Tesla Motors, Inc. (NASDAQ:TSLA) stock did not have a good start in 2016. In just two trading sessions, Tesla’s stock price slipped nine percent, down from $240.01 to $219.04. Why? It might have to do with Tesla’s sales figures, released on Sunday, or it might come from the emergence of a potential competitor, Faraday Future. Either way, can TSLA stock pull through?
Could This Be Bad News for TSLA Stock?
At the Consumer Electronics Show (CES) in Las Vegas, a secretive California-based automaker called Faraday Future unveiled its first concept electric vehicle (EV), the “FFZero1.” The concept car is a single-seater electric sports car that will be able to produce as much as 1,000 horsepower. The company is backed by Chinese investors and plans to build cars in a new factory in Nevada. (Source: “Secretive Tesla Competitor Unveils Concept Supercar,” CNN Money, January 5, 2016.)
It looks like Tesla might have a new challenger in the high-performance luxury EV industry.
Faraday Future has highlighted the pedigree of the 750 employees working on the project; the company has engineers and designers that come from Tesla, BMW, Jaguar, and a number of other car companies.
Additionally, Faraday Future compared itself to Apple Inc. (NASDAQ:AAPL), claiming that it would redefine the way people get around, just as Apple transformed the way people communicate and live their daily lives.
The thing is, Faraday Future didn’t really explain how it planned to reinvent transportation. There was no new technology and the concept car is, well, just a concept. To be roadworthy, the car would need to have more realistic features. Also, production isn’t expected to take place until 2020. Apple might have already launched its own vehicle by then.
The point is that Faraday Future’s concept car really isn’t bad news for Tesla. You see, startups in the car business often come and go. In the past, we have witnessed so many startups with great potential: Fisker, TVR, Gumpert, Carbon Motors, and many more. However, few of them managed to stick around.
Tesla, on the other hand, has not only survived, but it has also managed to reach 50,000 deliveries in 2015—something other car startups could only dream of.
In 2015, Tesla delivered a total of 50,580 electric cars. In November, Tesla’s CEO, Elon Musk, said the company was expecting total delivery to be between 50,000 and 52,000. In the fourth quarter alone, Tesla delivered 17,400 cars, a big improvement over the previous quarter’s 11,603. In the fourth quarter, the company also delivered 208 “Model X” vehicles, the much-anticipated electric SUV and the first of its kind from Tesla. (Source: “Tesla Barely Hits Q4 Goal Amid Cautious Start for Model X,” MarketWatch, January 4, 2016.)
Let’s not forget that Tesla could bring an affordable mass market car to the table in the near future, too. Right now, all Tesla’s offerings are quite expensive, with the “Model S” and the Model X starting at around $70,000.
How much will the more affordable “Model 3” cost? Well, Elon Musk has tweeted that the new car would start at around $35,000, before government incentives. After the federal tax credit, the car could cost as low as $27,500, and you get all the running cost savings of owning an electric vehicle, too (no gas bills, less maintenance, etc.).
While the Model 3 is going to be the relatively cheaper Tesla by price tag, the company will not compromise on its performance. The mass market car is expected to accelerate from zero to 60 miles per hour in just 4.1 seconds—that’s proper sports car performance! It would also have a range of 200 miles.
The Bottom Line on TSLA Stock
Of course, the road will not always be smooth for Tesla. Like pioneers in any industry, research and development will be expensive and there might be glitches and problems for newly released models. But this shouldn’t affect the enthusiasm of Tesla’s fans, as the company continues to work on these issues and provide firmware updates.
Having said that, owners of TSLA stock should definitely keep an eye on competitors like Faraday Future.