Why I had to buy $30,000 in Tesla Stock. (TSLA)

In Investing by C.J. CatoLeave a Comment

These are 15 reasons why I had to invest in Tesla.

1. Electric Vehicle (EV) Expansion
Clearly electric vehicles are trending upward with a near doubling of market share in major markets over the last 3 years. This of course also means internal combustion engine (ICE) vehicles are losing market share. That alone is reason to start seeking out the company with the best EV advantage.

2. Government Mandates
Many countries want to see gas burning engines off the road entirely, especially in congested cities where it can affect air quality. China (the largest EV market in the World) is trying to make all new cars sold in China electric by 2030. They are doing it through mandates and by offering subsidies.

France similarly has set a goal of all new cars sold by 2040 being electric and the banning of petrol powered vehicles in Paris by 2030. They too are offering government subsidies of $6,000-$7,000 Euros when purchasing an EV. And it’s not just countries, but companies stating they will move to EV soon, Lyft just announced they are going to go all electric by 2030, and Amazon has plans to switchover as well.

Source: iCET

3. Price Reductions
I think of Tesla more as a technology company than a car company, and when I think of technology I think about better performance per dollar over time. Just a few years ago Tesla offered cars with 200 miles of range, now you can get cars with over 400 miles of range, and rumors of 500-600 miles coming soon. I expect batteries will last longer and provide better range (batteries are estimated to be over 20% of the vehicle cost) while costing around the same or even lowering in price, A.I. hardware too will get better without getting more expensive, and manufacturing costs will drop for everything as production lines grow larger.

My expectation is that Tesla’s vehicles will outperform any similarly priced internal combustion vehicle very shortly, and in practically every way. Once this reduction in cost becomes significantly less than internal combustion vehicles, that will be the end of them, like the horse and buggy they shall go.

4. Batteries
Batteries may not sound exciting but this is really the tipping point that is going to get EVs to take off. If Tesla can get the price of it’s vehicles equal to or lower than petrol powered cars AND create batteries that last the life of the car, then the savings are incredible. It would mean you could buy an EV for the price of a regular car, charge it for half the cost of gasoline for the entire life of the vehicle, and never have to pay to replace the batteries. At that point it’s just impractical to own an ICE vehicle anymore. What if a battery that with only 6 minutes of charging could go 100 miles… we’re already doing that. Now imagine that getting better and faster every year going forward; why would you choose gas?

So not only does Tesla have a competitive advantage against ICE manufacturers, it also has an advantage against other EV manufacturers because it makes many of its own batteries. Not paying a 3rd party to make those batteries because you do it yourself? Priceless. It gets even better on the battery side. It could become that when you trade your car in, that the battery still having 90% of it’s life left could be used in a new car, saving the buyer thousands… or maybe it’s used to power a house for a couple decades when it’s connected to a solar roof. And when it is finally worn out Tesla will have the ability to harvest the infinitely recyclable metals from the batteries themselves at a fraction of the cost of mining.

5. Self-Driving
So most people still think this is a pipe dream, but not Elon Musk. Autonomous vehicles are not far off and Tesla seems to be at the leading edge of the process. Tesla will continue to improve the technology and once approved by government agencies a whole new World of transportation begins. You might be thinking this is something Tesla has plans to release in 2030 of 2040; but the plan is actually 2021 or 2022. Now there are other Self-Driving systems being created right now… but Tesla is going the hard route so they can scale easier later.

Most companies are having roads scanned and mapped along with expensive lidar systems all around the car. Tesla is instead using visual information like humans do and creating a neural network A.I. system that figures out how to make decisions on the fly using camera systems. It won’t have to have a map… it will see the road… it will see the pedestrians… it will think, and also learn from every other Tesla on the road which adds to the Neural Net. People may not realize just how sophisticated the autopilot already being offered to the public is, see what the $7,000 option gets you below.

6. Robotaxis
It’s going to be pretty cool when your car can drive itself,,, reading a book during your morning commute might make it more relaxing than frustrating. But what about the 22 hours a day you’re not driving? What if you could tell your car to spend the whole day you’re at work or asleep (or asleep at work?) to go around town picking up and dropping off passengers for a fee and giving you a cut of the action? That’s the plan with Robotaxi… once all government regulations are met Tesla plans to wake up all it’s vehicles with an over the air update. Except this time it won’t be Skynet coming to kill all the humans, it will be autonomous taxis coming to drive us around.

7. Robo-delivery
Tesla hasn’t announced this but it seems probable. The new Cybertruck also has all the self-driving hardware installed, and while maybe not suited to be used as a city Uber-like transporter… it sure would be a great way to transport “stuff.” I mean first of all the thing is literally bulletproof so your “Stuff” is safe. But more importantly if you have things to deliver wouldn’t it be nice not to need to rent a truck, or spend two hours behind the wheel. What if you could deliver a refrigerator 50 miles away by just using an app and loading it in the back? Whether it’s T.V.s or pizzas, I think “stuff” delivered by self driving vehicles is inevitable.

