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Tesla Motors Is Now Facing a New Challenge

August 24, 2014 | About:
sandyinvestment

sandyinvestment

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Tesla (TSLA) has had a virtual bolt on the high end of the electric auto market up to this point. The Volt, Leaf, and Prius all focus on the lower end. Yet BMW's (BAMXY) new i3 is squarely gone for Tesla's center customer.

A Near Miss

Just a short time back, Nissan (NASDAQOTH: Nsany.pk) chose to defer its all electric Infinity by at any rate a year so it could incorporate better innovation. An Infinity electric would have been the first true immediate contender to Tesla. Of course, Nissan also makes the Leaf, which is focused at the lower end of the business sector. That is the piece of the market that Tesla wants to get into, however hasn't had the capacity to.

Tesla must have inhaled a sigh of alleviation that a contender with better distribution, a well-known brand name, and a steadfast customer base chose a take-it-slow approach. Then again, it still has to take a gander at Nissan with a little envy since the organization has had the capacity to enter the mass market that Tesla craves.

Nissan's top and bottom lines fell steeply in the 2007 to 2009 recession. In the wake of bottoming in fiscal 2010, the top line is again heading higher. Profit margins, in any case, are just about 50% of what they were amidst the last decade. So while sales and earnings have been for the most part recuperating the last few years, the organization still has some room to go. Case in point, despite a sales change in fiscal 2013, earnings were level.

Still, with a dividend yield of around 1.4% and a PE of around 12, Nissan is a better than average auto organization exchanging at a reasonable cost. Especially contrasted with Tesla.

A lot of Money

Tesla was developed starting from the earliest stage sell electric cars. It has glorious innovation and a generally welcomed top of the line offering, however the cars are expensive. A lower evaluated version had so few preorders that it was never made. Still, the success of the organization's as of late propelled sedan pushed the once unprofitable automaker into the dark.

That single occasion prompted a share value development of in excess of 350%. Actually using generous assumptions of the organization's earnings potential, the shares are way overpriced. To align the organization's cost to earnings proportion with that of Toyota, which sells the Prius, would oblige the organization to win almost $2.30 a share each one quarter. The organization made $0.10 a share in the first quarter and lost cash in the second on a GAAP basis. It has far to go.

Besides, Tesla is gazing to fabricate an electric "gas station" system. That needs to happen, however the cost of such a move will weigh on the bottom line. So its difficult to envision the organization's bottom line is set to blast higher whenever soon. That said, investors could still take a gander at its solid position in the top of the line electric business sector to justify the grandiose sticker. Anyhow not any more.

In Come the Germans

BMW just presented its i3. Like the Tesla Model S, it was developed from the beginning. This is an enormous issue for Tesla, since now the main separation it has to offer is its American legacy. BMW obviously has better brand distinguishment, better distribution, and an effectively steadfast customer base.

Additionally, for customers stressed over reach, BMW is wanting to offer an auto share service as an extra. So much for requiring an electric "gas station" system. There's also supposed to be a gas motor extra, as well, in the same way as that offered on the Prius.

BMW is one of the enormous names in extravagance cars. While sales were affected by the recession, the organization's top line held up much better than mass business sector players. Truth be told, sales are currently around a third higher than they were preceding the recession, totaling almost $77 billion in 2012. Furthermore earnings of around 2.60 euro in 2012 are in excess of 60% above prerecession levels.

The organization has a PE of around eight and a yield of around 2.3%. Investors searching for a top of the line auto producer in the electric auto space would do well to take a gander at BMW.

Not Worth the Risk

Tesla is an incredible story stock, however that story has taken the shares to unsustainable heights. There aren't sufficient barriers to passage for alternate automakers to ensure Tesla's business. With BMW now in the same space and Nissan looking to get in, yet a year or thereabouts from now, Tesla is going to be up against some stiff rivalry. Those seeking a top of the line electric play should run with BMW. Alternately, with a more extensive lineup, hold up to see what Nissan has to offer with its deferred Infinity electric.


Rating: 2.3/5 (4 votes)

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Comments

weaponzero
Weaponzero - 3 weeks ago

BMW does not compete with Tesla at all at this point, neither does Nissan.

If you ask any BMW i3 owner what car they would prefer, their answer would be a Tesla Model S. The i3 is a low performance small city car. The Tesla Model S is a full sized high performance sedan. They don't even target the same audience and are in different price ranges.

A more closer competition to the BMW i3 is the Mercedes B class electric which uses a Tesla drivetrian.

bowerock
Bowerock - 3 weeks ago

This article clearly had the goal of building up the i3 to enforce the sensational headline.The i3 has the name, a stronger distribution system, and futuristic looks. Aside from that... it offers a range of 70-110 miles per charge. A three hour charge.

"Auto share service" sounds like admittance of error. "Oops... you can't actually drive the car you own to the places you need to go, so here- use another car in the meantime." It's an odd solution. The hybrid option follows suit.

It's great that another auto maker is making an earnest effort, and BMW die-hards might cough up some cash, but I don't see this as a challenger to the Model S.

Scott Ryan Anderson
Scott Ryan Anderson - 3 weeks ago

Tesla is not priced based upon things projected to happen 3-5 years from now which will at THAT POINT justify today’s stock price.

3-5 years from now, if every positive thing projected today actually happens, then we will have more visibility as to whether TSLA will be able to grow into the valuation over an additional 5-10 years. Much of the positive needs to happen in a vacuum as well, without competition.

By any stretch of the imagination, Tesla is a castle in the air. That's not a commentary on the product. That's a commentary on the share price.

deeageux
Deeageux - 3 weeks ago

Infiniti is such a well known premium automotive brand the author spells it Infinity.

The Infinity LE was a Nissan LEAF in Infiniti clothing. Same exact powertrain. It had flop written all over it that is why Nissan executives pulled it. No sigh of relief from Tesla. More like chuckles at the idea Nissan was actually considering producing it.

When Tesla has its Gigafacotry fully operational it will manufacture batteries at 10x the scale that Nissan assembles them. And it will manufacture at 250x the scale Samsung manufactures BMW specified prismatic cells for electric vehicles. BMW recent large order from Samsung includes specific batteries for hybrids and micro hybrids.

If Nissan and BMW-Samsung don't expand battery manufacturing capacity massively in short order they will be overwhelmed by Tesla's economies of scale. Palo Alto is not the one worrying it should be Munich and Yokohama that should be worried.

Unl

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