Tesla Motors Inc (NASDAQ:TSLA) is the most talked about company on the market right now. The firm is the first ever to popularize an electric vehicle, and its share price has quintupled in the last year. The advantage that the company has built up against competitors in the electric vehicle market is substantial, but a new report suggests that it will not last forever.


Stifel Research initiated coverage on Tesla Motors Inc (NASDAQ:TSLA) recently, and the company’s first report on Tesla Motors Inc (NASDAQ:TSLA) came out yesterday. The report put a Hold rating on the electric car company. Reasons for the rating were complex and many, but one of the most significant was that the Tesla advantage may not last that long.

Low head start

According to the Stifel report, Tesla Motors Inc (NASDAQ:TSLA) battery technology, among other parts of its patent portfolio, gives the company an important head start, but it won’t last forever. Tesla success means that the big auto players are already investing heavily in technology to compete.

That, according to this report, means that Tesla Motors Inc (NASDAQ:TSLA) only has a 2-3 year head start on competitors in terms of technology. The company will be able to leverage that advantage in order to build its brand and invest in further improvements, but other companies are going to catch up.

Tesla success in integration

Tesla Motors Inc (NASDAQ:TSLA) will not beat out other car makers on its vehicle design alone, as improvements from other companies will begin to pull demand from the company and compress margins. Tesla Motors Inc (NASDAQ:TSLA) does have another up its sleeve, however, but it’s difficult to quantify right now.

Tesla is doing something that no other big car company has even tried properly. It’s attempting to control almost every part of its manufacturing and service process. One of the most important parts of its chain is the supercharger network, it’s efficacy, and financial effect, is unknowable according to Stifel. It is still one of the most important parts of the company.

Tesla Motors Inc (NASDAQ:TSLA) will not beat the market as a car maker according to Stifel’s report. Tesla can win as an integrated electric vehicle services company, beating other car makers by offering a product they haven’t even dreamed of. The risks, however, are massive and justify the Hold rating put on the company.