8. Tesla Semi
Tesla is already taking reservations for their upcoming Semi. Imagine companies no longer needing to pay for Diesel fuel. With a 500 mile range a semi for somewhere like Wal-Mart could make all it’s daily stops from the distribution center to it’s neighboring stores on a single charge. And that’s just the beginning… the Semis are going too end up driving themselves at some point as they are all equipped with the autonomous driving hardware and sensors. If you’re a company would you rather pay $150,000 for a gas powered semi-truck, or $200,000 for one that will save you $200,000 in fuel costs over the life of the vehicle and potentially $75,000 a year in driver salaries, FICA, insurance, etc?


9. Vertical Integration
Don’t overlook the power of this one as this is the whole reason Tesla is a decade ahead of everyone else to start with. Let’s think about Apple for a minute and what they did right with the iPhone. I think the thing Apple really got right was doing as much in house as possible. They created their own processors, operating system, and apps. They vertically integrated the things they wanted to have control over and it gave them much more flexibility with both the product experience and pricing.

Now let’s look at Tesla; they make their own chips, their own batteries, their own code, their own A.I. When you look at their competition they are using a hodgepodge of 3rd party parts… they might use a repurposed NVidia video card made for video games (not even joking) for their autonomous driving hardware, a battery from LG, electric motors from another company, codes written from different manufacturers fused together to try and work as one, it’s a mess. If Tesla wants to tweak anything they have full control.

10. Solar Power
If you don’t know already Tesla is actually an energy company. You can order a solar roof for your house with your credit card at the same time you buy a new car. So they have not only expertise in Electric cars, but the batteries needed to power them, and potentially the solar receptor to power the battery. What the heck am I talking about? An option on the upcoming Cybertruck is a Solar roof that adds 15 miles a day of mileage; so if you only drive 100 miles a week you may never need to charge.

It’s not hard to imagine that as the technology improves this could become 30 miles a day, which means many people would rarely have to charge their cars at all with an outlet. Saving them thousands in energy costs. Fuel for your car could eventually come almost entirely from a power plant 93 million miles away!

11. Factories
Tesla is actively building more factories to meet the upcoming EV demand for vehicles and batteries. They already have massive factories in California, Shanghai, and the Netherlands They are also nearly finished with their Berlin factory and it is rumored that a new factory (possibly for the Cyber Truck) will be built in Austin, TX.

12. Performance
It’s pretty apparent that Elon Musk’s goal is not to catch up to ICE vehicles performance wise, but to absolutely embarrass them. I mean the model 3 is running a ridiculous 11.7 in the 1/4 mile, and it’s a 4 door commuter that weighs 2 tons… that’s faster than a Porsche Cayman. The Tesla Roadster that’s coming out next year has a 0-60 time of 1.9 seconds… on the base model. The Lamborghini Huracan goes from 0-60 in 2.4 seconds, has a top speed of 202 mph  and costs over $200,000… While next year’s Tesla Roadster does over 250 mph, and costs less. And that’s BEFORE the optional ROCKET THRUSTERS… I’m not even kidding. I know it sounds crazy, but we are talking about the CEO of SpaceX here, so rockets are kind of his thing.

 

13. Dependability
The average Internal Combustion Engine has over 200 different parts, while a Tesla motor has less than 20. That’s a whole lot less to go wrong and a whole lot less to fix when it does. And with Tesla now designing batteries to go over 1 million miles I think these vehicles will be much more dependable than their ICE counterparts that typically hit the junkyard before 200,000 miles.

14. Parts, Service, and Maintenance
For the average auto manufacturer Parts, Service, and Maintenance make up 30% of their revenue. With Tesla’s 8 year power-train warranty they’ve had to pay out of pocket for almost everything. Maintenance has been a giant liability. But as warranties expire what was once a liability will become yet another profit center.

15. No Dealerships or Advertising
Tesla doesn’t have all the overhead associated with dealerships or salespeople; you order one and it’s shipped out. If you want to see a Tesla you just go to a showroom and check it out. They also don’t have to pay for ads to run on T.V., Facebook, Google, and radio stations like other car companies, because demand for their vehicles is already higher than the supply. Win-Win!

So What’s my position on Tesla (TSLA) Stock?
Currently I have $30,000 invested in Tesla at an average price paid of $903 per share. Long term I’m bullish and think this may very well be the Apple or Amazon of the Auto World… BUT… I’m a little gun shy in the short run. Tesla can be very volatile and who knows what Roni-Rona is going to do for the rest of the year, so I have put some downside protection in place so that if there is a pullback to under $900 I will automatically sell half my holding using stop limit orders, and then try to get in at a cheaper price later.

On the other hand the stock may never see $900 again… there’s really no way to know. It was after all, just $200 a share a year ago. But long term I am bullish. I consider this $30,000 investment 50% of my buy in as I plan to dollar-cost-average an additional $30,000 into this stock over the next 18 months.

Watch a Tesla Model 3 Drive on Autopilot.