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Is Tesla Running Out Of Charge?

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Is Tesla Running Out Of Charge?

Key insights

Three reasons why all the FUD (Fear, Uncertainty and Doubt) about Tesla recently isn't changing my thesis on the company.

Tesla currently stands as the top electric vehicle manufacturer in the world. With the recent announcement of the Ford F-150 lightning, as well as growing electric vehicle competition, many investors have questioned if Tesla’s reign over the EV market will last.

Here’s why I think Tesla will continue to leave its competition in the dust. 

1. Tesla Demand is Unparalleled

Tesla’s futuristic Cybertruck alone has generated over 1 million pre-orders with over 200,000 reservations coming in the first 3 days following its unveiling according to Elon Musk. 

For comparison, Ford’s F-150 lightning truck produced only 70,000 reservations in the first week

Tesla competitors spend millions of dollars running advertisements for their cars. 

Ever seen a Tesla ad? 

Neither have I.

That’s because Tesla doesn’t run any. Elon Musk believes Tesla vehicles speak for themselves. 

Even today, Tesla can’t keep up with the massive demand for their vehicles with deliveries taking many months from the time of ordering 

To keep up with demand, Tesla is expanding its production capacity with Gigafactories in Austin and Berlin that are reported to have production capacities of 1 million vehicles each and will likely be complete by the end of 2021.

Even that may not be enough once Tesla unveils its more affordable $25,000 Tesla Model 2.

2. High profit margin on vehicles

According to Tesla’s 2021 Q1 filing, Tesla’s gross margin for automotive sales is 26%.

This is largely due to Tesla’s ability to sell its Full Self Driving (FSD) feature for $10,000 per vehicle. 

In contrast, Tesla’s competitors are unable to put such a large price tag on their versions of self-driving, if you can even call them that, which lag substantially behind Tesla’s technology. 

Tesla advantage in Full Self-Driving is partly due to having data on over 3 billion miles driven using its autopilot on public roads. Second place Waymo only has a fraction of this number with data on 20 million miles driven in 2020. 

Further still, It's plausible that Tesla’s profit margins will rise even further when it starts selling in-car entertainment and production of its higher end vehicles such as the Tesla Model S plaid +, Tesla Roadster, and Cybertruck in 2022. 

All this and I haven’t said anything about Tesla’s planned robotaxi network with its autonomous vehicles which can potentially be an incredibly high profit margin business. 

3. Energy Credits

Tesla is currently the only car manufacturer that has a pronounced supercharging network for its vehicles.

On May 12, 2021, Reuters published an article stating Tesla is seeking entry into the $18 billion renewable fuel credit market.

Due to Tesla’s supercharging stations, Tesla would be able to qualify for the most lucrative type of credits in this market. 

If Tesla is approved, they may reduce the price for charging using their superchargers or just make even more money from this segment of their business.

If it is the former, which I believe is more likely due to Tesla’s mission to electrify the car industry and decrease CO2 emissions, Teslas will become even more competitive. 

Is Tesla running out of gas?

It looks like things are just getting started. 

The author of this article has a long position in Tesla.

Sources

https://venturebeat.com/2020/01/06/waymos-autonomous-cars-have-driven-20-million-miles-on-public-roads/  

https://electrek.co/2020/04/22/tesla-autopilot-data-3-billion-miles/  

https://www.reuters.com/business/sustainable-business/exclusive-tesla-seeks-entry-into-us-renewable-fuel-credit-market-sources-2021-05-12/  

https://www.sec.gov/Archives/edgar/data/1318605/000095017021000046/tsla-20210331.htm  

https://insideevs.com/news/482499/tesla-production-sites-assignment-capacity-january-2021/  

https://electrek.co/2021/05/25/tesla-cybertruck-reservations-1-million-electric-pickup-trucks/  

https://www.usatoday.com/story/money/cars/2019/11/24/teslas-cybertruck-preorders-reached-nearly-150-000-48-hours/4290463002/  

https://fordauthority.com/2021/05/ford-f-150-lightning-reservations-reach-70000-in-one-week/#:~:text=In%20just%20one%20week%20after,12%20hours%20they%20were%20available

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