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Tesla Motors Inc (NASDAQ:TSLA) Faces a Rival Dressed as Inspiration

Tesla Motors Inc Challenger

Tesla Motors should be ready to face new problems when its mass market Model 3 hits the roads in 2017. Tesla has had a near monopoly of the high end pure EV market with its Roadster, Model S, and the Model X due for delivery in the next couple of months. Now, an unknown firm named Faraday Future is ready to challenge Tesla Motors in their space.

Tesla Motors Inc Challenger

Yesterday, Motor Trend reported that a new electric car company founded sometimes last year is serious about having an EV in the market by 2017. Faraday Future or FF says the only thing its cars will have in common with the cars of today is four wheels. Other than four wheels, FF is teasing about a list of what they won’t have in common which is nearly everything else.

Faraday Future Looks Serious

FF is not another EV maker wannabe, the firm is serious. Motor Trend reports that the firm “currently resides in the former Nissan research and design building in Gardena, California. FF currently has 200 employees and it is hiring about 10 a week. They claim they’ll have 300 employees by 2016.”

The LinkedIn Profile of the firm shows that it is hiring at a speedy rate. Its goal is to use “advanced combinations of internet, automotive, and aerospace technologies & methodologies” to deliver “clean, connected, smart mobility for all.”

Tesla surges ahead

Tesla Motors  has had an exciting run in the EV market but its success might be throwing up more challenges. When Elon Musk brought out the idea of a high end EV, skepticism was very high. Few people thought that it could ever leave the drawing board. Elon Musk has proved the world wrong with Tesla.

The firm has released Roadster and the Model S. The Model X will be hitting the roads in the next couple of months to take Tesla’s success story forward. The Model 3 is being planned for launch sometime in 2017 and the success of the Model 3 will lead to the widespread adoption of EVs. In fact, the success of Model 3 could disrupt the automotive market in the same way that Henry Ford disrupted the market for horse drawn carriages.

Drawing inspiration from the future

Tesla Motors is, of course, named after Nikola Tesla, one of the men most responsible for our current knowledge of electricity. Mr. Tesla lived part of his life at the same time as Michael Faraday, the man who linked magnetism with electricity and created the first generator as a result. Tesla clearly drew great inspiration from Faraday. This time the opposite is happening.

Faraday, if it comes out with a car at all, will have Tesla to point to as the source of its ideas. Elon Musk’s firm has driven EVs into the open, and he has created a new market as a result. If Faraday releases a car, and it has any success at all, it will be down to the boost from Tesla. That’s an interesting reversal given the nomenclature.

Drawing competition

Tesla’s success has caused other car makers such as General Motors and BMW to start trying their hands at making better EVs. Tesla Motors can easily outshine and beat all these traditional car makers because ICEs and EVs are on parallel lines. Tesla’s focus on EVs in contrast to the dual focus of traditional carmakers on ICEs and EVs could be the reason they can’t seem to pull Tesla down.

However, Tesla Motors might not have much edge over Faraday other than a first mover advantage. In fact, FF might provide a better value to investors who failed to buy Tesla in its earliest days.

More so, Tesla’s success might be the reference basis for the valuation for FF even before it has a single car in the market. Tesla survived against all odds when there wasn’t a reference point for its business. FF has better odds of survival because it can avoid Tesla’s mistakes and improve on Tesla’s shortcomings.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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