Zacks Investment Ideas Feature Highlights: Tesla, Ford And General Motors

Audi has an electric A8 in development with a 2022 target date for release, but it’s rumored that its partner Porsche might use the same technology to have an all-electric big sedan, similar to the current Panamera, on the market by 2020.

The most immediate competitor to the Tesla Model S is the upcoming Mercedes Benz EQ-S.  As part of Mercedes Benz’ goals to introduce 10 new “electrified” (meaning a combination of hybrid and fully-electric) models by 2022, this week they introduced the flagship EQ-S, aimed squarely at the Tesla Model S.  Similar in size, range and price, this is likely to be Tesla’s closest competitor in the luxury class.

It makes sense to point out that Tesla has been selling the popular Model S for six years and the closest competition is still 2-4 years away.  That’s quite a head start.

Semi Trucks

While electric vehicles seem likely to grab significant market share in the consumer market by providing incrementally better performance and efficiency, Tesla and its competitors stand to completely revolutionize the market for heavy trucks.  With semi trucks rolling all over the U.S and the world every day (many logging hundreds of thousands of miles a year) virtually every operator would love to utilize trucks with significantly lower maintenance and fuel costs. The fuel savings alone could be $100,000/year or more for a long haul truck, potentially turning the Diesel industry on it’s head.  

Smaller electric trucks are already widely in use, especially in Asia, mainly for daily-route duty like garbage pickup and food service delivery.  

There are three main apparent competitors to Tesla’s planned all-electric semi.

Diesel giant Cummins (CMI) unveiled its own all electric truck last year just before Tesla’s big unveiling.  It’s offering is slightly different in that it’s a Class 7 vehicle, suitable for daily use as a delivery vehicle, rather than long hauls. Cummins also hinted at a potential future upgrade to a range in the area of 300 miles.

Startup company Thor Trucks is attempting to beat the Tesla semi to market with a similar Class 8 (long haul, 80,000-pound payload) vehicle with a range of 300 miles. Dubbed the “ET-One”, prototypes look similar to the Tesla, and the announced base price of $150,000 is also comparable.  With the huge potential market for semis, the growing pains associated with scaling production will be the biggest hurdle for this tiny new company.

Salt Lake City-based Nikola has taken dead aim at Tesla with its planned One Electric semi, slated for production in 2020. (Even the company’s name is a play on Tesla’s – Nikola Tesla, get it?) Their offering is powered by a combination of electric power and a hydrogen fuel cell, which promises to significantly expand the range beyond an all-electric powerplant. Nikola also recently took the publicity-grabbing step of returning customer deposits it had already taken while preserving those customers’ place in line, declaring that they never use customer deposits to fund operations - a clear dig at Tesla.

(See part 2 here for a discussion on Tesla’s reliance on customer deposits.)

Solar and Energy Storage Solutions

With its acquisition of Solar City, Tesla became more than just an automaker.  Though the merger was overwhelmingly approved by shareholders, Tesla was broadly criticized in the media for the assumption of almost $3M of debt – and from a company that was burning cash ever faster than Tesla.

The solar panel market is fiercely competitive. U.S. manufacturers have experienced low retail prices and a glut of supply thanks to foreign competition. Specific competitors are literally too numerous to name individually. A 30% tariff imposed on imported panels in January 2018 appears to have done little to improve the fortunes of domestic producers. (Interestingly, the tariff on imported washing machines, announced at the same time, got much more press coverage.) Tesla would be foolish to go head to head with the market on commodity items like panels.

Tesla is taking a different tack in the energy market and it’s consistent with the way they’ve approached automobiles.

The basic idea is that solar power and power storage are a perfect fit with electric cars. They’re betting on Tesla auto customers becoming Tesla power customers. The premise is simple, an affluent customer buys a Tesla car, covers her roof in Tesla panels, uses the sun to charge that car (and power the rest of the home) and stores power when the sun is not shining in a Tesla Powerwall.

It’s certainly a compelling narrative, but how often will it actually happen? That certainly remains to be seen. Solar panel installations fell 17% in 2017 over the prior year after 5 straight years of gains.

Tesla generates less than 10% of its revenues from energy solutions, so for the moment, these plans are definitely taking a back seat to vehicles.

Tesla has consistently beaten its competition to the punch, partly at the expense of manufacturing prowess. To stay relevant, they're going to have to keep beating them and get better at turning great ideas into real-world products.

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