Tesla To Take On The World In 2021 After Claiming Stock
Market Title
The maker of electric cars has been steadily building up a
mountain of fresh capital for a pivotal year ahead. Over three secondary stock
offerings in 2019 alone, Tesla has raised $12 billion, with its cash balance
likely nearing $20 billion.
And while CEO Elon Musk is notoriously overly optimistic, he
will put investors' money where his mouth is. Tesla plans to double capital
spending in the next two years to $4.5 billion-$6 billion.
New Factories
"It's about execution in 2021 for Tesla," said
CFRA Research senior analyst Nelson Garrett. "Big things for them are
completion of the two factories under construction — one in Germany and the
other in Texas. They're operating on a very aggressive timeline to complete
construction and have first vehicle productions at both of those factories in
2021. If they accomplish that, it will be a very impressive feat."
The plant in Austin, Texas, will produce the much-hyped
Cybertruck. And as problems with the Model 3 showed, starting to mass produce a
new vehicle can be tricky.
And as if two new factories aren't enough, Nelson also
expects Tesla to announce the opening of a plant in India. On Monday, the
Indian Express reported that Tesla will begin operations in India early next
year.
Meanwhile, Tesla's factory in Shanghai will continue to play
a key role, producing cars for export overseas while serving the growing
Chinese market. Its presence there will be tested in 2021 as domestic players
such as BYD (BYDDF), Nio (NIO), Xpeng (XPEV) and Li Auto (LI) ramp up as well.
But as new capacity comes on line, questions will grow about
the future of the Fremont, Calif., plant, where production of the Model S sedan
and Model X SUV is shutting down from Dec. 24 to Jan. 11.
New Vehicles
Tesla is due to start production of its Cybertruck in late
2021. The single-motor Cybertruck will have a range of 250 miles per charge,
while a more expensive three-motor version will have a range of 500 miles.
The base cost of the Cybertruck is just under $40,000, while
the dual motor will cost around $50,000 and the three-motor version will cost
just under $70,000. But Tesla has said it doesn't expect to deliver the
Cybertruck until 2022.
Meanwhile, the Semi class 8 big-rig truck is also due to
begin production next year and be available in late 2021. The Semi will have a
price tag of around $200,000 and a range of 600 miles in a single charge. A
less-expensive version with a range of 300 miles will cost closer to $150,000.
As far as new vehicles, Musk has spoken repeatedly about a
model cheaper than the Model 3, which Third Bridge analyst Nick Shields views
as critical as more mass market automakers enter the space and release their
own competing models.
"While production and battery costs might make such a
model not very profitable, it is nonetheless arguably more critical for the
company than the Cybertruck or the Semi, which will also be top of mind for the
investment community," he said.
In fact, Tesla is working to reduce battery costs. In
September, Musk announced plans to develop a new battery that improves an
electric car's range and power while slashing the battery's cost.
Emerging Threats To Tesla Stock
The prospective competitive landscape changed radically when
Reuters reported this month that Apple could introduce a car as soon as 2024.
If Apple does get in the car business, it has "the
potential to be a transformative event for the industry over the decades to
come," Morgan Stanley analyst Adam Jonas wrote in a note Dec. 22.
"Apple's potential entry into autos represents perhaps
the most credible/formidable bear case for Tesla's stock that investors have
had to consider for some time," he added.
At the same time, traditional automakers and startups will
ramp up production of their EVs in 2021, which could put pressure on Tesla
stock as well as its sales.
Volkswagen launches its ID.4 in the U.S. in March, and the
first edition of Ford's (F) Mustang Mach-E electric SUV has sold out already
after launching earlier this month.
Tesla is likely to face fierce competition in the truck
space in 2021. Jonas said in a separate note he expects Tesla's Austin, Texas-made
EV pickup truck "to lead a flood of new EV entrants from startups and
established players in the segment."
Rivian's R1T should hit the market in early to mid-2021,
with a base price of $67,500. Ford's
electric version of the F-150 may come in 2021 with a $70,000 price tag.
Further out, General Motors (GM) is expected to begin
production of the electric Hummer truck at the end of 2021 with a base price of
more than $112,000. And Lordstown (RIDE) has said it's on track to begin
production of its electric pickup truck in September 2021.
Tesla Stock Wild Card: Autonomous Driving
Musk has been promising a fully autonomous vehicle for
years. Will 2021 be the year investors see it? The answer is a definite maybe.
"He normally makes good on his promises," said
CFRA's Nelson. "The problem is that they often don't come on the initial timeline
that he promised."
To some extent, Tesla stock is already pricing in some sort
of breakthrough, he noted. Still, it would be a major win if Tesla finally
unveiled a self-driving car next year.
"I can't say if it'll be in 2021 or after that, but they're
ahead of the competition on autonomous driving," he said. "It's an
enormous market opportunity if they are the ones to crack the code before any
of the other competitors." - Investors