Automakers Imitating Tesla Is a Flattering Sign for TSLA Stock

Today should reminder investors why Tesla (NASDAQ:TSLA) is the leader of the electric vehicle (EV) race. The company turned some heads this week when it announced it would be raising EV prices. Some experts wondered what it would mean for TSLA stock, but so far, it has posed no negative consequences. Today also brought the news that the EV innovator would be forced to temporarily close its Gigafactory in Shanghai due to rising Covid-19 cases. However, we have seen other reports recently that point toward continued dominance in the EV sector and a smooth road ahead for Tesla.

white tesla car (TSLA)
Source: franz12 / Shutterstock.com

What’s Happening With TSLA Stock

A few days ago, the Wall Street Journal reported that some of Tesla’s competitors were attempting to emulate the company’s retail strategy. As it turns out, the company that disrupted the automotive industry years ago is still doing exactly that, forcing legacy automakers to reexamine how they sell cars. Earlier today, Inside EVs noted the importance of the article while discussing the same topic.

On its second straight day of gains, TSLA stock has risen almost 3% so far. While shares fell earlier today, they have since rebounded and made up any lost ground.

Why It Matters

Throughout recent years, Tesla has showed its industry that it needs to go electric. Now, it is showing that the future of auto sales is online and with no middle men. The company’s sales model centers around a direct-to-consumer approach that eliminates the need for independent dealerships used by legacy automakers.

“The success of Tesla’s retailing strategy is becoming a threat for traditional car companies, which are trying to increase EV sales while selling through independent dealerships,” states the Wall Street Journal.

Tesla isn’t the only automaker to implement these tactics. Since its rise, EV startups such as Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN) have emulated it as well. For trendy startups, a digital-first strategy makes sense. According to the WSJ, though, the list of names considering it has grown to include Ford (NYSE:F) and General Motors (NYSE:GM), two industry pillars who have been fighting hard to compete with Tesla.

Tesla shouldn’t be worried when its competitors make plans to emulate its strategy. In this case, it should remember that companies only emulate rivals who are doing better than themselves. In short, they wish they’d thought of it first. Tesla has maintained its spot as leader of the EV race because it arrived first and innovated from there.

What It Means

Consumer trends are shifting toward an industry landscape in which vehicles are purchased online. In this world, new vehicles are bought directly from the dealer. Adopting this type of retail strategy will help companies such as Ford and General Motors remain competitive. It is unlikely, though, that it will allow them to grab a piece of Tesla’s market share.

Even the recent closing of the Shanghai Gigafactory hasn’t pushed TSLA stock down today. The trend of competitors emulating Tesla’s strategy should remind investors that TSLA remains a safe bet, even throughout tumultuous times and market uncertainty.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.


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