TSLA Stock: Is This Bad News for Tesla Motors, Inc. in 2016?

tesla motorsIs This Bad News for Tesla?

New Year has dawned in all its glory with some big developments taking place in the electric vehicle (EV) industry where Tesla Motors, Inc. (NASDAQ:TSLA) is a key player. TSLA stock investors must keep tabs on these shifting industry dynamics in 2016.

All eyes are now set to the most anticipated, adrenaline-pumping event of the year—the Consumer Electronics Show 2016 (CES 2016). The biggest gathering, which brings techies in droves from all over the world, is touted as the launch pad of some of the groundbreaking technologies we have seen over the years. This year, virtual reality, augmented reality, and the Internet of Things will be three of the next-generation technologies that everybody would be looking forward to. But at the top of my list is the EV technology that is expected to see the biggest boost post-CES 2016.

This is because all the big automakers are now entering the EV arena with full force. General Motors, Nissan, and Volkswagen are expected to reveal their all-electric cars this week. But my eyes are set on that one car that they are calling the “Tesla killer.”

Faraday Future is going to showcase their first EV concept on the event. Haven’t heard of them until now? Join the club!

Little is known about this private company, but its teaser video is already becoming a talk of the town. (Source: “Faraday Future released a teaser video of its ‘Tesla Killer’,” BGR, December 30, 2015.)

Rumor has it that Faraday Future’s first EV, which is being touted as one of the biggest competitors of Tesla, will hit the market in 2017—around the same time as Tesla’s “Model 3,” a smaller, more affordable Tesla being designed for the masses.

Faraday Future is reportedly backed by a Chinese investor and already has a factory under construction in Nevada, Tesla’s home turf. In fact, the company is also reported to be poaching former Tesla employees to build a comparable team of professionals. (Source: “Faraday Follows Tesla to Nevada for $1 Billion Auto Factory,” Bloomberg, December 9, 2015.)

In ways, new competition is good news for Tesla, which has been trying hard to commercialize electric vehicles. It also bodes well for Tesla stock investors by bolstering their confidence in the future of EV industry, ultimately making their investments worthwhile.

In other ways, however, this could be bad news. Tesla has so far not been able to return profits because of a lack of economies of scale. The growing interest in EVs may boost demand for its cars in the future, but competition is fast catching up.

The Bottom Line on TSLA Stock

Tesla has little to worry about. The growing competition may be a threat in the short-term, but in the long-term, Tesla will ride higher as this industry expands. Having already gained a strong recognition for its brand, Tesla will now be able to make bigger strides towards higher sales and profitability. All the old and new automakers now betting on this technology will only help further Elon Musk’s dream to make EVs the next leaders in automobiles.

Rest assured, competition will pave way for both the company and TSLA stock’s future growth.