Tesla Inc (NASDAQ: TSLA) is going to launch the Model 3, its first mass market EV, on July 28th. Right now investors are worried about whether or not that project is going to go smoothly, but there’s something else they should have on their minds. After the Model 3 is in full swing, what could possibly be next for Tesla?
Some enterprising investors have, however, been keeping an eye on the firm’s future plans. We know a lot of the parts of what the firm plans to do over the next couple of years. There’s going to be a Model Y crossover, a new Roadster, and even a semi-truck. What we don’t know is how Tesla is going to justify its mind-boggling share price.
Here’s a look into the ideas of the brave few who have developed theories of the Tesla case.
1 Tesla as a freight network
We know that we’re getting an electric semi truck from Elon Musk in the coming months. What we don’t know, however, is how the firm plans to make money off of it. Trent Eady over at Seeking Alpha says that these heavy vehicles will open up a multi billion opportunity.
Mr. Eady says that the Tesla Freight Network, a self-driving on-demand cargo transport business, will launch in the early 2020s once Tesla Inc (NASDAQ: TSLA) has all of the kinks with the self driving truck worked out.
The idea is, of course, highly speculative. We haven’t even seen if the firm can make a worthwhile truck or not just yet.
If Tesla can make a truck that drives itself and, with solar-EV power, is able to lower cost per mile at the same time, it would have a massive opportunity to displace the regular freight business. Mr. Eady estimates that the business could be worth $72 billion in extra market cap to the firm going forward.
2 Tesla is just a battery company
We’ve seen a whole lot of talk about the Powerwall, but to date Elon Musk’s firm appear to be producing relatively few. If you believe a certain kind of futurist, however, the firm is all about battery technology.
That means that the real advantage the company will have going forward is not in its brand cache, nor in its stylish cars. Instead the firm’s batteries are going to be so much better than those of the competition that they will be a high margin good.
If the firm can lower price per unit and increase energy density, those plans could indeed come true. The firm is putting its name out there as a big battery vendor, looking to build the world’s largest storage facility in Australia among other things.
This is one of the theories that tries to explain why Tesla isn’t just a car firm. To date, however, there is no proof that its battery tech really is that much better than the competition. Investments are being made, but to really rule this kingdom, it will need new revolutionary technology.
3 Tesla is like Uber, but not really
This theory has been around for quite a while. Essentially it says that Tesla is going to develop some sort of subscription or pay-per-use transport network. The firm wouldn’t sell its cars in this theory. Instead it would rent them out, sort of like how Uber does with its network. There would be, however, one major difference. The Tesla Inc (NASDAQ: TSLA) fleet wouldn’t have any drivers.
This is how Morgan Stanley analysts Adam Jonas sees the future of Tesla. In a November 2015 report he forecast that a “mobility app” would be released in the following 18 months. We’re just over that line right now, and we’ve not heard too much from the firm. Tesla has announced the “Tesla Network” platform, but we’ve yet to really see how it’s going to work in real life.
In fairness to Mr. Jonas, the Autopilot system hasn’t developed quite as quickly as hoped. A huge amount of driving data is, though, now making its way into the Palo Alto firm’s servers. We’re just waiting for a big leap in how much the Model S can drive itself.
Mr. Jonas reckons that the single biggest problem with any car is its capital utilization. People spend tens of thousands on a machine that sits unused for twenty hours per day. That’s the space he sees Tesla levering its way into. In order to do so, though, the firm is going to need Autopilot improvements to kick into overdrive.
4 Tesla tunnels are a transport dream
The idea that Tesla is just a car company is too boring for the firm’s most excited investors. It’s the same as saying that Apple Inc. is just a phone maker. Sure it’s true, but it sucks a lot of romance out of the financial potential.
The Tesla Inc (NASDAQ: TSLA) transport dream is what you get when you put together all of the firm’s major efforts. That includes everything from the Hyperloop to the Boring company. In a future dominated by the firm, Elon Musk would take care of all of your transport needs.
The Boring company, Tesla’s tunneling enterprise, is one of the more interesting parts of this equation. Because the firm makes EVs, it may be able to skirt some tunnel regulations. The Tesla transport future could involve Tesla tunnels criss-crossing America’s major cities. These would be the EV-only superhighways of the future, carrying Tesla Network passengers to and from work without a single human driver.
The only problem is, of course, is that the technology isn’t there. Elon Musk has just begun his experiments with tunnels. We could be years and years away from the first being opened. Or it may never happen at all.
Don’t bet on crazy Tesla stock theories
If you need some unfounded long term theory about what Tesla is going to expand into next, you shouldn’t buy shares. Right now the firm is a car company, and it faces substantial risks in that world. No amount of tunnels or freight hauling in 2030 is going to separate it from those risks.
Tesla stock is a risky investment. Don’t let anyone tell you otherwise. Elon Musk is a great industrialist, and his firms have huge potential to change the world. They’re not, however, worth betting your financial future on.
If you believe that Tesla Inc (NASDAQ: TSLA) is fairly valued based on its public plans, then go ahead and invest in the firm. If, however, you need to imagine great and powerful revenue streams descending from on high, an index fund is probably better for you.