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Who can beat Tesla in the EV market?
30 Oct 2021 (915 views)  

I realized a profit of more than $500,000 in my investment in Tesla over the past 30 months.

I have often been asked the questions:

a) Will NIO, Li Auto, XPeng, BYD or Lucid be as successful as Tesla?

b) Will the legacy auto manufacturers, e.g. Toyota, Ford, GM, VW give a challenge to Tesla when they move into the EV (electric vehicle) market?

I will give my views.

a) Tesla has excellent models and designs for their EV. But other manufacturers can also have excellent designs. Indeed, some of the other manufacturers have models with better specifications. This is not a competitive moat.

b) Tesla's strength is in its manufacturing expertise. It uses a high degree of automation in its gigafactories. They even design the alloys that goes into the structure of the vehicles.

c) Tesla developed its own battery technology. Although the batteries are manufactured by Panasonic, CATL and other suppliers, I believe that they are made according to specifications by Tesla. Tesla will soon be manufacturing their own batteries. 

d) The key strengths of Tesla translate into its ability to produce its vehicles at a cost that is much lower than the other manufacturers. I do not see any of them, apart from BYD, that is able to compete with Tesla in cost of manufacture and quality of the vehicles. Some of the other manufacturers may be able to produce EV of the same quality as Tesla, but their cost will be considerably higher.

e) Tesla sells their vehicles direct to customers and does not need to spend on advertising. The legacy manufactures depend on dealerships and are afraid of antagonizing the dealers by cutting them out.

For the above reasons, I do not see any of the legacy or new EV manufacturers being able to compete with Tesla in a big way. They will have their niche markets, but cannot have the scale of Tesla.

Tesla now manufactures its vehicles in the gigafactories in California and Shanghai. They will double their production capacity in 2022 with the opening of the gigafactories in Berlin and Texas.

Tesla is developing its "self driving" software. When it is fully functional in a year or two, it will be able to operate a robotaxi fleet, i.e. self driving vehicles to operate as taxis. 

I get most of my information from YouTube videos that are made by several Tesla fans. They give regular updates to cover the latest happenings in Tesla.

While the future for Tesla is unassailable, the stock price of Tesla has gone to a high multiple, i.e over 100 times of the projected earnings per share for 2021. 

I will keep a core holding in Tesla and may invest in BYD as an alternative to Tesla (but not in the other manufacturers). 

Tan Kin Lian




 


Who can beat Tesla in the EV market?
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I realized a profit of more than $500,000 in my investment in Tesla over the past 30 months.

I have often been asked the questions:

a) Will NIO, Li Auto, XPeng, BYD or Lucid be as successful as Tesla?

b) Will the legacy auto manufacturers, e.g. Toyota, Ford, GM, VW give a challenge to Tesla when they move into the EV (electric vehicle) market?

I will give my views.

a) Tesla has excellent models and designs for their EV. But other manufacturers can also have excellent designs. Indeed, some of the other manufacturers have models with better specifications. This is not a competitive moat.

b) Tesla's strength is in its manufacturing expertise. It uses a high degree of automation in its gigafactories. They even design the alloys that goes into the structure of the vehicles.

c) Tesla developed its own battery technology. Although the batteries are manufactured by Panasonic, CATL and other suppliers, I believe that they are made according to specifications by Tesla. Tesla will soon be manufacturing their own batteries. 

d) The key strengths of Tesla translate into its ability to produce its vehicles at a cost that is much lower than the other manufacturers. I do not see any of them, apart from BYD, that is able to compete with Tesla in cost of manufacture and quality of the vehicles. Some of the other manufacturers may be able to produce EV of the same quality as Tesla, but their cost will be considerably higher.

e) Tesla sells their vehicles direct to customers and does not need to spend on advertising. The legacy manufactures depend on dealerships and are afraid of antagonizing the dealers by cutting them out.

For the above reasons, I do not see any of the legacy or new EV manufacturers being able to compete with Tesla in a big way. They will have their niche markets, but cannot have the scale of Tesla.

Tesla now manufactures its vehicles in the gigafactories in California and Shanghai. They will double their production capacity in 2022 with the opening of the gigafactories in Berlin and Texas.

Tesla is developing its "self driving" software. When it is fully functional in a year or two, it will be able to operate a robotaxi fleet, i.e. self driving vehicles to operate as taxis. 

I get most of my information from YouTube videos that are made by several Tesla fans. They give regular updates to cover the latest happenings in Tesla.

While the future for Tesla is unassailable, the stock price of Tesla has gone to a high multiple, i.e over 100 times of the projected earnings per share for 2021. 

I will keep a core holding in Tesla and may invest in BYD as an alternative to Tesla (but not in the other manufacturers). 

Tan Kin Lian