TSLA Stock: Here’s Why Tesla Motors Inc Could Win the Driverless Car Race

tsla stockThis Could Be Huge for Tesla Stock

Tesla Motors Inc (NASDAQ:TSLA) stock has lost quite a bit of attractiveness since the announcement of a potential acquisition of SolarCity Corp (NASDAQ:SCTY). But let’s forget that deal for a second and focus on its core business—electric cars. Once you realize what the company is capable of doing, you might find Tesla stock appealing again.

To many shoppers of electric vehicles (EVs), Tesla is the Holy Grail. One of Tesla’s biggest achievements is that it made electric cars attractive not just to the environmentally conscious, but also to those who weren’t looking at EVs in the first place. In 2015, the Tesla “Model S” outsold the Mercedes-Benz “S-Class” in the U.S. (Source: “Tesla Fourth Quarter & Full Year 2015 Update,” Tesla Motors Inc, February 10, 2016.)

Tesla is also moving into the mass market with its “Model 3.” But there is something else that I believe will truly take the company to the next level—autonomous vehicles.

Sure, this future industry is already filled with big-name competitors. Tech heavyweights like Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG), as well as automotive giants including Ford Motor Company (NYSE:F), Volkswagen Group, and Daimler AG are all in the race. How do we know if Tesla even has a chance?

Well, here’s something that Tesla has—tens of thousands of beta testers.

You see, autonomous cars are driven by computers. The car detects its surroundings using radar, light detection and ranging (LiDAR), GPS, odometers, and computer vision. Then, the computer system interprets sensory information to determine the vehicle’s next move.

If the process sounds complicated, that’s because it is—and there’s more. Because there are different types of roads, varied weather conditions, and different types of road signs in different regions, we are probably not going to see just one big launch of driverless cars. It’s more likely going to be a gradual learning process.

That’s why many companies have started testing their driverless cars and driverless car systems on the road. For instance, Google’s driverless car system is now being tested in three cities and has covered more than 1.5 million miles in total. (Source: “Google Self-Driving Car Project,” Google.com, last accessed June 28, 2016.)

This is where Tesla truly shines. The company started equipping its Model S sedans with ultrasonic sensors back in October 2014. One year later, Tesla sent out a software update to the tens of thousands of cars sold with those sensors, enabling an important feature—“Autopilot.”

Right now, Autopilot cannot replace the driver completely, but it can take over control of the vehicle on the highway and in traffic. It offers a combination of adaptive cruise control, lane keeping, lane changing, and self-parking.

On their own, these features don’t seem to be that groundbreaking. But remember this: Tesla has a huge following that is willing to become beta testers for whatever the latest technology.

There are plenty of stories and videos showing just how impressive Tesla’s Autopilot function is. For instance, it saved a Model S (and its driver) from a side collision from a boom lift truck.

And let’s not forget what Tesla’s customers are willing to do when the company launches a new product. Usually, people want to buy products that are proven to be reliable, and few want to be guinea pigs.

Not at Tesla, though. Tesla fans are more than happy to be beta testers. The company unveiled its Model 3 at the end of March and in less than a month, the company has received almost 400,000 preorders. (Source: “Tesla’s Model 3 Reservations Rise to Almost 400,000,” Fortune, April 15, 2016.)

This is quite remarkable because to reserve a Model 3, you have to put down a $1,000 deposit on something that’s not expected to be in production until late 2017.

The Bottom Line on TSLA Stock

As I have said, driverless cars won’t just make a big sudden appearance. Rather, it’s going to be a gradual process where new features become available step by step. With tens of thousands of cars already sold with Autopilot and hundreds of thousands to be delivered in the future, Tesla stands to win in this race. And that’s a good thing to know for TSLA stock investors.