Wednesday, February 24, 2021
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Everyone is coming for the Tesla crown
Tesla (TSLA) is synonymous with electric vehicles, but a new generation of electric vehicle manufacturers inspired by the electrified empire of CEO Elon Musk may be arriving after his crown.
Lucid Motors, which is headed by former Tesla engineer Peter Rawlinson and promises better performance than Tesla, announced on Monday its plans to go public. Meanwhile, Rivian, backed by Amazon (AMZN), which is also planning an IPO this year, is facing Tesla in the truck space. Traditional automakers like Ford (F) and Volkswagen also pose a threat to the world leader in electric vehicle sales. And then there is potentially Tesla’s biggest eventual rival: Apple and its own EV ambitions.
Tesla has conquered its way to the top of the EV market through the pure and simple will of the outspoken and often fickle CEO Elon Musk. And although on Tuesday, Tesla’s share price fell by 18% in the last month after its $ 1.5 billion bet on bitcoin, the company is still up 319% in the past 12 months.
But it will take much more than a charismatic leader and fanatical fan base to maintain his leadership for years to come. According to Deloitte Insights, EVs will account for 32% of new car sales in 2030, compared to just over 2.5% in 2020 – meaning that there is plenty of room for competitors.
“Tesla has a lot of … competition,” Craig Irwin of Roth Capital Partners told Yahoo Finance. “There are companies that have superior technology in autonomous companies, there are companies that have superior technology in batteries, there are companies that have superior technology in electric vehicles. Tesla has great cars, don’t get me wrong, but you will see a series of very exciting developments over the next year. “
So how can Tesla maintain its leadership? Continuing to push for its global expansion in India, and ensuring that its secret ingredient – its technical skill – remains ahead of its rivals. But the increasingly crowded market for EV vehicles may throw some obstacles in the way of Tesla.
How Tesla can maintain its leadership
For Tesla, global expansion is the easiest way to keep up with the new crop of competitors, and it has progressed on that front. The company has already launched its vehicles and built a factory in China, and is in the middle of building its first European factory in Germany.
Tesla also has the advantage of understanding the difficulties of putting its own manufacturing resources online. The company went through what Musk called “production hell” by putting its Model 3 assembly line up and running in 2018. The company was just a few weeks from sinking during construction, and in a recent tweet, Musk revealed that during the construction he tried by contacting Apple CEO Tim Cook to sell the automaker.
While Tesla’s move to China was crucial because the country has the largest auto market in the world, its next move to India, also one of the largest markets in the world, will be almost as important to the company’s continued growth.
“The main development this year is the beginning of sales to India,” noted Irwin, adding that he heard “rumors” that Tesla had already selected a location for the Indian plant.
Tesla, which fell just over 2% at the close of the market on Tuesday, also needs to ensure that it doesn’t get caught up in its recent move to bitcoin (BTC-USD). The company invested $ 1.5 billion of its money in the cryptocurrency, helping to further increase bitcoin. And while he made about $ 1 billion in profits on paper, Musk’s subsequent statements about the cryptocurrency may have helped to lower his price.
Wedbush analyst Dan Ives, however, warns that Tesla’s cryptographic game should not distract investors from the company’s overall efforts.
“This is a golden age for EVs and we anticipate that $ 5 trillion will be spent in the next decade,” Ives told Yahoo Finance. “EV, led by Tesla, is changing the way investors value these companies in the future. It is no longer your grandfather’s auto industry, as Detroit is showing in electric vehicles. “
In addition, there are many other companies targeting Tesla in the meantime.
Tesla’s next competition
Lucid Motors revealed on Monday that it was going public through a reverse merger with a special purpose acquisition company, or SPAC, Churchill Capital IV (CCIV). The deal values Lucid at an incredible $ 24 billion and will provide the new automaker with $ 4.4 billion to expand its Arizona-based plant.
Lucid intends to put its state-of-the-art luxury sedan, the Lucid Air, on the roads this year and eventually have the Arizona plant producing up to 365,000 units a year. The company is also working on the production of its luxury SUV, the Lucid Gravity, scheduled for launch in 2023.
The Lucid Air Dream is Lucid’s top-of-the-line model priced at $ 161,500, well above the $ 119,900 Tesla Model S. “Our first product is shamelessly a luxury car that will compete with the Mercedes Benz S-Class at the head table,” CEO Peter Rawlinson told Yahoo Finance Live on Monday. “And there is currently no EV offering in the real luxury arena.”
What makes Lucid so impressive is that, according to its own number, it already beats Tesla in terms of battery performance. With an estimated range of 503 miles per charge, the Dream battery can also be charged up to 300 miles in just 20 minutes. Meanwhile, Tesla’s long-range Model S reaches just 412 miles on one charge and can be charged with up to 200 miles of power in 15 minutes.
Lucid is not the only competitor coming after Tesla, of course. Rivian is also due to launch its long-awaited electric truck this year, with the support of heavyweights, including Amazon, which is preparing a fleet of electric delivery vehicles based in Rivian. Rivian is also supported by Ford, which will use Rivian technology in its own offerings. The company promises more than 300 miles of range on its R1T truck with a starting price of $ 67,500.
Rivian is also expected to make an IPO this year with an estimated valuation of $ 50 billion, according to Bloomberg. This company is supplying power with an electric truck, creating fierce competition for Tesla’s next Cybertruck, which will also be launched this year.
Tesla even managed to inspire an electric truck company appropriately called Nikola (NKLA) – Tesla was named after inventor Nikola Tesla – although that company was criticized in a report by short seller Hindenburg accusing it of being a fraud. (Nikola denied the report and called it a “successful job”.)
Traditional automakers entering the market include Ford, which will launch its highly anticipated Mustang Mach-E crossover in the coming months at a starting price of $ 42,895 and over 250 miles per load. Patrick Moorhead of Moor Insights & Strategies says Volkswagen could also become a rival to Tesla, noting that a major automaker could, in a few years, become the second electric vehicle maker after Musk’s company.
Then there is Apple, which they say is joining an established automaker like Hyundai in its own electric vehicle. Still, details about how Apple will actually make the car are sparse and are not expected to hit the market until 2024.
But Apple is only part of the big picture, which is: the EV field is getting crowded. Tesla may have the best-selling EV of all time, by a wide margin, as my colleague Rick Newman pointed out, but the flood of new competitors may expose its weaknesses.
These failures include an unpredictable CEO who was sued by the SEC over a tweet saying he had funding to make Tesla private, as well as fatal car accidents that led to the scrutiny of its autopilot system. Tesla may still be the EV leader despite these shortcomings – but now is not the time for Elon Musk to take his empire for granted.
In Daniel Howley, technology editor. Follow him on @DanielHowley