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‘Model 3 killers’ coming from all sides, yet the Tesla EV may emerge unscathed

Tesla (TSLA) had reported stellar earnings in the third quarter, with average Model 3 production roughly 4,300 units per week. Though stock received a much-needed fillip by the results, Tesla critics and short-sellers weren’t convinced.

Hedge fund manager and one of Tesla’s prominent bears, David Einhorn said electric car pioneer is at its peak with any more growth not possible. He had pointed out a few reasons to back his theory – one being the expected cut-throat competition in the industry.

Tesla model 3 vs others
Courtesy: Tesla

It’s true that peer companies have sped-up their production plans to capture the budding market, but the probability of these new entrants actually eating into Tesla’s market share is relatively thin.

First, let’s take a quick look at the competition that is brewing in the electric vehicle industry. Tesla’s biggest global rival is German auto giant Volkswagen, with its ID lineup. Last week, Volkswagen had announced that it would produce an entry-level ID model, costing around $21,000. Tesla CEO Elon Musk has promised a base Model 3 version for $35,000, though it is yet to be made available. Volkswagen will start production of the vehicle in 2020.

During the Geneva Motor Show in March this year, BMW announced that it would bring the all-electric sedan, I4, by 2021. BMW added that it would have a total of five electric cars on roads in the coming three years.

The Model 3 also faces competition from a few existing models, including the Nissan Leaf, Chevy Bolt, and Mercedes B250e. Ironically, and all these rivals claim to be ‘Tesla killers.’

However, the vehicle itself is only one aspect of the EV industry – there is also the charging infrastructure network that needs to be taken into account when considering an electric vehicle. And Tesla scores big time here. Tesla has the best charging infrastructure, not just in the US, but in Europe as well.

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Separately, the global production figures given by the German rivals – Volkswagen and BMW – are relatively in line with Model 3, which means the allocation for the North American market is pretty less in the initial stages. It may be inferred that at least in Tesla’s home market, one cannot expect a disruptive entry by both the companies even by 2021.

Finally, Tesla focuses on delivering drivable computers, rather than vehicles and the company enjoys a wide fan following. Hence even the price disadvantage is unlikely to dent the market share of Model 3 in the foreseeable future.

While the EV market is sure to see a lot of emerging trends in the next five years, Tesla is expected to assume a dominant space in the industry.

 

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