Tesla Motors’ (TSLA) Competition
The Easiest Investment Today
Should You Buy Equifax (EFX) Now?
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Longtime readers will remember that Tesla Motors (TSLA) was one of the market’s top performers back in 2013, zooming to gains of 344% as the company’s Model S sedan earned rave reviews.
Readers of my own advisory, Cabot Stock of the Month, know that since we bought the stock late in 2011—and haven’t sold yet—we’re sitting on gains of 692%.
But the stock has spent much of the past two years building a basing pattern, digesting that advance.
And now more and more companies are building electric cars!
So I thought I’d take some time today to review the competition, to see if Tesla, whose base model costs $75,000 and has a range of 240 miles, has anything to worry about on the competitive front.
For the record, I’m only considering pure electric vehicles here, which plug in to recharge. There are tons of hybrids out there, including the very popular Toyota Prius and the Chevy Volt, but those cars lack the simplicity of operation and maintenance that make electric cars so wonderful.
Tesla Competitors Today
Nissan Leaf – $29,010
Range: 84 miles
The Leaf is the world’s most popular electric car, with more than 200,000 vehicles sold worldwide since its debut five years ago. And now, the new 2016 model offers the option of a larger battery (starting at $34,200) that provides 107 miles of range. The Leaf looks a bit odd, with its bug-eye headlights that improve aerodynamics and a panel on the nose where you plug in, but its battery is located in the car’s floor, where its weight improves stability and handling, and its sales record proves Nissan knows what it’s doing.
Volkswagen e-Golf — $36,300
Range: 83 miles
The original Golf is one of the most popular cars in the world, and despite being nearly 400 pounds heavier than a gasoline-powered Golf, the electric version retains the brand’s responsive handling characteristics—which means it’s the best-handling of the “affordable” electric cars. Unusually, the e-Golf has an engine noise simulator so pedestrians can hear the car coming. And the car is only available in the 10 Zero Emission Vehicle (ZEV) states: California, Oregon, Maryland, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, Vermont and Maine, plus Washington, D.C.
Ford Focus Electric – $29,200
Range: 76 miles
Like the e-Golf, the Focus Electric is an existing model converted for pure electric, so it’s almost indistinguishable from the original. One drawback, however, is that the batteries take up some 40% of the car’s original trunk space. And, like the e-Golf, the car is not widely available; fewer than 5,000 have been sold since the car debuted four years ago. In industry jargon, these are “compliance” cars, sold to meet some legal requirement and not a serious effort to make money or gain market share.
Mercedes B-Class Electric – $42,400
Range: 82 miles
The smallest car available from Mercedes offers the luxury expected from the brand with a price to match. It has five real seats. Its powertrain is supplied by Tesla—though Mercedes has programmed the drive unit for comfort and efficiency rather than performance. Its battery is in the proper place (under the floor). And it’s available in all 50 states.
BMW i3 — $43,300
Range: 81 miles
The other high-priced contender comes from BMW, which apparently gave its designers free rein to create something that looked different. And they did; the i3 is short, tall and wide, with a space-age interior. So if you’re shopping in this price range, you can go conservative (Mercedes) or noticeably-different. Furthermore, because it’s built with aluminum and carbon fiber, the i3 is also the lightest mass market EV on the market. It’s a fun and fast car.
Chevrolet Spark EV — $26,000
Range: 82 miles
The tiny but fun Chevy Spark was a compliance car originally sold in California, Oregon and Maryland. But sales boomed earlier this year when Chevy cut the price (lease at $139 a month, no money down) and began advertising, and people discovered how much fun the car was to drive. Reportedly, Chevy’s experience marketing the Spark will pave the way for its launch of the mass market Bolt (see below).
Fiat 500e — $32,600
Range: 87 miles
Perhaps the cutest car of the bunch, and nearly as fun to drive in the city as the Chevy Spark, the Fiat 500e is only available in California and select ZEV states. Pity.
Kia Soul EV - $34,500
Range: 93 miles
With a mid-range price and better-than-average space and driving range, the Kia Soul is a good value, especially if you like the car’s style. It’s available in 10 states: California, Oregon, Washington, Georgia, Texas, Hawaii, New York, New Jersey, Connecticut and Maryland.
Smart Electric Drive – $25,750
Range: 68 miles
It seats only two people, but it’s available with a convertible top and you can park it almost anywhere. Just don’t plan on doing much highway driving. This is a city car, and it’s only available in California, Massachusetts, Maryland, Maine, New Jersey, Oregon and Rhode Island.
Mitsubishi i-MiEV – $23,800
Range: 62 miles
Its low price is probably its biggest attraction, unless you like the odd look and the odd name. The range speaks for itself.
