If you bought Tesla (TSLA) when I originally recommended it to my readers you’d have generated a significant return. How much exactly? Well as of right now those early buyers have a profit of more than 11,000%.
Automotive industry heavyweights have finally realized that the future is electric, and in 2020 and 2021 they made a slew of announcements about spending serious money on electrifying their fleets. $35 billion in spending was announced by GM (through 2025), $30 billion by Ford with the goal of electrifying 40% of its volume by 2030, and Daimler announced plans to spend $47 billion to shift to all-electric by 2030.
Legacy automakers have made it abundantly clear that competition is coming. Still, I think you can buy TSLA, as it will maintain its lead for many years to come. Here’s why:
One—Tesla has no legacy fossil fuel business to protect, because the company has been laser-focused on electric cars from the start. In fact, Tesla’s mission is “to accelerate the world’s transition to sustainable energy,” which is why the company is also making great progress in solar power systems and battery storage systems.
Two—Tesla does no paid advertising. Not in print, not on the radio, not on television and not on the internet. In 2019, Ford spent $2.8 billion advertising in the U.S., while GM spent $3.7 billion.
Three—The reason it does no paid advertising is that Tesla still cannot produce all the cars the market wants. Demand exceeds supply—which is something none of the other major automobile manufacturers can say. The company’s new gigafactories in Austin and Berlin will increase supply, but demand keeps growing!
Four—Tesla has no dealers. By selling directly to the consumer, Tesla gets to keep more profit. But the legacy manufacturers are tied to dealers—which will scream bloody murder to lawmakers if GM and Ford every try to bypass them. Even when you place a reservation for the new Ford F-150 Lightning online (I expect it to be an awesome truck), the fine print says, “The F-150 Lightning order is being placed on your behalf by your selected Ford EV Certified Dealer” and “The purchase agreement will be between you and the dealer, not you and Ford.”
Five—Tesla has achieved accelerating revenues over the past four quarters, as detailed in the numbers below.
| Revenues (Billions) | Change From Year Before | |
| Q3 2020 | 8.8 | 39% |
| Q4 2020 | 10.7 | 46% |
| Q1 2021 | 10.4 | 74% |
| Q2 2021 | 12.0 | 98% |
This is an astounding feat for a company of this size. The only large companies that are close to growing that fast are Alphabet (GOOG), Facebook (FB) and Nike (NKE)— but Nike’s growth was mainly because consumer sales cratered a year ago in the pandemic.
Six—Tesla has a huge lead in the race to provide public chargers, with more than 25,000 Supercharger stalls in nearly 3,000 locations worldwide. A distant second is Volkswagen’s Electrify America, which was established in 2016 as part of the “remedy” for the company’s emissions scandal. Electrify America currently has 635 locations in the U.S. and is aiming to have 800 locations with roughly 3,500 chargers by the end of 2021. But Tesla is now moving to make its chargers accessible to all electric users, in part because laws in Sweden and Norway encourage it, and the cool part about that is that users would download the Tesla app to enable use (and payment) and thus get exposure to the Tesla brand.
Seven—Tesla’s self-driving software gets a lot of bad press (mainly whenever there’s a fatality), but intelligent minds remember that we tolerate 40,000 deaths per year from human-driven cars, mainly because we like freedom, and most of us think we’re better-than-average drivers, which of course is logically impossible. But here are the facts. The NHTSA says that there’s an automobile crash for every 484,000 miles driven, while Tesla says that in the first quarter of 2021, there was one Tesla crash for every 4.19 million miles driven in which drivers had autopilot engaged—which makes it roughly ten times safer than unassisted humans. And the system will improve, and Tesla will monetize it by charging a monthly fee for the service—which, like all Tesla, software will keep improving.
Eight—Moving beyond automobiles, it’s very possible that Tesla’s energy business—mainly solar power installations and backup batteries (both home-size and utility-size) will eventually dwarf the company’s automobile business. It’s a huge industry that’s ripe for disruption.
Nine—The last reason to buy TSLA is easy. It’s Elon Musk, the visionary behind the whole company. He’s not always politically correct and he’s had his differences with various authority figures, but that’s what it takes to change the world. So as long as he’s in charge, I’m sticking with TSLA.
Do you believe legacy automakers can catch up, or is Tesla too far in the lead to lose significant market share?