Tesla is winning the battle of attrition in the electric-vehicle market.
“For years, investors have been concerned that Tesla must eventually face a wave" of competing all-electric vehicles that would "substantially erode its market and competitive position,” wrote Morgan Stanley analyst Adam Jonas.
“Here we are more than seven years after the Model S launch and, while there have indeed been new product introductions from the likes of Jaguar, Porsche and VW," the state of play in the market remains fairly peripheral," Jonas wrote. Global automakers such as Toyota and Ford don't even sell all-electric vehicles, he added.
Additionally, a number of electric-vehicle makers have found their business models in question in recent weeks, according to Jonas. He points to Nio, Dyson, Harley-Davidson and Faraday Future as evidence.
Nio, often referred to as the “Tesla of China,” has been burning through cash and last month was forced to raise $200 million from CEO William Li and the Chinese gaming giant Tencent, one of its largest shareholders. The company struggled to keep up with its delivery targets in the past, though it topped them in the third quarter. Shares have lost more than 75 percent of their value this year.
Meanwhile, Dyson, the high-end vacuum and luxury appliance maker, last week killed its $3.1 billion electric-car project, with founder Sir James Dyson saying he “simply can no longer see a way to make it commercially viable.”
And on Monday, Harley-Davidson announced it was temporarily idling production of its $30,000 electric motorcycle LiveWire due to battery-charging problems. The production stoppage is a blow to Harley, which is counting on the motorcycle to help rejuvenate sales. Additionally, Jia Yueting, founder of the Chinese electric-car maker Faraday Future, filed for Chapter 11 bankruptcy protection with liabilities of up to $3.6 billion.
That’s not to say that Tesla hasn’t had its share of problems. The electric-vehicle maker has been burning through cash at a scorching pace. The third and fourth quarters of 2018 were the only time Tesla has posted back-to-back quarters of profitability, and even so, the company lost $2 billion last year.
On its second-quarter earnings call, CEO Elon Musk said he expects a return to profitability later this year.
“From a profitability standpoint, we expect to be probably around break-even this [third] quarter and profitable next quarter," he said. Tesla in its second quarter lost $408 million, down from $702 million the previous quarter.
Tesla has also had to navigate the go-private saga in which Musk, in August 2018, tweeted that he had secured funding to take the electric-vehicle maker private at $420 a share. Musk settled with the Securities and Exchange Commission in April of this year, agreeing to pay a fine and to step down as Tesla chairman.
According to InsideEVs, Tesla controlled about 78 percent of the all-electric car market in the U.S. through September, more than 10 times the portion of its next-biggest competitor, the Chevrolet Bolt, the analyst said. The sector is also referred to as the battery-electric vehicle, or BEV, market.
Jonas has an equal-weight rating on Tesla and a $230 price target – more than 10 percent below where shares settled on Monday.
Tesla is set to report its third-quarter earnings on Oct. 23. Analysts surveyed by IBES are expecting a loss of 41 cents a share on revenue of $6.37 billion. Shares have tumbled 21 percent this year.