Clearly, none of these is remotely “competitive” with the Tesla Model S. But there are new competitors on the way!
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Tesla Competitors on the Way
Chevrolet Bolt – $37,500
With a target range of 200 miles, the Bolt could be a huge seller, but it doesn’t exist yet. An unveiling is scheduled for the Consumer Electronics Show in January, and actual sales may start in late 2016, with supply reaching all 50 states within a year.
Faraday Future — $?????
With four Tesla veterans on its leadership team, a work force of 400, and plans to hit 500 by year-end, Los Angeles-based Faraday Future is aiming to build a car that’s even better than the Tesla Model S—better meaning 15% more power, more digital bells-and-whistles (aromatherapy?), and a revenue structure that’s closer to that of a smartphone. The sources of money behind Faraday Future remain a mystery, but the company expects to unveil a concept car on January 4 in advance of the Consumer Electronics Show, and says it will manufacture in North Las Vegas. Good luck to them!
NextEV — $?????
Founded by the chairman of Chinese automobile portal Bitauto.com and backed by other Chinese technology leaders, NextEV came out of stealth mode just last week after raising $500 million of the $1 billion it’s looking for to build a U.S. factory to manufacture a Tesla challenger. There are lots of unknowns here, but the fact that Padmasree Warrior, ex-CTO of Cisco, is its U.S. CEO and chief software officer, is a plus. Good luck to them, too!
Conclusion
Summing up, while the current crop of electric cars pose little competition to Tesla, three coming down the pike might. In the meantime, Tesla continues to gain experience and cultivate brand loyalty.
Furthermore, Tesla has a huge asset in its Supercharger network (there are currently 563 stations with 3,227 chargers), which allows users to recharge fast, for free, on road trips.
While those little city-based electric vehicles don’t take many road trips, the three vehicles that are on the horizon will be designed to. But how will they charge? To date, there’s been no indication yet that Tesla is ready to share its charging infrastructure. If it doesn’t, these competitors may struggle, and if it does (for a price), Tesla could see a great new revenue stream. In any case, the future will be very interesting!
And then there’s Tesla’s gigafactory in Sparks, Nevada, which will manufacture batteries more efficiently than ever before and allow Tesla to drive down its costs significantly. Having access to the lowest-cost batteries will be a terrific advantage for Tesla in the future.
Another issue of the near future is autonomous driving. Today’s Teslas already have Autopilot, which avoids collisions and keeps the vehicle in its lane. Google has lots of little cars that truly drive themselves, though you can’t buy them. And Apple is working on car technology too.
And then there’s the movement toward not owning a car at all! Zipcar is in the vanguard of the car-sharing movement, while Uber leads in the ride-providing movement, and there’s little doubt that Uber’s impact on the world of transportation has only just begun.
Put it all together, and you get a very bright future, full of innovation and disruption, and from where I stand, the prospects for Tesla are still very bright.
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The Easiest Investment Today
Turning to the market, the easiest investment today is buying oil stocks, because they’re so cheap. It’s obvious!
Trouble is, what’s obvious seldom works in the market. Or, as Humphrey Neill put it in The Art of Contrary Thinking, “When everyone thinks alike, everyone is likely to be wrong.”
So I don’t recommend buying oil stocks here, unless you’ve got specific information on a particular stock that is a screaming bargain—and the stock’s action indicates growing support.
Alternatively, you should stick with strength, because as we all know, trends, once in effect, tend to continue.
Which Brings Me to Equifax (EFX)
The name Equifax is familiar to most Americans as one of the three credit-rating agencies. Understandably, as the world increasingly runs on credit, that business is quite healthy.
The company has grown revenues every year of the past decade except 2008, when revenues shrank by 11%. In the years since, revenues have grown 8%, 5%, 6%, 11% and 6%. It’s not rapid but it’s sufficient, and it’s fairly dependable.
It pays a 1.0% dividend.
And last month it acquired Australia’s leading credit bureau for $1.8 billion. The market definitely liked that news, because the stock hit record highs last week.
So, you could jump in and buy Equifax (EFX) now.
Even better, you could wait for a normal pullback.
But my advice is to buy the “next” Equifax (EFX).
You see, Equifax was originally recommended by Chloe Lutts Jensen in Cabot Dividend Investor back in April, when it was trading at 94. Her regular readers are now sitting on profits of 20%, and collecting regular dividends as well.
Chloe recommends three complete portfolios for her readers: “High Yield,” “Dividend Growth” and “Safe Income,” and readers are encouraged to mix and match, to build a diversified portfolio that’s tailored to their investment needs. Chances are, it would be good for you too!
Yours in pursuit of wisdom and wealth,
Timothy Lutts
Publisher, Cabot Wealth Advisory
Chief Analyst, Cabot Stock of the Month
