News of Apple’s (AAPL, Financial) plans of endeavoring to join the electric vehicle space brought down Tesla’s (TSLA, Financial) stock price by 2%. Similar news of major automakers planning to launch electric cars has been doing the rounds for quite some time now.
Everybody is talking about how Tesla’s days are numbered just because the big players are thinking about building electric cars.
Anyone who has been following Tesla closely will not pay much heed to such speculation as this company has already achieved too much to worry about what its competitors are doing.
The first mover advantage
Here’s what the competition looks like right now. While other car makers are still in the process of testing prototypes, Tesla has already tasted success with its Model S, while it has already started prebooking for its second venture Model X, an electric crossover SUV.
It would be fair to say that Tesla will enjoy unchallenged success at least for another couple of years.
The Model X has already created a lot of excitement with features such as the falcon wing doors and anticipation over the launch Tuesday at Fremont, Calif., has already brought an upsurge in stock prices.
More players means bigger market size
Elon Musk himself believes that more players in the EV space will be a good thing. The very concept of a zero emission vehicle itself is very compelling. Bigger players investing in research and development on electric cars augurs well for Tesla, already a pioneer in this space. Besides, all this will create more awareness among consumers, eventually expanding the market for electric cars.
Customers in the future are sure to prefer zero emission vehicles. It may not be confined to just EVs as there are other emerging technologies like hydrogen fuel. However, considering Tesla currently sells a maximum of 30,000 units, its journey to 500,000 units with the help of the soon-to-be operational lithium-ion battery Gigafactory does seem realistic.
Tesla’s expertise not limited to manufacturing electric cars
While Tesla is the undisputed leader in EV technology, its capabilities and unique qualities are not limited to that.
The distribution strategy it follows is almost impossible for its competitors to replicate. By erasing the middlemen from the equation, it can cut costs considerably, bringing down the price that end consumers have to pay for its cars
Its expertise in automotive tablets and over-the-air software updates in cars is also one of a kind. According to Morgan Stanley (MS, Financial) analyst Adam Jonas, the company is best positioned to enhance low automobile utilization rates by implementing autonomous driving technology and execute a shared mobility model like Uber.
Last but not least, the company is poised to enter the energy storage space in a big way, as a big chunk of its Gigafactory venture’s production capacity is slated to be used for energy storage.
Not surprisingly then, even though the stock is 16% higher than last year, Jonas has set the maximum target price of $465 for the stock.
