Can Tesla Deliver on Its Promises This Time?TSLA) performed very well in 2015, and is off to a decent start this year. At present, Tesla and its major rivals are focused on the driverless cars technology. While not a traditional car manufacturer, Alphabet holds the leading position in the market and is the closest to bring driverless car technology to reality. According to a recent report from California Department of Motor Vehicles, Alphabet has the utmost number of test permits for driverless cars – 73 permits, followed by Tesla Motors at the second position with just 8 test permits.
On the contrary, Tesla (TSLA) is very close to revealing its mainstream reasonably priced Model 3 at an event to be held in California.
Price is the most important and critical factor that will decide whether Tesla can reach its aim of 500,00 vehicles each year by 2020. Apart from price, one more factor that will have terrific influence on Tesla’s Model 3 is service.
For beginners, Tesla’s service substructure will require to be intensely expanded ahead of the launch. As per the yearly report in December 2015, the company possessed and operated 118 service locations worldwide. Tesla delivered an aggregate total of around 107,000 Model S cars, excluding the cars manufactured and delivered this year. Tesla lingers to enlarge its service network, but has not delivered information on the scope quite yet.
Furthermore, let’s assume that Tesla’s expansion tactics are comparatively destructive and that it can successfully manage the projected volume surge. The company is focusing aggressively on it superior service experience, which would suffer if the substructure cannot handle the volume.
While still speculative, I think Tesla can manage t deliver on its target this time. Tesla will continue growing at a 50% clip, which is enough to sustain its present valuation. Unless there is a major error from Tesla's part, I think the stock can has limited downside despite its seemingly rich valuation. Investors with an appetite for risk can consider buying Tesla as a speculative long-term investment.
Disclosure: No position in any of the stocks mentioned in the article.
Published on Mar 21, 2016By Akshansh Gandhi