Every company in the world has its strengths and weaknesses. That isn’t the question. The question is, “Which one is greater?” Tesla Motors Inc (NASDAQ:TSLA) has generated a lot of excitement among its customers and among investors, too. Year-to-date, its stock is up about 215%, why wouldn’t investors be excited? Let’s dig a little bit deeper and find out if it’s really worth buying at this point.
Strengths
It’s electric. It’s not a hybrid like Toyota Motor Corporation (ADR) (NYSE:TM) has produced, and that fact alone should generate a lot of interest from potential buyers. Toyota Motor Corporation (ADR) (NYSE:TM) only sold 2,353 Toyota Prius’ in Q1 — not even half the amount of vehicles Tesla Motors Inc (NASDAQ:TSLA) sold. Because Tesla’s vehicles are fully electric, fuel filters, gas stations, smog checks, oil changes, spark plugs, and timing belts all become a thing of the past.
Gas mileage? What’s that?
Besides being fully electric, never needing to replace/maintain any of the issues listed above, and experiencing phenomenal sales last quarter, Tesla Motors Inc (NASDAQ:TSLA) is working to make its vehicles cheaper. Elon Musk’s three step process should ensure long-term profitability. In short, these three steps are: 1) Sell expensive, luxury cars, knowing not many will sell. 2) Sell cheaper luxury cars knowing that more people will buy them. 3) Sell affordable cars that virtually everyone can afford, and sell a lot of them.
Tesla is currently at the beginning of stage two, which means its cheap vehicles are yet to come. This could pose some serious competition for other automobile manufacturers, but it is certainly a strength of Tesla Motors Inc (NASDAQ:TSLA)’s.
Weaknesses
Unfortunately for Tesla, its biggest weakness has little to do with it as a company. That in and of itself is a weakness. However, if you read the reviews of current Tesla owners, the one thing that always sticks out is the battery life. Congratulations, Toyota Motor Corporation (ADR) (NYSE:TM), you win in this category. This is something the Toyota Prius hasn’t had to overcome much of up to this point.
It has to be frustrating to only be able to drive just over 200 miles (at highway speeds). However, Tesla Motors Inc (NASDAQ:TSLA) might have more control over this than one might think. If it can continue to grow and sell thousands of vehicles, someone, somewhere, will provide a solution to their problem. That’s how the free market society works. Someone will develop long-lasting batteries that Tesla can use, and make a lot of money off of it.
Even if technology doesn’t create a quick fix for battery life, the price should drop dramatically. In fact, a McKinsey analysis showed that lithium-ion batteries could fall by as much as 66% by 2020. While it is not expected for batteries to advance as quickly as smartphones or computers, small changes can make a huge difference. The ability to develop cheaper batteries may be the biggest factor in how popular electric vehicles become.
Right now, not everyone can afford one of its state of the art vehicles. Let’s face it, not everyone will pay $60,000-$90,000 for a car. Yes, it will save money over the long run, but a lot of people simply don’t have the money. Again, it will be rolling out cheaper models as time goes on, and I believe this will one day be a strength of Tesla Motors Inc (NASDAQ:TSLA).
Opportunity
Growth. I could go on and on about the opportunities that Tesla presents, but in short, it continues to have tremendous growth opportunities. The more vehicles it sells, the more people will be informed, and the more people will likely buy its vehicles.
