TESLA: THE PIONEER IN ELECTRIC VEHICLES

Tesla was the first American car company to IPO in 2010 since The Ford Motor Company went public in 1956 but interestingly, it only took 7 years for Tesla to match Ford’s value.

Recently Tesla’s stock price has left all other members of Nasdaq 100 in the dust. It has more than doubled since the start of November, blowing all past record highs; and this comes after the dip in the share price that happened due to the smashing of the windows of the cybertruck during its launch. The shares had dipped by more than 4% at that time and since then it has been growing continuously. One of the primary drivers of share price was surprisingly the cybertruck itself; as Elon Musk within 3 days of the enveiling of the cybertruck tweeted that they had already received 200,000 pre-orders for the electric pickup. Shares went up by at least 5 % after this news. This was mainly due to the fact that they were taking reservations for the truck at a deposit of 100$, which was much lower than Tesla’s previous reservation programs.

The most recent increase is due to the statement of Panasonic corp. on Monday saying that its automotive battery venture with Tesla was in the black for the first time. The stock’s gain also follows the automaker’s strong fourth-quarter results. Revenue and earnings per share during the period beat analysts’ average expectations, and free cash flow jumped. On Tuesday, Tesla’s shares jumped to hit a record-high price of $940 per share. A second consecutive profit in the December quarter and guidance that deliveries “should comfortably exceed” 500,000 vehicles in 2020 gave investors more reason to believe in the company’s growth plans. In its fourth-quarter report, Tesla declared 2019 a “turning point” for the company and said the launch of the Model Y was running ahead of schedule, with production in California now under way.

But how did we reach till here? For that, let’s have a look at how it all started:

A BRIEF HISTORY

• Tesla was founded in 2003 by American engineers cum entrepreneurs Martin Eberhard and Marc Tarpenning. The company’s name is a tribute to engineer Nikola Tesla.
• Tesla Motors was formed to develop an electric sports car. Eberhard was Tesla’s chief executive officer (CEO) and Tarpenning its chief financial officer (CFO).
• PayPal co-founder Elon Musk, contributed more than $30 million to the new venture and served as chairman of the company, beginning in 2004. Later both Eberhard and Tarpenning left the company and Musk took over as the CEO in 2008.

THE RISE OF TESLA AND HOW IT REVOLUTIONIZED EVs

In 2008, Tesla Motors released its first car, the completely electric Roadster. The Tesla Roadster helped to dispel the stigma around EVs.

Further in 2012 Tesla launched a new EV – Model S and the rest is history. The model won multiple awards, including being recognized as the “safest car ever tested” by the NHTSA and the “Best car ever tested” by Consumer Reports.

The only problem, the Lithium-ion batteries were still too expensive for a mass market car to be feasible. Now to bring EVs to mainstream these costs had to be reduced and for this Tesla revealed initial plans for its Gigafactory concept where through economies of scale, reduction of waste, a closer supply chain, vertical integration, and process optimization, the cost of batteries would be sufficiently reduced to make a mass market EV possible.

In 2014, Tesla introduced Autopilot for the first time, which gave the Model S semi-autonomous driving and parking capabilities.

In 2015, Tesla also branched out into solar energy products. A line of batteries to store electric power from solar energy for use in homes and businesses was unveiled.

Tesla’s ability to update the software of its vehicles with over-the-air updates is probably the one thing that makes the rest of the industry highly vulnerable to obsolescence.

Tesla obliterated every issue that made electric cars in real life seem like “A Bad Idea” for the masses:

• “Electric cars look like ugly! – Teslas are sexier than most of the status symbol luxury cars out there.
  
  
• “Electric cars aren’t very practical for daily life use” – Model S sedan can seat 5 adults and 2 children and has two trunks, totaling more cargo space than some minivans.
  
  
• “Electric cars are so slow” – Try Ludicrous Mode.
  
  
• “Electric cars have such low range – Tesla cars have a range far, far above 200 miles per full charge. Free Tesla Supercharger stations being built out to eventually be as ubiquitous as gas stations in major areas and routes.

FUTURE EXPECTATIONS

The next event to watch is Tesla’s “battery day” as Power cells are shaping up to be a limiting factor in the company’s production ramp-up, and any positive updates to battery technology or new suppliers could lift a downward pressure for the automaker.

Furthermore, Musk will keep moving forward in the direction of achieving the primary goal for which Tesla was created which is to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible and now with the statement made by Panasonic coming into the picture, investors feel that Tesla can make mass volume EVs, and automakers, battery makers and suppliers can make money from EVs.

The company’s strategic investments are set to push deliveries to a lofty record in 2020, and “demand remains a non-issue” with several new models set to hit markets in the coming years.

Catalysts expected to help drive sales during the year include the start of Model Y deliveries in March and the ramp-up of Model 3 production at the company’s new factory in Shanghai.

Lastly, if we talk about the share price of Tesla’s stock, some analysts have attributed the rally to short covering as well. So can Tesla’s share continue to rise indefinitely in the future?

Well why not! As irrational as the price seems today, based on actual sales and earnings, there may be more madness ahead.