Self-Driving Cars a Big Win for TSLA Stock
Tesla Motors, Inc. (NASDAQ:TSLA) is getting ready for a face-off with Alphabet Inc (NASDAQ:GOOG) and it may be a winner-take-all kind of fight. There’s a lot of room for growth in Tesla stock, but only if the company comes out on top. If I were a betting man, my money would be on TSLA stock, because Elon Musk knows how to win.
Don’t get me wrong, Google has been enormously successful in its self-driving endeavors, but the firm may not be equipped to take on Tesla. Elon Musk has thought the endgame through and he started laying the groundwork for this fight more than a year ago.
Ultimately, it doesn’t matter which firm perfects driverless technology first. Google may have started the trend, but that doesn’t grant it a natural monopoly on the industry. Have you seen the Google prototype? It’s hideous.
Only a handful of customers will deliberately buy a car for its self-driving technology. Everybody else will simply gravitate to a car that meets all of their needs and has a driverless feature embedded in its software. It will be the icing on the cake, not the cake itself. Of course, appearance will play a role as well.
Google Car Doesn’t Stand a Chance Against Tesla
The idea that someone with a regular job and bills to pay will suddenly dish out tens of thousands of dollars for a Google car simply because it’s self-driving is absurd. People have other things on their checklist when shopping for a vehicle and those reasons don’t suddenly disappear.
Originally, Google was using existing vehicles like the Toyota “Prius” and Lexus “RX450h,” but the development team kept running into issues. As a result, the company decided the route to an industry-standard self-driving car was through original design (which I agree with). Google works best when its employees get a chance to reinvent the wheel. (Source: “Google Self-Driving Car Project,” Google web site, last accessed December 10, 2015.)
They took out the pedals, they took out the steering wheel—in fact, the interior barely resembles a car anymore. The car’s exterior is shaped to give its sensors the widest field of view, which is practical, but not necessarily a wise design choice when it comes to appearance. After all, a lot of people care about how their car looks.
Elon Musk understood that when forming Tesla, which is why the “Model S” looks so different from all the electric cars that came before it; he knew that Tesla had to satisfy all its customers’ preferences.
Then there’s the lack of pedals and steering wheels in the Google car. Once again, it’s an efficient move, but not one that is marketable to consumers at this time. It’s one thing to buy a self-driving car when you will be sitting in the driver’s seat, ready to take over if the software fails. But sitting in the back with nobody else in front of a wheel is a different matter all together. People can get anxious in that situation.
Tesla Stock Could Still be Undervalued
By contrast, Elon Musk is several steps ahead of Google. Last year, in October of 2014, Tesla added sensors, sonar, and GPS to its outgoing fleet of Model S cars. A year later, the company performed a software update to beta test its “Autopilot” function on a few hundred cars. (Source: “With New Software Rollout, Tesla Accelerates Toward Fully Self-Driving Cars,” Re/Code, October 14, 2015.)
Soon after the update, people were posting videos of themselves being driven by their cars. The Tesla Model S can drive in traffic and even change lanes without any instruction from a driver. It’s not a complete implementation of driverless technology yet, but that hardly matters.
Elon Musk demonstrated that Tesla’s competitive edge in the self-driving space comes from its seamless integration with existing Tesla users. There was no retrofitting of cars or releasing special editions; the company just performed a standard update and suddenly, the feature was available.