In the auto industry space, be careful that you do not get stuck with investments in companies that will become redundant in the future.
Tesla, which is less than fifteen years old, has the highest market cap per vehicle. Table 1. Tesla is the future of the auto industry and the sooner the fact is recognized, the more money you will save in your investments.
Tesla has made sure that every single USD of incremental investment in the auto industry goes into new technology, which is largely electric. Investments in petrol and diesel technology has virtually stopped and no car manufacturer is increasing production lines for fossil fuel cars.
More importantly, the tech giants of Apple and Google with cash that is more than the market cap of auto manufacturers, are investing heavily in electric cars. They can spend and spend, wipe out the auto manufacturers even if they do not see returns for a decade.
Similarly, car ownership patterns too are changing. Reports show that millenia are not buying cars. The trend is towards app based taxi hailing services and towards renting cars. Why would anyone want to own a car in a crowded city with no parking and expensive insurance and maintenance, when there is good public transport and when there are taxis available on call at very reasonable costs? For driving experience, you can rent a nice big car such as any of Tesla’s models. You may want to own a Tesla for pleasure driving too.
A little known fact is that Elon Musk, the charismatic CEO of Tesla Motors is not the original founder of Tesla. The Electric Car manufacturer was originally founded by engineers Martin Eberhard & Marc Tapering at Silicon Valley, California in 2003. They founded the company with the idea that cars which run on electricity are better than cars which run on petrol or as it is called in many places in the world, gasoline or gas.
Tesla Motors have sold about 139,000 cars worldwide since its first model Tesla Roadster was launched in 2008. Tesla is the first automobile start up in the US after more than 100 years when Ford Motors was founded.
Apart from cars, Tesla also manufactures Powertrain components and battery products and because of its superior technology it is reported that Daimler uses Tesla’s battery pack, Mercedes Benz uses Tesla’s Powertrain, Toyota uses a Tesla Motor and General Motors has created a special task force to track Tesla s moves.
The Tesla electric car got near perfect reviews by Consumer Reports and also named a model “the best car ever tested”.. It is a little wonder that it is an aspirational buy for the hip and the happening jet setting crowd.
You can drive around the whole day and charge it at home at night or at any supercharger hubs and you are good to go. No need to make repeated trips to gas stations to fill the tank. The upfront cost of owning a Tesla is higher than a regular petrol or diesel based automobile but running cost is about half of a normal car and also requires much less maintenance than cars that run on petrol or diesel.
Tesla cars are known to accelerate at a ludicrous speed; it can go from zero to 60 miles an hour at an unbelievable speed of under 5 seconds. Their new models have insane features like autopilot mode, can park itself, a quick electrical braking system at high speeds, superb LCD controls, all glass roof which can open at a touch of a button, updates done wirelessly and can go on for a pretty long time before it needs to be recharged.
The car not only looks sleek and stunning; it runs on electricity which has a low environmental impact. In the US and the western world awareness about global warming, greenhouse effect and harmful effects of pollutants is very high and this car gives the owner a guilt free, feel good feeling of saving the environment while splurging on a great looking car. The hype , buzz and the positioning of the car as a clean tech high end vehicle is an unbeatable value proposition.
Tesla sells its own cars ditching the powerful car dealership networks, this it claims to save costs and control the selling experience to the customer, helps in brand building and saves money in the long run.
The company has its fair share of problems too. Reports of fatality due to the self-driving auto pilot features failure, doubts on Tesla’s ability to scale up manufacturing to meet demand, managing the acquisition of SolarCity, which is a loss making solar panel manufacturing company, are some of the issues that need to be addressed.
Tesla has received multiple rounds of funding and was saved from bankruptcy in May 2009 when the maker of Mercedes-Benz, Daimler AG bought a stake of less than 10% for a reported USD 50 million. In the same year, Tesla also received a low interest bearing loan of USD 465 million from the US department of Energy, which has since been paid back. Tesla has to report regular profits to make it a sustainable viable business.
All over the world there is a push for green renewable sources of energy and cut carbon emissions. US and many European nations incentivise use of electric cars and Norway has passed a law to phase out all gasoline and diesel based cars by 2025.
In India, we have seen a ban on diesel vehicle in the Delhi NCR region. If public transport improves and technology helps in sharing of privately owned vehicles too, it may make complete sense not to own a vehicle and life will still run smoothly.
Electric Car is an idea whose time has come.
Coming back to Tesla, a lot is riding on its boundary pushing visionary Elon Musk. He is a man with a mission to make the world a better place to live and has no qualms on breaking any technological or corporate conventions.
The world therefore is going nuts over Tesla Cars and or electric vehicles, it is a company to follow and watch closely. If its popularity increases all over the world, then disruption in all the automobile manufacturing and auto ancillary space will happen sooner than we think.