The rise of Tesla & why they hold the reigns of the EV revolution (Part 2)
The Value of Tesla
Tesla’s stock market value has come in the past six months. Since November, the shares have more than doubled and experts and critics worldwide have been left astounded.
The company’s rapid growth has shot the value of Tesla’s stock to past $100bn. This is now more than the combined share value of Detroit’s royalty, General Motors and Ford. In addition, Tesla has also already surpassed the value of Volkswagen, once considered the company’s largest automaker and still the biggest car-maker by volume of cars.
The company (and CEO indeed) have still got many critics in the market and of course even more admirers but their actual value to the Automotive market is something no one can deny. Tesla on their own have effectively created a brand-new industry which due to their experience they dominate and will do so for years to come. Considering the fact, the company makes a pitiful number of cars (in terms of value and not quality) in comparison to its competitors, it may indeed seem a tad “unreal” to set a high valuation. The fact the company has often relied on investors, issuing new shares and creating debt since 2010, also enforces that notion of Tesla’s unrealistic valuation.
However, Tesla’s achievement to be able to not only penetrate one of the hardest markets in the world but actually take it over and become a key player is a testament to their pioneering vision, and undoubted understanding of markets and people’s future attitudes.
Most of the large players in the industry were proven to be relatively short-sighted in ignoring customer attitudes and trends which paved the path for innovative companies like Tesla. They in turn transformed the industry with disruptive (but effective) technologies and ideas which allowed them to revolutionize the market rather than simply take a “small piece of the cake”. Finally, Tesla have a very large, loyal (some may argue “cult-like”) customer following, and historically very little competition in their operating space. Their brand reputation, earning forecasts and market penetration are the driving factors before their fascinating valuation rise which analysts predict will continue for years to come.
Tesla’s Strategy to create Ecosystems
Tesla’s Master Plan carefully explains the company’s plan to not only create electric cars. It is evident their goal is to create a new market to support their products through an entire sustainable energy ecosystem. Elon Musk’s perception of sustainability is that it comes from disrupting the whole ecosystem rather than just reducing emissions from vehicles. As a result, Tesla has slowly but steadily acquired a variety of companies to complement its broader plan for a sustainable ecosystem that works within itself.
Companies like Powerwall, Powerpack and Solar Roof and projects such as SolarCity and the GigaFactory, enable homeowners, businesses, and utilities to manage renewable energy generation, storage, and consumption whilst enabling the company to expand their network.
All the above support Tesla’s automotive and energy products is Gigafactory 1 – a facility designed to significantly reduce battery cell costs. By bringing cell production in-house, Tesla can produce its own lithium batteries at the volumes required to meet production goals, while creating thousands of jobs.
Tesla has curated their product line in a very deliberate sequence that has enabled them to enter the market by capturing the early adopters. This allowed them to then focus on the mass market and truly impact the world by making their products reliable, high performance and affordable.
And some may argue that all this is just the beginning. With Tesla building its most affordable car yet and its heavy penetration in Europe and other markets worldwide, Tesla continues to make products accessible and affordable to more and more people. In this way they are not only growing they brand and subsequent valuation but also speeding up the advent of clean transport and clean energy production. Electric cars, batteries, and renewable energy generation and storage already exist independently, but when combined, they become even more powerful as Tesla have already proven to the world.
As we all know, there are no guarantees in Life and Business especially the Automotive industry. However, there is one reality we can all attest to. Tesla’s undeniable lead in tech is partly due to the company not being tied down to traditional automotive supply chains. The supply chains that have helped today’s auto giants grow are now beginning to hamper their ability to innovate. If their competitors do not employ similar tactics in the future, Tesla will only grow and take a larger part of the industry’s share.
Tesla have truly morphed from an over-ambitious start-up to an established industry player…and the story continues!
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