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

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

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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.

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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.

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2 COMMENTS

  1. from a product perspective I’d love to own one of the next gen Tesla vehicles as I can see that running costs could compensate for higher purchase price. I want about 350 miles range to be comfy , but could live with a genuine 250 so I need another bump in that area but they are very close now.

    Oddly I currently own a Dacia Sandero which is essentially the same as the Logan but with a smaller boot – but again I bought this on a TCO basis. On a personal view therefore yes I think there is a reasonable comparison to be made between the companies as their markets will shortly overlap at least partially even though the products the offer are significantly different.

    However, from a stock perspective I personally think Tesla is over valued as they still have large execution risks with things like their battery plant and I dont believe they can scale production without large costs even if they do manage to address the mass market segments.

    Tesla bulls always seem very emotional about their investment case which to me is a big concern as they don’t appear to be willing to consider / accept any risk in future projections. They therefore value the company as high growth, high margin and low risk – I don’t accept that view.

  2. So they made 117 times as many vehicles for 28 times the
    revenue.

    What about market saturation if Dacia upped production
    by 50% a year, by 2020 they have to sell 440,000,000 units a year as opposed to
    500,000.

    Not to mention the plan for the model X, and the third
    generation model.

    Let me guess you’re short Tesla?

    This article brings to mind something the principle in Billy
    Madison said, “What you’ve just said is one of the most insanely idiotic things
    I have ever heard. At no point in your rambling, incoherent response were you
    even close to anything that could be considered a rational thought. Everyone in
    this room is now dumber for having listened to it.”

Comments are closed.