So if you didn’t notice, on Wednesday this week Tesla Inc. shares touched $1,134 leaving it with a market value of $209.47bn. That made the company more valuable than the world’s largest automaker Toyota. The firm is also now worth around three times the combined value of US rivals General Motors and Ford. And this is despite the fact that the company has been profitable only for the last 3 quarters and mostly been a loss making entity until now. And get this, all this was achieved in just over 10 years since its listing on NASDAQ in 2010 at $17 a share. Imagine investing in such a company. That’s what we are looking at today in a different blog than usual. Trying to find out how on earth a firm not only grabs the attention of the industry heavyweights but topples them in such a short time and how you should look for such firms as well.
Let’s go back a bit and see how it all unfolded and what actually made Tesla into the global phenomenon it is today.
Tesla came into being in 2003 and contrary to popular belief Elon Musk is not the founder/co-founder of the company. Rather it was founded by two Silicon Valley Engineers and Musk led the investment in the company initially and joined as head of board. Their first product, the Tesla Roadster was launched in 2008 and was a high performance electric sports car. The reason they went for a low volume product initially was being a very young company they could shed the existing stigma around electric vehicles (EVs) and benefit from the higher margins. Moreover it was very difficult for them to build a mass produced vehicle initially since they had no prior experience.During this time, Musk had also taken over as CEO.
Now in the 2010s is when the company really started to come alive. After going public and raising money in the process, it set out to build vehicles from scratch and scale up production. And after launching the Model S in 2012, there was no looking back. You see the biggest problem with electric cars was the range, the charging time and the lack of charging infrastructure. But Tesla knew that if they wanted to make electric cars mainstream they would have to sort these issues out. And they did so in some convincing fashion. Their cars had unheard of range of around 300 miles on a single charge, plus they were already building their supercharging network along the way. Keep in mind a supercharger can charge up to 50% in just 20 minutes. The company had redefined the ownership experience as well. Want to buy a Tesla? Just go on online and place a deposit on its website. Heck, the cars can even update themselves automatically and engineers can fix software issues remotely without even touching the car. Tesla doesn’t even have franchise dealerships like all other manufacturers and instead manages them on its own.
Fast forward to today, the company has 3 models on sale with a lot more to come including a commercial Semi-truck, it has the largest charging infrastructure in North America and Europe with over 17000 superchargers, and it is reporting record sales every quarter. The company has built its Gigafactory in partnership with Panasonic which would be capable of producing batteries for 500,000 cars a year, significantly lowering battery prices so that EVs can cost at par or even less than their gasoline alternatives. It has even ventured into the energy generation space building solar panel roofs for homes and developed its Powerwall for energy storage.The company even went open source and allowed anyone to use its patents. Even after 10 years it’s still the best electric car manufacturer. No one has been able to match its capabilities with giants like Audi, Volkswagen, Porsche ,etc. still building EVs that cost more and don’t deliver as much.
What Tesla has done is a brilliant example of exceptional execution and planning for a quality product that is required for the success of any young company. In that sense, you can’t really look at Tesla like just another hardware/car company they are much more than that. Some even argue that it’s much more of a tech company and has followed a similar trend of having negative earnings initially in return for much bigger profits in the future. The journey of Tesla and Musk is somewhat closely following what Steve Jobs did with Apple. You might argue it’s all easy to say with hindsight and we would have to agree with you. But that is not the point. The thing is, there is always someone trying to redefine what an industry can do or become. Look at what Mukesh Ambani is doing with Reliance and its Jio platform and how much it has grown in front of our eyes. Investors have lined up in front of his doorstep to have a piece of the cake.
You don’t have to turn around a company yourself like them. All you have to do is pay attention and keep an eye out. Because the best players are right in front of us but only the brightest of eyes can spot them.