Tesla stock won’t be the only electric car darling forever, even though it was Tesla Inc (NASDAQ:TSLA) that legitimized electric vehicles. Once Elon Musk put the long-range Model S on the roads it proved battery-powered cars weren’t restricted to the fringe of the automobile market.
The advent of Tesla’s cars has been rewarding for investors too. Though it’s been all over the map in the meantime, Tesla stock has gained more than 1000% over the course of the past five years. It also remains the top dog of the United States’ electric car market, and it’s one of the top EV names on a global basis, second only to a partnership between Renault SA (OTCMKTS:RNSDF) and Nissan Motor Co Ltd (ADR) (OTCMKTS:NSANY).
If you think Tesla’s got a straight shot to becoming the world’s undisputed leader of the electric vehicle market though, or if you’re mulling a purchase of Tesla stock because you think it can only widen its market-share lead in the U.S. think again. The competition is finally coming in a big way.
Getting Serious About EVs
Don’t read too much into the notion that the electric vehicle market isn’t Tesla’s for the taking. It is the name to beat, particularly now that Model 3’s are in production and Tesla-made cars are affordable for middle-income drivers.
Other manufacturers aren’t just rolling over though. Indeed, now that Tesla has made it clear EVs are marketable, those other players have been emboldened to up their game.
Take Nissan, for instance. Though its electric Leaf was once heralded as a worthy threat to Tesla, long-term Tesla stock holders know that the Leaf (at least the old Leaf) never really caught on with consumers the way it was supposed to. The new one might though. The latest iteration of the car boasts a 40% improvement of the old Leaf’s range of 150 miles.
It’s not just Nissan that should worry owners of Tesla stock, however. Bayerische Motoren Werke AG (OTCMKTS:BMWYY), better known as BMW, is altering its electric i3 in a way that takes dead aim at Tesla’s Model 3. Namely, BMY is changing the size and body of the i3 EV to make it look more like a car and less like a toy, matching Tesla’s “cool” factor that’s made such a big difference in its vehicles’ marketability.
General Motors Company (NYSE:GM), like Nissan and BMW, has been at the electric vehicle dance for a while, but its electric Bolt has been a relative wallflower. That’s poised to change too, however. While the Chevrolet Bolt isn’t due for any major design changes, GM has re-imagined how electric vehicles can be used. It’s turning up the heat on its car-sharing program called Maven, which indirectly could spur demand for its entry in the EV race.
Point being, not only have other car makers seen the light that Tesla shined, they’re actually starting to do something about it.
Again, if you’re in a TSLA position, it’s not necessarily a reason to panic. Tesla is still miles ahead of the competition. For all that BMW, Nissan Motor, Renault and other have planned on the EV front, the time-frames for these plans are looking out to between 2020 and 2025 before meaningful results are produced. Tesla has a commanding lead.
On the other hand, it would be wrong to ignore the potential headwind. All of those other car makers are planning EV sales in the hundreds of thousands per year. Some of them are forecasting annual sales of their electric vehicles in the millions.
Parallels With Netflix
In many regards the Tesla story isn’t unlike that of Netflix, Inc. (NASDAQ:NFLX).
When Netflix turned the bulk of its focus to streaming content rather than DVD rentals back in 2010, there were no other viable choices. Studios were also more than happy to rent their mostly-unused video content to Netflix because (1) is wasn’t being used otherwise, and (2) some money is better than no money. Few really though Netflix was going to become the smashing success it’s since become.
Now that it’s proven the model though, plenty of companies are willing to rip off the idea and use it for themselves.
Hulu, a joint venture owned and operated by Walt Disney Co (NYSE:DIS), Twenty-First Century Fox Inc (NASDAQ:FOX) and Comcast Corporation (NASDAQ:CMCSA), was the first to try out an alternative, mostly as an experiment that leveraged their collective libraries of content. As it turns out, the Netflix model worked for entities other than Netflix. The idea has run rampant in the meantime though, with Amazon.com, Inc. (NASDAQ:AMZN) jumping into the game. The premise has so much promise, in fact, that Disney plans to pull its content from Netflix and start selling its own subscription-based video service. CBS Corporation (NYSE:CBS) already did something similar in 2014, launching its All Access streaming video service.
None of them would have been made possible had Netflix not trained consumers and cultivated the market first. In the same sense, Tesla has trained and cultivated the electric vehicle market that other auto manufacturers are more than happy to tap into.
Bottom Line for Tesla Stock
It can’t be explained enough — there’s a ton of time before any of these other initiatives make a sizable dent in Tesla’s dominance, especially in the United States. It is coming though, and there’s little Tesla can do so stop it.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.
