now - say, the very end of 2019 - all of these three companies could be selling their first "mainstream" product in the U.S. market. Two of them, perhaps near the end of 2018. The definition of "mainstream" in this case is widely exaggerated. I mean a car that can fit at least four people comfortably plus a decent amount of luggage.
I sense that the first Faraday Future car could be very expensive, selling mostly above $150,000. That's obviously addressing a tiny market, although not as tiny as if the car were a two-seat supercar.
After NextEV's first hypercar, I have no idea how it will price its cars, but one senses that the focus would be mostly on relatively affordable cars - however you define that. In any case, significantly under $100,000. Again, one might see several tiers for the U.S. market with the first one due November 2019.
Atieva? I have no idea what it will cost. One senses that the highest-performance metrics could take it to around $100,000 and above - but in a more modest configuration could start a bit below. In other words, a lot like Tesla Model S.
The products coming from these three companies will all likely look fresh inside and out and have various classes of innovative features and services. In other words, they seem to be gunning for much of the same people who have bought a Tesla. Not only has Tesla lost droves of employees to these three companies but they are also competing for the same buyer pool. That can't possibly bode well.
If these three companies are darlings of the Chinese government, why would China lend a helping hand to Tesla for the purpose of selling cars in China - let alone making them in China? You may remember how Elon Musk kept telling us in 2014 how it would be a huge player in China already by 2015. Well, that didn't work out. Will it ever, with these companies coming online?
3. Exit strategy for Tesla
Let's say you're a really big company and you might consider buying an electric car startup. Tesla's fully-diluted market cap at $200 a share and 162 million fully-diluted shares, is $32 billion. It loses money left and right.
Obviously, Tesla is much further ahead than these companies in terms of go-to-market. Tesla has achieved respectable production volumes many years before the new startups will. So Tesla might be worth a lot more. But how much more? In a year or two from now, will any of these other smaller/newer companies be available for somewhere under $4 billion? Under $2 billion? Under $1 billion? Who knows. But Tesla won't be the only option for someone looking to cut a deal.
Investment prospects for these kinds of startups
Until any of these companies starts delivering ANY car in even a tiny volume - say, 40,000 a year - several hundreds of millions of dollars will have to be invested. More likely, a billion or two - and that's in the absence of building any factory. Production can be outsourced anyway. Then, to build out a sales and service network - among other things - and get to "cruising altitude" in terms of volumes, one might think that more billions of dollars will have to be spent.
One does get the impression that launching a new car company is the "new hot thing to do" in Silicon Valley and beyond. It's glamorous. It's in fashion. Politicians nod and red carpets are rolled out.
In other words, it's the kind of thing that doesn't end well 99% of the time.
Will these three startups be part of the 1% that will survive the next half-decade? Will Tesla?
Disclosure: I am/we are short TSLA.
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.
Additional disclosure: At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.