Tesla Motors Inc (NASDAQ:TSLA) had an amazing run over the past 10 years, gaining an astonishing 873%. Tesla stock is down 20% for the year, as the fallout of its SolarCity acquisition weighed on sentiment, issues with production hurt sales and Tesla suddenly finds its backyard chockablock with competition. The introduction of the Jaguar I-Pace at the Los Angeles Auto Show could be the latest blow to TSLA.
Jaguar, a brand owned by Indian automaker Tata Motors Limited (ADR) (NYSE:TTM), has been on a tear lately. The brand has seen a complete turnaround and is having one of its best years ever in 2016.
Jaguar debuted its concept Jaguar I-Pace at the recent auto show to stunning reviews and sent whispers around the industry of the competition it could bring against industry leader Tesla.
The Jaguar I-Pace, due out in 2018, is a 400 horsepower all-wheel drive electric crossover vehicle. The vehicle will seat five people and has properties of both a sedan and a SUV. Jaguar’s new vehicle has a current range in excess of 220 miles, which would put it just below the Model X, but ahead of the Chevy Volt by General Motors Company (NYSE:GM). This is the first all-electric concept car from Jaguar.
The Jaguar I-Pace shown off at the LA Auto Show was technically a concept car. However, this car is already taking pre-orders and is expected to be fully introduced next year. The car will hit dealer showrooms in 2018 and be available for purchase that year as well.
One of the biggest advantages Jaguar could have here over Tesla is its network of dealers. Tata Motors had over 330 franchises in North America for its Jaguar and Land Rover brands. Around 70% of those dealerships carried both brands. Tesla, for its part, has 250 dealerships globally. And the company has been barred from selling its cars in several states under a dealership model. Tesla is getting creative, however, and putting dealerships inside high traffic malls and even one inside a Nordstrom, Inc. (NYSE:JWN) store.
Jaguar has been a strong luxury brand for some time and recently a growing affordable luxury brand with several new launches. No price on the Jaguar I-Pace has been announced, so that is one area that is unknown in the battle versus Tesla.
Still, competition from Jaguar comes at a bad time for Tesla stock, as the company’s production was thwarted due to the need to equip its Fremont, CA location with everything needed to deliver “full self-driving hardware.”
While Tesla doesn’t break out monthly sales figures for its cars, some electric vehicle sites give their best estimates. Tesla didn’t top the chart in October or November and now has a narrower lead over GM’s Chevrolet Volt for the first 11 months of the year.
In October, estimates say Tesla sold 925 units of the Tesla Model S and 725 units of the Tesla Model X. This greatly trailed rivals like the Chevrolet Volt with 2,191 units, the Fusion Energi by Ford Motor Company (NYSE:F) with 1,272 units, and the Leaf by Nissan Motor Co Ltd (ADR) (OTCMKTS:NSANY) with 1,412 units.
In November, after production began to ramp up again, the Tesla Model S sold 1,400 units while the Model X sold 900. Chevy’s Volt still obliterated those figures with sales of 2,531, while Ford’s Fusion Energi sold 1,817 and the Nissan Leaf managed 1,457.
Through 11 months, Tesla holds the first and fourth positions for sales, with the Tesla Model S (23,571 units) and Tesla Model X (14,348). The Chevrolet Volt ranks second (21,048) in sales. In third is Ford’s Fusion Energi (14,839), and rounding out the top five is the Nissan Leaf (12,107).
Tesla continues to be a big player in the booming electric car market and maintains an early lead. Competition from heavyweights could be cause of alarm for Tesla stock, but could also signal the strong growth of the market and room for several players.
Bottom Line on Tesla Stock
Tata Motors could be a boon here for investors as it continues to reignite the Jaguar brand. Tata paid $2.3 billion to acquire Jaguar and Land Rover from Ford. The buyout was seen as a high price by many, despite the fact that Ford paid $5.3 billion to acquire both brands. Tata Motors is now seen as a big winner, gaining two brands it was able to turnaround.
After years of relying on its domestic brands, the Jaguar Land Rover division of Tata Motors is now the most important in terms of revenue and earnings. Over the past five years, operating margins have been 11% for the Jaguar Land Rover division and only 1% for the domestic business. If Jaguar can capture share of the electric vehicle market and continue its sales growth momentum, Tata Motors could be the stock to buy here.
Tesla stock trades around the $192 mark, putting it below the midpoint of its 52-week trading range ($141.05 to $269.34). Tesla shares hit that high in April after bottoming out in February. After a nice run from February to April, Tesla stock has traded downward.
Tesla stock may continue to trade under $200 until it gets some good news. Competition continues to creep up on Tesla, which may mean TSLA won’t keep its lofty valuation anymore.
As of this writing, Chris Katje did not hold a position in any of the aforementioned securities.