If you want a really dynamic market space these days that has nothing to do with medicine or the coronavirus, then just take a look at the electric vehicle space. We've got drama, we've got a horse race, competition is coming in out of the woodwork....and the company that really started the rush, Tesla (NASDAQ:TSLA) has clearly seen that it's no longer the only game in town anymore. It's begun reacting accordingly, and Tesla's latest moves are making it a force to be reckoned with.
Tesla's Response Makes It Look Like a Car Company Again
While Tesla's primary stock in trade seems to be a little less about vehicles and more about controversy generated by CEO Elon Musk sometimes, there's no doubt it's making a push toward being a car company in every sense of the term.
No longer able to merely rely on the fact that it's pretty much the only real electric vehicle that can hit roads without having a golf cart exemption, Tesla has been stepping up its game accordingly. For instance, the company recently cut the price of its Model 3 vehicle around 8%, converting the standard Model 3 to a less-expensive battery than the one commonly used. Making a play for a loss-leader position to get customers in the door? That sounds like a car company move.
Tesla is also making a greater push toward availability. It's recently announced record delivery volumes, and that achievement was made despite the huge number of exigent circumstances currently surrounding all global trade, not just Tesla vehicle deliveries. The announcement was connected to a one-week event, reports note, so the exact number of quarterly deliveries is as yet unknown.
However, those same reports suggest that Tesla may have actually pulled off quarterly goals as well, and this despite hefty Wall Street expectations up around 140,000 vehicles shipped this quarter. The numbers do tend to get a bit confusing, though; a recent letter to employees from Musk noted that the company has “a shot at record quarter for deliveries.” Yet Tesla's last record was just 112,000 vehicles. With the consensus running quite a bit higher than that, will a “record” really be enough?
Additionally, Tesla has been spotted making moves in its side businesses as well. For instance, the company recently updated the website for its Solar Roof system, the home energy generation tool. The third version of its Solar Roof tiles have now been released, and with that, the cost to install has been dropped by around 40%.
New Challenges Emerge on Several Fronts
These gains will serve Tesla well, because the market itself will not be a forgiving one. The sheer number of new entrants into the field, ranging from vehicle makers like Nio (NYSE:NIO) and even General Motors (NYSE:GM) thanks to its ongoing development and possible new connection to Nikola (NASDAQ:NKLA), will serve to dilute Tesla's market share. Throw in gains from completely new technologies like those seen at Plug Power Inc. (NASDAQ:PLUG) and you've got a ready-made competitive environment where Tesla is just one among many possibilities.
With California poised to halt gasoline vehicle sales by 2035, that's going to open up a potentially massive new market, assuming the ban actually sticks. Questions of “legality” have arisen therein, according to Andrew Wheeler, head of the EPA, and the sheer mechanics of such a ban raise dogged questions. As Wheeler put it, such a situation “...begs the question of how you expect to run an electric car fleet that will come with significant increases in electricity demand when you can't even keep the lights on today.” Throw in likely difficulties ahead in sourcing lithium for all these new and amazing batteries—not to mention the periodic disasters stemming from Tesla's auto-pilot system—and the potential problems Tesla faces become clear.
A Real Electric Horse Race
Tesla has problems. That's not even in question. The ones we've seen so far are really just a start. However, Tesla also has advantages that will let it tackle those problems more effectively. It has first-mover advantage in the electric vehicle scene. It has diversified its market to tackle home-based electric service. It's working to diversify its vehicle line so it can address different use cases and tap into different markets. If it ever gets that auto-pilot working properly that will be a game-changer par excellence.
There's a lot to watch in this growing and rapidly changing market. Tesla is making an excellent case for its continued involvement therein, and with the exception of GM, it likely has the market share and the cash to fend off a lot of that outside involvement. It will likely lose some market share—competition all but ensures that—but Tesla as a going concern in the future is a near-certainty.
Companies in This Article:
