Tesla Inc is a monopolist. That’s the opinion of Alexander Haissl, a German auto industry analyst. In his view there is no other company that will match Elon Musk’s investments in EVs over the medium term. That will give the firm an almost entirely dominant position in the industry in just a few short years.
As Tesla heads toward the release of the Model 3, we’re going to start hearing a huge amount of talk about the firm’s rivals for that top spot. This is precisely what happened with the Model S, and with the firm’s Model X release.
As Elon Musk heads toward building a “monopoly”, it’s important to look back at the Model S killers, and see what progress they’ve made toward ending Tesla’s solo run. Fans of the Palo Alto firm won’t be too surprised about the conclusion.
Here are the Model S killers
This is the Model S rival that’s been most talked about this week. It has a Silicon Valley heritage, and there’s already a prototype. Unfortunately the firm isn’t anywhere near production and its marketing team is already putting a new spin on that “Model S killer” selling point.
Journalists are now listing the Lucid Air among the possible “Model S 2.0” candidates. That is the next generation of luxury EV sedans. The Lucid Air is selling itself on much the same lines as the Model S, but its design is newer. If you reckon the Model S nosecone has gotten stale, this might be the car for you.
Dead-in-the-water. The Fisker Karma, hailed as a Model S killer, is gone. The car never touched the Model S in substance. It was a plug-in hybrid rather than a pure EV. Only a few thousand of the cars ever sold. In the second half of 2017, however, the man behind the Karma, Henrik Fisker, is expected to unveil a new car.
That’s sure to appear on future “Model S Killer” lists across the web.
A snappy, interesting launch video is enough to get a lot of attention in the tech world. Faraday Future capitalized on this in 2015. The firm was dubbed a “Model S Killer” before it revealed anything like a car design. The firm finally showed off its Model S rival earlier in 2017.
The FF91 has no mass production schedule, and Faraday Future is in financial, and other, trouble. This Model S rival was ended long before Tesla had time to consider it.
This Chinese EV was a Model S killer in the line of the Oreo. The hope was that by imitating the design, the firm could become a strong alternative to Elon Musk’s EV in the Chinese market. That didn’t convince the Western media initially.
We haven’t heard anything about th Youxia X since that first reveal, but we’ll be sure to keep an eye out. If you’re a Tesla stock holder, this is one that you really shouldn’t be worried about.
We can see, from a quick glance at the Model S killers, that Tesla Inc is a long way from losing out to other startups. But is that enough to think of the firm as an entirely dominant force in the future of automobiles?
Audi, General Motors, Mercedes? Volkswagen? BMW?
This is where the monopoly idea really comes into its own. Despite hearing lots of rumors about Model S rivals from established car firms, we still seem to be years away from an actual release. Rumors of an Audi EV sedan remain blurry, BMW is still thinking it over, all Mercedes offers is a $40,000 B class with 90 miles of range.
General Motors has gone further. The firm designed and launched the Bolt, a strong mid market EV entry. Given its behavior since launch, however, it appears to have no interest in selling the car.
Meanwhile Volkswagen says that it’s going to unveil two new EV sedans for the US market in the coming years. Promises, however, are easier to make than follow through on.
It seems clear that the traditional automakers are happy, in the short to medium term, to let Tesla have the EV market. That may come back to bite them in future.
Will Tesla build a monopoly?
If the FTC ever decided to think about EVs as a separate market from ICE cars, Tesla Inc could indeed become a monopoly in the coming years. In order to be considered a separate market, however, EVs would need to be a much closer substitute for each other than they are for ICE cars.
If it’s a separate market then Tesla would be able to increase its margins giving it strong earnings for some years to come. That’s why Alexander Haissl, who authored his report for Berenberg, is so bullish on the future of the California carmaker.
He thinks that EVs are a clearly separate market from traditional engined vehicles. No other carmaker, in his view, is doing enough investment to actually meet Tesla on that playing field. “A lack of real action and strategic commitments betray their underlying conviction,” he wrote in the report.
The future of Tesla Inc stock
For those with Tesla stock, all of this comes down to one thing. At Friday’s closing price of $327.78, is the firm going to increase in value? That’s something that Wall Street is very confused about right now.
Over the last few months Tesla stock has been on a rollercoaster. Overall shares have gained more than 50 percent since January 1st. In the last month, however, stock has dropped by 14 percent or so.
Much of that drop was precipitated by a negative report from Goldman Sachs. The Wall Street bank, once a major Tesla Inc bull, cut its price target on the firm to $180.
David Tamberrino, who wrote that report says that there was “potential for downside as the Model 3 launch curve undershoots the company’s production targets.” He also warned that “demand for TSLA’s established products (Model S and Model X) appear to be plateauing slightly below a 100k annual run rate.”
That last line should be the most frightening for those betting on Tesla stock and its rivals alike. The Lucid Air and the Fisker Karma won’t exist if demand for the Model S, and other luxury EV sedans, plateaus. There simply won’t be enough of a market to go around.
That would, interestingly enough, leave Tesla Inc with a monopoly, albeit in a market that’s not worth a $50 billion market cap.