You might have noticed the Tesla Motors [NASDAQ:TSLA] share price over the past month. It has gone from the darling child of the NASDAQ to one of the most volatile companies you can invest in.
It peaked at just over $193 at the end of September. The calls were for $200+. But on the flip side there were many (including me) who felt the stock was overvalued.
To give you a comparison, Tesla is on track to ship about 21,000Model S cars this year. Audi on the other hand is on track to ship about 1.57 million cars by the end of September.
In short, Tesla ships about 1.3% of the volume that Audi ships.
And yet Tesla’s market cap is currently $17 billion, while Audi’s is about $28 billion. It’s pretty easy to see the difference here. The sales numbers clearly don’t stack up.
However that doesn’t mean Tesla should only be worth 1.3% of the value of Audi. The technology Tesla provides is cutting edge. In fact it’s world class. Industry leading. Pioneering.
I believe Tesla will soon be the best buy on the NASDAQ.
That’s because, as I see it Tesla is the best carmaker in the world. But for likely self-serving interests, it seems the US is hell-bent on quashing this amazing, homegrown company.
It started back when Tesla decided to adopt the ‘Apple’ sales method. By that I mean Tesla planned to sell cars directly to the public. Open up a Tesla shopfront, sell the cars. Simple.
No need for dealers, no need to inflate prices. No need for a middleman. It’s the business model of the modern era. Cut out multiple handling of products and pass on the benefits to the consumers.
Except a few states have a problem with this. Namely Texas, Colorado, Minnesota, New York, New Hampshire, Massachusetts, Virginia and North Carolina. There are ongoing legislative battles preventing Tesla from selling their cars directly to the public.
Car dealers want a slice of the pie, but Tesla doesn’t want to give it to them. Nor should they. The battle seems to be in favour of the car dealers too. And it’s no coincidence that car dealers have spent over $130 million in state and federal political lobbying compared to the paltry $500,000 spent by Tesla.
But sales methods are just one aspect of the battle facing Tesla.
It seems as though US lawmakers are really afraid of things they don’t understand. Maybe that’s why 23andme are in trouble also — more on that another day.
Anyway Tesla had a bit of PR misfortune recently when three of their cars caught fire in the space of five weeks.
This sent the stock price into a tailspin. Not only that, but the good old National Highway Traffic Safety Administration (NHTSA) decided to stick its nose into this media inferno. It’s investigating if the Model S is safe and whether the car has any design flaws.
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All three Model S fires were kept out of the passenger cell. So no flames entered the passenger compartment. In all three accidents the car was able to instruct the driver to pull over, and exit the vehicle. And all three drivers believe the Model S design actually saved their lives.
The US National Fire Protection Association lists in their 2012 fact sheet that in 2012 there were 172,500 car fires in the U.S.
Of those 172,500 there were 300 fatalities and 800 injuries. The estimated damage bill was $1.1 billion. That equates to one highway vehicle fire every 182 seconds.
Since Tesla released the Model S to market in 2012 they’ve had three fires. And no fatalities.
In the official Tesla Blog on their website Elon Musk said this about the Model S,
‘An average of one fire per at least 6,333 cars, compared to the rate for gasoline vehicles of one fire per 1,350 cars. By this metric, you are more than four and a half times more likely to experience a fire in a gasoline car than a Model S!‘
Yet the NHTSA wants to investigate Tesla cars for design flaws? Seriously?
But it goes further. The Germans have decided they want in on the act too. Try to figure this one out…
The three Tesla fires occurred in, Seattle, Tennessee and Mexico. And because of this the German Federal Motor Transport Authority was concerned. They basically asked Tesla for a ‘please explain?’
Of course, the investigations from both the NHTSA and ‘Ze Germans’ have come up with nothing. There’s no design flaw in the Model S. In fact they’re unbelievably safe cars. Safer than most petrol cars.
But the negative publicity from these fires is beyond belief. It’s as though the government is doing everything it can to find a weakness in Tesla.
Put it like this. If Tesla continues on its way they plan to have two more electric vehicles (EV’s) come to market over the next few years. One of those is an affordable priced sedan for the masses. An affordable electric car has been Tesla’s primary goal all along.
And as EV’s become more common around the world, it means some lean times for petroleum companies. That could also mean some pretty lean times for companies like Exxon Mobil, BP and Total SA.
Now I’m going to speculate here, but my guess is that there are a lot of ‘pro-oil’ politicians in the US Congress. Just a stab in the dark there… Not to suggest any kind of political corruption of course. But well, put two and two together and sometimes you can get five.
There is literally billions at stake for carmakers, but also petroleum companies as the world goes ‘EV’. For the stockholders, it’s a worrying time.
Tesla is certainly in for a long, protracted fight in a highly profitable market. So far they’ve come through each battle with flying colours. And in my opinion they will continue to do so.
I get the impression that Musk is up for the fight. In fact these roadblocks likely spur him on even more to make Tesla a success.
But watch this space. There’s a strong tide pushing against Tesla. And at the right time it will present as a brilliant buying opportunity. Because everyone will hate the company, but from what I can see, they’ll still be the best carmaker in the world.
And if that perfect storm comes around, Tesla will be the best buy on the NASDAQ.
Sam Volkering+
Technology Analyst, Revolutionary Tech Investor
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