Though Tesla is a newcomer relative to the likes of Fiat Chrysler Automobiles and Ford, it has managed to surpass them in market capitalization. And though temporarily, Tesla’s market value also managed to exceed that of America’s largest carmaker currently, General Motors. All this happened despite the fact that Tesla sells far fewer vehicles than either of the three manufacturers. It also came at a time when Tesla is yet to realize a profit, when Ford and General Motors are all profitable.
Betting on the future
The reason for Tesla’s success in the eyes of the market has to do with the future where many investors see it as the car company with huge potential for growth. With regards to the number of units that Tesla sells, for instance, Tesla has a lot of room for growth.
At present the low number of units that it sells can be attributed to its limited global reach compared to more established rivals as well as the fact that it is only currently catering to the luxury car market. Additionally, it is only selling two models – Tesla Model S and Tesla Model X. Fiat Chrysler, Ford and General Motors, on the other hand, are hampered in this area since they are already represented in almost all car categories from sports utility vehicles to sedans to trucks. When the electric carmaker eventually starts producing mass-market cars and ventures into other categories, revenues are bound to increase.
Commercial transport sector
Tesla’s future plans include not just launching a mass-market car but also venturing into truck making. Later this year in September, Tesla will be branching to the commercial transport sector when it launches a prototype of driverless semi-truck (Class 8 trucks – 18 wheels). This move has been hailed by Morgan Stanley as being more lucrative than passenger cars since the addressable market is expansive. If the electric carmaker only managed to get one tenth of it, it would lead to a big bump in its annual revenues.
Diversifying into the commercial transport segment would also allow Tesla to participate in the market for product services which would allow the electric car maker to even pursue a new business line of leasing batteries. This is a potentially highly attractive for transport companies since they would be in a position to reduce their fuel costs by almost half. And even better for Tesla, all these new product lines would come at little research and development cost to Tesla since the company already has a big portion of the technology needed.