Tesla Inc (NASDAQ:TSLA) bulls have reason to be excited about the rise of the electric car, but it’s just about the profits and little else. An auto revolution is definitely on its way. That said, it has been on stuck on the road for a very very long time. I don’t need to tell most readers that EVs aren’t at all new. They have decades under their belt. Elon Musk and his auto company definitely have a hand in popularizing them though. The question is, why haven’t they taken over yet?
Electric car facts
See, the environmentally friendly reasons forced down our throats are really far-fetched, if not very close to outright fake. Indeed, the EV is supposed to be the future of transportation and it is, but not because it saves the planet. Using fossil fuels is a big no no. The thing is though, so is driving an electric car.
The mining of lithium and creation of car batteries doesn’t quite cancel out gas car emissions. Also bear in mind that plugging your car into a coal-powered electricity grid is not much better than driving a Hummer. You are essentially switching one fossil fuel for another.
Electric cars are the next big driving trend and, in that regard, Tesla has a multi-billion dollar head start over rivals. While they are not so profitable right now, they will be in years to come, once the world sees EVs as the new normal. No need to take my word for it though, just ask the likes of Volvo.
Volvo recently swore to commit itself to building electric vehicles and hybrid cars in the next two years. The automaker and dozens of others worldwide are pouring billions into getting some skin in the EV game. You would have a hard time finding a car marker today without an EV range or two. This in itself is proof of the growing popularity of alternative energy cars. However, despite all of this, I count far more gas cars on the road than those powered by electricity.
Tesla Inc face these EV deterrents
Recent gas prices have not given people a lot of reasons to switch. According to a Bloomberg extract, the price of gasoline in the U.S. has plummeted significantly for end users. In the last three years, it has dropped by over a dollar, from about $3.60 to just over $2.50.
Electric cars are not exactly fill-up-and-go cars either. An hour or so at a Supercharger station for a full battery is far from convenient. This adds to the deterrents of any EV for now, but times should scale down over time.
Another factor is that the technology crammed into electric powertrains. It makes EVs really expensive. Buyers can easily be fooled by the “affordable” Model 3 though. It goes for about $35,000 at its most standard. Yet any analyst worth their salt will agree that the car is not worth its assured price tag.
The Model 3 lie
Although the company won’t outright admit it, Tesla Inc (NASDAQ:TSLA) is probably selling the Model 3 at a small loss for $35,000, at least to start with. In truth, the car is more of a build-your-own-Tesla. The firm hopes the average buyer will go much higher than the base price, $42,000 at least according to management. At the car’s unveiling, Musk let those in line know that well over 300 miles of range per charge can be acquired for an extra $9,000.
Beyond that, the base price Model 3 sedans will only roll out once the company really gets the ball rolling with mass production. Higher add-on cars gain priority for now. It is only once the economies of scale makes things more affordable for Tesla that the company can make things more affordable for end users. Hence the long wait for buyers of the stock standard affordable sedan.
In truth, electric cars are not really pocket friendly right now. While companies are dedicating a lot of money in bids to make them so, they will go at hefty prices for the next decade or so. Note that major automakers like GM and its Bolt already have the resources, profitability and the economic benefits on mass production their side. Tesla isn’t so lucky right now, but that will change over the next few months. Half a million pre-orders for its newest car promise to finally make the company profitable.
The bottom line for TSLA investors
For now, Tesla Inc investors can rest assured that Musk has the infrastructure and fan fare for eventual success. People should back the company for its growing capacity to own the auto scene and not much else. All that “save the planet with a Tesla” stuff,is only a feel-good slogan. Most people kind of know it too. Still, go Elon Musk!
In other bearish news, the public can help Tesla Inc (NASDAQ:TSLA) reach its goal of fast-tracking into the mass market. Indeed, you too can have a hand in up-scaling Model 3 production by buying TSLA “junk bonds”. That’s all for this week’s Tesla bear session, save for headlines about how “production hell” means actual hell for company employees. Take a look.