5 Disruptive Reasons To Buy Tesla Motors


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Tesla Motors is a disruptive game-changer in many ways. This slideshow walks you through the 5 biggest reasons to buy Tesla shares today, including the 1 radical move that made Fool analyst Anders Bylund pull the trigger.

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5 Disruptive Reasons To Buy Tesla Motors

  1. 1. 5 Disruptive Reasons to Buy Tesla Motors
  2. 2. I bought my first Tesla Motors shares last week... Here are the 5 biggest reasons why. Tesla Model S debuts in the U.K. Image source: Tesla Motors.
  3. 3. The big Tesla thesis: Disruptive innovation Auto maker veterans in Detroit, Japan, and Germany are losing sleep over Tesla. Tesla disrupts long-established business practices in many ways. Let’s start with Tesla’s 4 most shocking innovations.
  4. 4. #1: Lean, mean research machine Image source: Tesla Motors.
  5. 5. Quick, cheap, great – choose any 3! • Tesla developed Model S in 2 years on a $650 million budget. • This is cheaper and faster than a big automaker like Toyota or Ford developing a new model or major redesign. • Foolish auto expert John Rosevear notes that the savings aren’t huge, and quality startups are expected to work this way… but “Tesla does deserve big props for what they did. It's totally unprecedented for a startup car company to deliver a vehicle that can compete on quality and price with the likes of BMW and Mercedes, never mind the electric powertrain.” • “Their real achievement was to assemble the team and resources that could deliver a car that is fully competitive with the big car companies' products,” Rosevear said. • Not only competitive, but excellent. Consumer Reports called Model S “The best car ever tested.”
  6. 6. #2: Factory-direct sales Image source: Tesla Motors.
  7. 7. Why is this a big deal? • Tesla doesn’t have a network of car dealerships. • You’re likely to find your local Tesla store in a shopping center or mall – not surrounded by oceans of inventory-storage parking spaces. • Buyers can’t haggle about prices and features, and Tesla stores don’t sell used cars. Trade-ins are handed over to AutoNation’s used-car network. • Direct-from-factory sales is a more efficient model. • Tesla’s simple buying experience is making waves in the auto industry. • The company faces lawsuits and tailor-made legislation to protect the old dealership strategy.
  8. 8. #3: Free fuel for life Image source: Tesla Motors.
  9. 9. Free fuel? Really? • “At a Supercharger, a Model S can get half a charge in as little as 20 minutes, allowing for long-distance travel without having to pay a cent for gas (or, now that we mention it, electricity). By charging only at Superchargers, Model S owners can drive for free, forever.” • Tesla already has 100 Supercharger stations worldwide. • By the end of 2015, Tesla expects to have 98% of the U.S. population within 100 miles of a Supercharger station. • That’s just the beginning. Tesla is joining forces with Nissan and BMW to create industry-wide charging standards. • 100 stations isn’t much, but Tesla’s ultimate coverage goals are game-changing.
  10. 10. How does this help Tesla? • Free fuel is a major selling point. • Replacing my own Nissan Maxima with a bare-bones Tesla Model S would cost about $63,000 today. • At current gas prices and driving habits, free charging would make up for that sticker shock in about 22 years… again, assuming that gas prices stay firm for 2 decades. • Tesla plans far cheaper models in coming years, aiming for $30,000 per vehicle in 2017. • Soon enough, you’ll be able to save money in the long term by choosing an electric vehicle and using free Supercharger power.
  11. 11. #4: Brilliant management Elon Musk, left, on NASA TV in 2012. Image source: Wikimedia Commons.
  12. 12. How clever is CEO Elon Musk, really? • Once upon a time, Elon Musk co-founded the disruptive PayPal online payment business. • Musk made $200 million when eBay bought out PayPal… and poured it all into Tesla and spaceship developer SpaceX. • He risked his entire fortune, living off loans for a while. • Today, Tesla has made Musk a billionaire and SpaceX vessels have delivered multiple payloads to the International Space Station. • Through Tesla, Musk wants to change how we drive -- more on that in a minute. In SpaceX, he wants to make space exploration affordable and commonplace. • And it that weren’t enough, he’s using SolarCity to promote sun- powered energy for corporations and consumers .
  13. 13. Proof is in the pudding: Musk’s radical ideas are paying off. Early Tesla investors have enjoyed nearly 900% gains in 4 years. Tesla’s gross margins passed BMW and Toyota over the last year, and are now second only to Honda among major auto makers. Tesla expects to report sustainable profits as soon as in 2014.
  14. 14. #5: It’s not all about the money Image source: Tesla Motors.
  15. 15. Tesla’s vision is bigger than making billions for shareholders • Don’t get me wrong – I love big returns on my investments. • But the best companies don’t start with profit goals and add strategy later. It’s the other way around. • "Our goal when we created Tesla a decade ago was the same as it is today: to drive the world’s transition to electric mobility by bringing a full range of increasingly affordable electric cars to market.“ • That’s Tesla CEO Elon Musk, explaining how Tesla makes the world a better place. • That minuscule market share you just saw means a huge opportunity to do better.
  16. 16. The final straw: • Last week, Tesla opened up its patent portfolio to the whole industry. • Elon Musk promised not to sue others for using his patents on batteries, power trains, and more. • “If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to [the long-term goal of taking gasoline cars off the streets],” Musk said. • “It is impossible for Tesla to build electric cars fast enough to address the carbon crisis. By the same token, it means the market is enormous. Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.” • “We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.”
  17. 17. …and that’s a wrap! • Wall Street saw Tesla’s open patent book as a sign of weakness, and shares fell 5% that day. • That was exactly the wrong reaction. • Tesla is indeed creating competition for itself where there was none before, but will also grow the total electric car market dramatically faster. • Going mainstream never hurt anybody, except maybe a few indie rock bands. I saw the final buy-in signal I needed, and opened a brand new position in Tesla the same afternoon. • Analysts and investors have since reconsidered, helped along the way by BMW and Nissan jumping on Tesla’s bandwagon. • My Tesla shares have already gained 13%... And I plan to own this terrific company for many years.
  18. 18. One more thing… • You just found 5 big reasons to buy Tesla, as the electric car pioneer disrupts the auto industry. • Tesla’s risks are another story. • Fool analyst Sean Williams recently shorted Tesla shares. For the bearish side of the story, you can read up on the 5 things Sean hates about Tesla. • Tesla makes up about 5% of my portfolio now, and I’m in for the long haul. This is the right strategy for me. • But your mileage may vary. • Gamblers bet on stocks. Investors invest. That means doing your homework.
  19. 19. Warren Buffett’s worst auto industry nightmare. (Hint: it isn’t Tesla!)