Tesla Inc’s (TSLA) stock has taken a tumble over the last few week, falling almost 30% since January 26.That’s hundreds of billions of dollars wiped off the value of one company in a matter of weeks.
Other stocks int he sector took a similar beating, such as Nikola (NKLA) and Nio Limited (NIO). They are all substantially off their recent high’s also.That may be partly due to the tech sector sell-off following last year’s monster rally.
Will Tesla Stay Triumphant in the EV Market?
What it doesn’t mean is the electric vehicle (EV) party is over, according to recent research from Swiss bank UBS. The real question is who will win, and for many people that question can be rephrased as “Will Tesla be triumphant longer-term?”
The good news for EV fans is the industry is set to grow far larger than it is now.
“The EV trend is supported by long-term technological and environmental shifts,” the UBS report states.
UBS notes that EV sales were up 43% in 2020 while the auto market itself fell 15% over the same period. EV’s now make up 4.2% of the total market.
But that market share will likely be 100% faster than most people can imagine. That will ultimately mean that the market will be more than 20 times greater than it is now.
T.I.N.A. to Ditching Internal Combustion Engines
That’s because “there is no alternative” for auto manufacturers other than ditching fossil fuel engines in favor going electric in various ways. Alternatives include battery vehicles, fuel cell vehicles and hybrid vehicles that can be plugged into the electrical grid, the report says.
What isn’t viable long term are Diesel or gasoline-powered cars/light trucks.
The lack of alternative to EVs explains why the heavy hitters in the auto industry are planning to tackle Tesla and other upstarts head-on. The report explains the matter as follows:
“This move toward electric has also been embraced by traditional automakers such as Volkswagen, which has pledged investment of over EUR 50bn in its EV strategy as it aims to catch up with Tesla.”That’s a lot of moolah and it matters because when VW wants to do something it does it.
Tesla’s Competition is Growing Fast
The German company managed to survive WWII and then brutal European Union regulations of every shape and form. More recently, the Diesel emissions scandal which ended more than half a decade ago in 2015, does not seem to have hurt the company’s brand reputation.
VW not only owns the VW marque but also Seat, Audi, Bentley, Lamborghini, Porsche and Skoda, plus other brands.
They are the type of competitor no one really wants to find themselves pitted against. They also aren’t the only one looking to go electric. Every major auto manufacturer sees the writing on the wall regarding internal combustion engines and they knew electric is the future..
That’s bad news for upstart companies like Tesla or Nio because they will see increasing competition from industry heavy weights which have both financial power and huge marketing budgets.
UBS warns investors not to put all their eggs in a single basket when it comes to EV stocks.
“We advise investors to invest in a broadly diversified selection of stocks in order to minimize company- and technology-specific risks,” the UBS report states.
In other words, don’t bet the farm on a single EV stock, whether its Tesla or Nio or indeed any single company in the space.