4 Reasons No One Catches Tesla
Trigger warning: What you are about to read might sound offensive if you are a Tesla bear. Please proceed with caution.
In 2011, software giant Microsoft launched Microsoft Mobile. This endeavor established a major partnership with Finnish mobile phone maker Nokia. Under the agreement, Nokia would exclusively produce smartphones using the Windows Phone platform.
But the new venture did not fare so well.
Each time Microsoft spent millions marketing a new Windows Phone, it was met with very little fanfare. Mobile consumers would flock to phone stores and return home with either a new iPhone or Samsung.
In 2014, Microsoft doubled down on its Windows Phone platform by acquiring Nokia’s Devices and Services division for $7.2 billion. A year later, it took a $7.8 billion write-down and announced the layoffs of 7,800 employees.
This is one of the biggest business mistakes of the last few decades.
Microsoft had entered the smartphone business too late to catch up to Samsung and Apple.
Mark Twain reputedly said: “History doesn’t repeat itself, but it often rhymes.”
A similar situation is playing out in the race to dominate the electric vehicle (EV) market as Tesla’s decadelong head start looks insurmountable.
The Battery Storage Revolution
One of the bigger, if not the biggest, stories of the 2020s will be the battery storage revolution.
This will have a huge impact on the cars we drive, the way we power our homes and the environment. In the last 10 years, the price of lithium-ion batteries dropped over by 90%. And it will continue to drop into the 2020s.
The specific reason the automotive market will be transformed by cheaper battery power is less about the environment and more about economics.
In the next few years, the cost of producing an EV will be cheaper than producing a gas guzzler. And there are fewer moving parts in an EV, which means maintenance costs over the life of the vehicle are significantly cheaper. You’ll never need to change an EV’s engine, oil, coolant, transmission fluid or belts.
That’s why the EV market is expected to surge 16-fold from 1.73 million autos sold in 2020 to 25.8 million annually in 2030.
Cheaper, denser batteries will transform how we use energy — from cars to air conditioning to flying.
And since Tesla has the leading edge in battery development, it’s set to dominate this energy and automotive revolution.
Why Tesla Will Always Dominate the EV Space
While we might hear of traditional automotive companies launching new EV platforms, there are four key reasons Tesla is still best positioned to dominate this space:
- Batteries: Tesla has a decadelong lead on battery development. It’s not only the leader in the battery pack design, but also in the chemistry and performance. Additionally, it has the production capacity needed to build EVs at scale. Tesla’s battery lifespan is already 300,000 to 500,000 miles, and Elon Musk is getting ready to reveal a battery that can even last 1 million miles in September.
- Motors: No other automaker has an electric motor on the market that can compete with the ratio of the Tesla Model 3. Consider this: At a base price of $37,990, the Model 3 is roughly the price of a Chevy Volt. But the Tesla outperforms the Chevy in acceleration and steering.
- Charging: Tesla has spent the past half-decade building out its 1600 Supercharger network, with over 14,000 Superchargers available. With these fast charging stations, most Teslas can be fully charged in 30 minutes. This gives Tesla a clear advantage on long road trips.
- Autonomy: Elon designed and built Tesla’s full self-driving computer, which can be downloaded on new vehicles like a new piece of software. This is the nail in the coffin for traditional automakers, which are just as far behind in autonomy as they are in battery technology.
These are four reasons why Tesla is uniquely positioned to dominate the EV industry in the next decade. It’s also why it has an insurmountable head start on the U.S. EV market:
In 2020, Tesla is expected to earn around $6 a share. But that starts to climb dramatically this decade. By 2022, the company could earn $31 a share.
And by 2025, Tesla could take in $80 a share. This is based on assumptions that Tesla can sell 3.2 million vehicles in 2025, up from 500,000 this year.
While Tesla is trading for an absurd 70 times 2022 earnings per share, if you look at where the company could be headed in the next five years, that multiple doesn’t look so absurd.
And if we’ve learned anything from the Microsoft phone saga, it’s that it can be nearly impossible to catch a clear market leader.
That’s why I look for these massive winners ahead of time — when the bears are still sure that companies such as Tesla are doomed to fail. It’s how I locked in a 550% gain on Tesla for my Automatic Fortunes readers — by keeping an eye on tipping-point trends that are changing life as we know it.
For more details on how you can profit from tipping-point trends such as electric vehicles, click here.
Editor, Automatic Fortunes
My career on Wall Street started while I was in college. I spent a summer interning for Merrill Lynch in the middle of the ‘90s bull market. I was fascinated with trading, and as a result, after college, I joined Salomon Brothers in the famed mortgage bond trading department. Later, I spent time at Citigroup working with credit derivatives. Eventually, I needed to walk away from the excess of Wall Street. That’s when I joined Banyan Hill in 2017. Now I help readers get ahead of the market and build their retirements.