Tesla, Inc. (NASDAQ:TSLA) is one of the most controversial companies in the public market today. Bulls point out that the electric-vehicle leader is poised for massive revenue and profit growth as the world gradually weans itself off fossil fuels. Bears point out that the company is still burning through capital, and that its stock is insanely overvalued using any traditional valuation metric.
Tesla Stock Surges
Tesla struggled through the first half of 2019, amid doubts over consumer demand and whether or not the company could achieve profitability. But the stock bounced back in the second half of the year following a surprise profit in the third quarter of 2019, hitting a bevy of new all-time high share prices and reporting profits in both the third and fourth quarters.
Tesla Model 3 sales also remained strong across multiple regions. Over this time, Tesla shares broke through several barriers, including the once-famed $420 stock price quoted by CEO Elon Musk during his short-lived attempt to take Tesla private back in 2018.
Earlier this year, Tesla became the first U.S. automaker to hit a $100 billion market cap. That’s now grown to $140.5 billion—almost twice the combined size of rival automakers General Motors ($48 billion) and Ford ($36 billion). Only Toyota has a higher market cap at this point.
This new milestone, which was augmented by recent breakthroughs such as the start of local Made-in-China Model 3 production and deliveries in Giga Shanghai, only helped push TSLA stock further, culminating in last Monday’s massive 19.89% surge.
Elon Musk is the company’s biggest shareholder and last Monday’s share price gain pushed his net worth to $39.3 billion, Forbes estimates.
Tesla’s competitors play catch-up on electric batteries
Tesla’s experience in building electric vehicle battery packs is helping the electric car company extend its lead over other automakers, according to a new report. Last year, the Gigafactory manufactured battery packs to power more than 365,000 new Tesla vehicles, with most of them for Model 3.
Cairn Energy Research Advisors, a consulting firm specializing in electric vehicle battery research, says the cost of a cylindrical cell battery pack dropped to $158.27 per kilowatt-hour last year, down by more than $100 per kWh from four years ago.
Tesla is the only automaker to use cylindrical battery cells in its battery packs. Other automakers use battery packs that include pouch or prismatic battery cells. Those battery packs cost, on average, more than $200 per kWh in 2019, according to Cairn.
Low Cost Marketing
For better or worse, Tesla has a knack for making headlines. Every move Tesla makes is covered in extreme detail by the media, which provides the company with an unbelievable amount of free advertising. It also doesn’t hurt that CEO Elon Musk has a cult-like following and boasts more than 14.4 million Twitter followers. All this attention makes it incredibly easy for the company to quickly get the word out when new products become available and drum up huge amounts of demand for its products (witness the 400,000 pre-orders for the Model 3). That’s quite impressive for a company that spends less than $50 million on marketing, promotional and advertising costs per year.
By contrast, traditional auto manufacturers like General Motors, Ford, and Toyota still have to spend billions each year on advertising to get the word out and create demand for their products. We think that gives Tesla an enormously powerful and underappreciated advantage.
Ridiculously Loyal Consumers
Consider a recent survey by Consumer Reports that ranked Tesla first among all automakers in terms of owner satisfaction. CR‘s data showed that a stunning 91% of Tesla owners surveyed said they would purchase the same vehicle if they had it to do all over again.. That result was 7 percentage points ahead of its next closest competitor.
Or how about the company’s Net Promoter Score? According to indexnps.com, Tesla comes in first among auto brands with a net promoter score of 96. This number, which represents how often consumers would recommend a brand to others, is excellent in absolute terms and it ranks a full 12 points ahead of its closest competitor.
Potential Gigafactory in Texas?
Elon Musk is pondering on building a Gigafactory in Texas and the CEO wants to find out what the electric car community on Twitter thinks of the possible next big move for the electric carmaker. Musk started a poll late Tuesday night and gave the Twitterverse two options: “Hell yeah” and “Nope.” The poll had garnered over 305,000 votes with around 80% of respondents being in favor of building the new Gigafactory in the Lone Star state.
Giga Texas would be Tesla’s fifth Gigafactory, and while many believe the nomenclature is perfect for the state where everything is bigger, many are wondering why Musk would consider building a factory in a state where the direct sale of its vehicles is not allowed. A bill was even pushed once to prohibit the electric car manufacturer from servicing its vehicles in the state.
Giga Texas?— Elon Musk (@elonmusk) February 5, 2020
During the Q4 2019 earnings call, Musk explained that Tesla needs to make sure it has the batteries to make cars that are already on its lineup. “We got to scale battery production to crazy levels that people cannot even fathom today. That’s the real problem,” the chief executive of Tesla said.
Giga Texas might be the solution to this problem. It can also be the perfect place to ramp the production of the Cybertruck, whose Tri-Motor version is set to hit production by 2021. With Giga Texas, the Fremont factory will not have to handle additional pressure as it already produces the Model S, Model X, Model 3, and the much-awaited Model Y crossover. Ultimately, penetrating Texas is setting foot in the heart of the country’s biggest oil producers and refineries, and that’s quite a statement for Tesla.