Did Tesla (NASDAQ:TSLA) and Tesla stock get a much-needed shot in the arm?
Ford (NYSE:F) CEO Jim Hackett’s heart probably skipped a beat if he was watching Tesla’s reveal of the Model Y SUV. That’s because, during the reveal, CEO Elon Musk predicted that his company would eventually sell more Model Ys than Model 3s.
While Great news for Tesla stock, Hackett and the rest of Tesla’s competitors better hope it was one of Musk’s usual marketing superlatives and not based in reality.
It’s Not Coming Until 2021 or Later
On the surface, Tesla detractors will point to the fact that the new SUV won’t be ready for delivery until 2021, perhaps longer. A lot can happen between now and then to alter the electric playing field.
Volkswagen (OTCMKTS:VWAGY) is spending $49 billion on electric and connected vehicles over the next five years, a considerable sum for any vehicle manufacturer, but a King’s ransom for a company like Tesla that’s struggling to keep the lights on.
The German company already has the e-Golf in production and four in line for production sometime in 2020. By the time 2021 arrives, Tesla could be yesterday’s news.
Here’s why that’s highly unlikely:
Tesla sold 140,000 Model 3s in 2018 compared to less than 1,500 for the e-Golf. If this were a Little League baseball game, they’d call it on account of the mercy rule. Volkswagen’s bringing a knife to a gun fight.
In fact, the 12 top-selling electric vehicles behind Tesla in 2018, had combined sales that were lower than Elon Musk’s baby by approximately 17,000.
Electric Vehicles Tiny Part of Automotive Industry
As the Globe and Mail’s Scott Barlow so ably points out, Tesla’s Model 3 sales accounted for less than 1% of the total vehicles (17.3 million) sold in 2018. Jim Hackett and the rest of the big producers of combustible-powered vehicles can’t be quaking in their boots.
And that’s why I believe other auto manufacturers better hope to god Musk is wrong about his prediction because if he’s not, that will mean, once and for all, that Tesla’s figured out how to play in the automotive industry’s sandbox.
The argument used to be that Tesla would never be profitable. Then it was that Tesla would never be able to mass produce more than one vehicle. The most recent being that it wouldn’t be able to produce 5,000 Model 3s weekly consistently.
All not true.
Now, granted, there are asterisks’ attached to each of these accomplishments, but they are accomplishments nonetheless.
In March 2017, I discussed the three ways Tesla stock can reach $500. At the time it was trading at $261, not too far from today’s share price. The closest it got was $386.99 on June 23, 2017.
Here’s what I had to say about the Model Y:
“Car companies are known to use a single platform to produce several different vehicles in one production facility. Tesla is said to be introducing its Model Y crossover SUV sometime in 2018; it’s a vehicle that could be built on the same platform as the Model 3. If so, the cost of producing the Model Y would drop significantly helping to point its way toward GAAP profitability and automotive mass production.
“We don’t even know if the Model 3 is going to be a hit, but a smooth rollout later in 2017 should pave the way for strong demand of the Model Y.”
Ok, so Tesla was a year late on the rollout of the Model Y, but I think you get my drift.
You would have to be blind (my apologies to the visually impaired and truly blind) to fail to notice that Tesla’s a much better manufacturer than it was in June 2017, when it traded 26% higher.
If you read my three points from the March 2017 article, you will see that to one extent or another; they’ve all come true.
The Bottom Line on Tesla Stock
If you own Tesla stock, the latest reveal by the company isn’t so much about the Model Y, as it is about another milepost being reached, one of many that Tesla shorts and detractors thought impossible.
Now, more than ever, I believe $500 is not only possible, it’s probable, within the next 12-24 months.
Tesla isn’t perfect. Nor is Elon Musk. But it’s a heck of a lot more exciting to watch Telsa’s progress than a company like Ford who’s so corporate in all the wrong ways.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.