Wednesday, February 24, 2021
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They all come for the crown of Tesla
Tesla (TSLA) is synonymous with electric vehicles, but a new generation of electric vehicle manufacturers inspired by CEO Elon Musk’s electrified empire may come after his crown.
Lucid Motors, which is led by former Tesla engineer Peter Rawlinson and promises to perform better than Tesla, announced its plans to go public on Monday. Meanwhile, Rivian, backed by Amazon (AMZN), which is also planning an IPO this year, will take on Tesla in the trucking space. Traditional automakers like Ford (F) and Volkswagen also pose a threat to the world’s leader in electric vehicle sales. And then there’s potentially Tesla’s biggest eventual rival: Apple and its own EV ambitions.
Tesla made its way to the top of the EV market thanks to the sheer will of the outspoken and often fickle CEO Elon Musk. And although, as of Tuesday, Tesla’s stock price fell as much as 18% in the past month following its $ 1.5 billion bet in bitcoin, the company is still up 319% in the past 12 months.
But he will need much more than a charismatic leader and a rabid fan base to maintain his leadership for years to come. According to Deloitte Insights, EVs will account for 32% of new car sales by 2030, up from just over 2.5% in 2020, which means 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, 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 number of very interesting developments over the next year. “
So how can Tesla maintain its leadership? Continuing its global expansion in India and ensuring that its secret sauce, its technical prowess, remains ahead of its rivals. But the increasingly crowded EV market could put some obstacles in Tesla’s way.
How Tesla Can Maintain Its Leadership
For Tesla, global expansion is the easiest way to keep up with the new generation of competitors, and it has moved forward on that front. The company has already launched its vehicles and built a plant in China, and is in the midst of building its first European plant in Germany.
Tesla also has the advantage of understanding the difficulties of putting its own manufacturing capabilities online. The company went through what Musk called “production hell” when it launched its Model 3 assembly line in 2018. The company was only weeks away from going under during construction, and in a recent tweet, Musk revealed that during the Construction tried to contact Apple CEO Tim Cook to sell the automaker.
While Tesla’s move to China was crucial because the country has the world’s largest car market, its next move to India, also one of the world’s largest markets, will be almost as important to the company’s continued growth. .
“The key development this year is the start of sales in India,” Irwin said, adding that he heard “talk” that Tesla has already selected a site for the Indian factory.
Tesla, which was down just over 2% at the market close on Tuesday, must also make sure not to get caught up in its recent move towards bitcoin (BTC-USD). The company put $ 1.5 billion of its cash into the cryptocurrency, helping Bitcoin to skyrocket even higher. And while it made roughly $ 1 billion in profit on paper, Musk’s subsequent statements on the cryptocurrency may have helped drive its price down.
However, Wedbush analyst Dan Ives cautions that Tesla’s crypto game should not distract investors from the company’s overall efforts.
“This is a golden age of electric vehicles and we forecast that $ 5 trillion will be spent over the next decade,” Ives told Yahoo Finance. “The electric vehicle, led by Tesla, is changing the way investors value these companies in the future. It’s no longer your grandfather’s auto industry, as Detroit shows in electric vehicles. “
Plus, there are plenty of other companies targeting Tesla in the meantime.
Tesla’s next competition
Lucid Motors revealed on Monday that it would go public through a reverse merger with special purpose acquisition company, or SPAC, Churchill Capital IV (CCIV). The deal values Lucid at a whopping $ 24 billion and will provide the upstart automaker $ 4.4 billion to expand its Arizona-based plant.
Lucid aims to put its high-end luxury sedan, the Lucid Air, on the road this year and ultimately have the Arizona plant produce up to 365,000 units a year. The company is also working on the production of its luxury SUV, Lucid Gravity, which will be launched in 2023.
The Lucid Air Dream is Lucid’s top-end model priced at $ 161,500, well above the $ 119,900 Tesla Model S Plaid. “Our first product is, blatantly, a luxury car that will compete with the Mercedes Benz S-Class in the top chart,” CEO Peter Rawlinson told Yahoo Finance Live on Monday. “And there is currently no electric vehicle offering in the realm of true luxury.”
What makes Lucid so impressive is that, by its own number, it already surpasses Tesla in terms of battery performance. With an estimated range of 503 miles per charge, the Dream’s battery can also be charged to 300 miles in just 20 minutes. Meanwhile, Tesla’s long-range Model S gets just 412 miles on a charge and can be charged with up to 200 miles of power in 15 minutes.
Lucid isn’t the only competitor to come after Tesla, of course. Rivian is also set to launch its long-awaited electric truck this year, backed by heavyweights like Amazon, which is building a Rivian-based fleet of electric delivery vehicles. Rivian also has the backing of 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 go public this year with an estimated valuation of $ 50 billion, according to Bloomberg. That company is coming out the door with an electric truck, creating stiff competition for Tesla’s next Cybertruck, which will also launch this year.
Tesla has even managed to inspire an electric trucking company called Nikola (NKLA) (Tesla is named after the inventor Nikola Tesla), though that company was criticized in a report by short-seller Hindenburg accusing it of being a fraud. (Nikola denied the report, calling it a “successful job”).
Traditional automakers entering the space include Ford, which will launch its highly anticipated Mustang Mach-E crossover in the coming months at a starting price of $ 42,895 and more than 250 miles per charge. Moor Insights & Strategies’ Patrick Moorhead says Volkswagen could also become a rival to Tesla, noting that a large automaker could, in a few years, become the second-largest electric vehicle maker after Musk’s company.
Then there’s Apple, rumored to be partnering with an established automaker like Hyundai, on an electric vehicle of its own. Still, details on how Apple will actually make the car are scant, and it’s not expected to hit the market until 2024.
But Apple is only part of the bigger picture, which is this: The EV field is getting crowded. Tesla may have the best-selling electric vehicle of all time, by a wide margin, as my colleague Rick Newman pointed out, but the flood of new competitors may expose its weaknesses.
Those flaws include an unpredictable CEO who was sued by the SEC for a tweet saying he had funds to privatize Tesla, as well as fatal car accidents that invited scrutiny of his autopilot system. Tesla may remain the leader in electric vehicles despite these flaws, but now is not the time for Elon Musk to take his empire for granted.
For Daniel Howley, technology editor. Follow him on @DanielHowley