Tesla Motors Inc (TSLA) Need Not Be Compared To Dacia

Tesla Motors Inc (TSLA) Need Not Be Compared To Dacia
<a href="https://pixabay.com/users/Blomst/">Blomst</a> / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) and Renault SA (EPA:RNO) (OTCMKTS:RNSDF)’s market valuations are in the similar range. While the French company sold 2.63 million cars last year, the U.S. electric vehicle maker’s sales clocked 22,450 units. Zoltan Ban of Seeking Alpha notes that the Model S sales were similar to other electric brands such as Nissan leaf and Chevy Volt. Tesla’s revenue in 2013 was just over $2 billion, while Renault’s revenues were about $56 billion.

Tesla’s potential customer base is limited

Zoltan Ban says that investors looking for an automobile company that can increase its sales by more than 50% a year over the next decade should look at manufacturers that produce vehicles at $5,000-$10,000 price points. He argues that Tesla Motors Inc (NASDAQ:TSLA) will find it difficult to maintain that growth rate because it is targeting the top 1% with its Model S, and the potential customer base for such company is limited. Even if Tesla maintains its growth rate at 50%-55% a year, its annual sales will reach 500K units by 2020.

ValueWalk’s March 2021 Hedge Fund Update: Klarman, Loeb, Reddit And Much More

Nestle Dan Loeb Daniel Loeb third point capital hedge fund manager activist investor poison pen activism Yahoo corporate governance famous investorsWelcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring Seth Klarman and Dan Loeb's investment in Intel, losses and profits from Reddit's frenzy, and an analysis of hedge fund pay. Q4 Read More

In contrast, adds Zoltan, Renault SA (EPA:RNO) (OTCMKTS:RNSDF)’s Dacia Logan sells at just $11,000. It is targeting the lower middle-class in developed as well as developing markets. Dacia sales rose 46% in Europe in the first quarter this year. He says that the middle class in developing countries earns only a small fraction of those in the U.S. Therefore, the middle-class earners look for lower cost cars. Tesla Motors Inc (NASDAQ:TSLA)’s Model E, the third-generation car, is expected to hit the market at the base price of around $35,000. Even at this price, it would cater to those earning over $100K a year. So, Tesla’s potential customer base is limited, while Dacia has a vast customer base (may be in billions).

EV story is similar to the hybrid story

Ban goes on to argue that the EV story is no different from the hybrid car story we have already seen. In late 1990s, hybrid cars used to rule the market. But only 4.5 million hybrid cars were sold until 2012. In contrast, billions of gasoline or diesel-powered passenger cars were sold. Though Zoltan’s arguments seem to be logical, Tesla Motors Inc (NASDAQ:TSLA) shouldn’t be compared to Dacia. Elon Musk has no plans to produce a $10K vehicle. He is committed to making innovative, high-quality cars that redefine the user experience. Here is why we think the Palo Alto-based company should not be compared to Dacia:

Why you can’t compare Tesla to Dacia

Of course, there are fewer buyers for high-end cars. But they buy more often, and have multiple vehicles. Moreover, Tesla Motors Inc (NASDAQ:TSLA)’s electric vehicles are a lot more affordable than the price tag suggests. Just look at the savings on maintenance and gas, which makes an 85K Model S as affordable as a 40K gasoline-powered car. People have started realizing these savings. You can recharge your Model S for free at Supercharger Stations. Companies are now using Tesla vehicles for taxi cabs because they turn out to be cheaper than a gasoline taxi when they put up all those miles. And once the mass-market Model E comes out at 35K, it would be as affordable as a 15K gasoline vehicle.

As far as Zoltan’s argument about hybrid cars is concerned, data shows that electric vehicles’ growth rate is much higher than hybrid cars, and the biggest thing is there is no formidable challenger to Tesla Motors Inc (NASDAQ:TSLA). At this point, no major automaker has planned anything that would compete with Model E. The next generation Chevy Volt is expected to have a range of 50-60 miles, while the next-gen Nissan Leaf is supposed to offer 150 miles. In contrast, the Model E is expected to have a 200-mile range, better design, and more cargo room. Elon Musk will make sure that they bring something better than anything in the market in that price range.

On the other hand, Dacia caters to the low-end market, where dozens of rivals vie for the same consumers.

No posts to display