Tesla Motors (TSLA) has been on a tear in the last few years, as the company has powered to profitability and captivated Wall Street and consumers alike.
But competition from elite American auto manufacturer Fisker could put TSLA stock on the defensive, and could create a real rival for the Tesla Model S.
In a Bloomberg Businessweek article with the headline, “Is This Man Going to Be China’s Elon Musk?” Fisker’s new owner all but declared war on TSLA. Lu Guanqiu, chairman and founder of China auto-parts conglomerate Wanxiang Group, said: “I’ll put every cent that Wanxiang earns into making electric vehicles. I’ll burn as much cash as it takes to succeed, or until Wanxiang goes bust.”
Sounds like fightin’ words … and possibly a serious long-term concern for TSLA stock holders.
Don’t Worry About Tesla Stock in the Near Term
Some EV enthusiasts might scoff, considering the momentum behind TSLA and the iconic nature of the Model S, and the rather battered shape of Fisker.
The American auto manufacturer planned to launch its flagship car, the Fisker Karma, in 2009 … but didn’t get production up fast enough and vehicles couldn’t be sold until 2011.
Even then, the hybrid Fisker Karma got a rather disappointing assessment from the Environmental Protection Agency, with an all-electric range of just 32 miles and just 20 MPG running on gas.
Fisker stopped production in 2012, then declared bankruptcy in November 2013.
That’s not exactly the kind of track record that’ll have Tesla shaking in its shoes. So in the near term, it’s business as usual for both TSLA stock holders and customers.
Early this year, however, the company was bought by Wanxiang Group — and now, chairman Lu is wasting no time talking up the potential of his new acquisition.
It’s a wise move for Wanxiang to focus on Fisker EVs, given the pollution problems in mainland China and the increasing need for cleaner transportation alternatives. After all, 16 of the 20 most polluted cities in the world are in China.
But there’s a lot of daylight between the current volatility in Tesla stock based on sentiment and the long-term prospects of Fisker getting up to capacity and giving TSLA real competition either at home or in China.
TSLA stock holders shouldn’t sweat this posturing just yet … but in the long term, it will be crucial to watch what Wanxiang and Fisker EV production looks like, and whether Tesla can maintain its current status as the preeminent electric vehicle manufacturer in the world.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.