Is Tesla still a great opportunity?

Is Tesla still a great opportunity?

I firmly believe that it's crucial to invest a portion, at least 5%, of one's total wealth in innovative concepts that have the potential to shape our future. By considering the success of so many of the biggest investments of the past, it makes sense to invest in the top prospects for the future. If they prove to be successful, they can significantly enhance our lives. On the other hand, even if they don't, the impact on our lifestyle would likely be minimal.

Investing in quality companies with great potential takes patience (and a lot of courage), but the reward can be substantial if you give them time to grow. By allocating your resources for a period of 10 years, you can witness the transformative effect that exceptional ideas can have on your financial well-being.

A couple of examples to help understand long-term investment and thinking with a small amount of capital.

·????????$1,000 at Amazon IPO would be valued at 1.65 million but if you invested in Amazon from 2010 you would have 14X your capital

·????????$1,000 of Microsoft at IPO would be 2.65 million but if you invested in Microsoft in 2010 you would have 7X your capital.

·????????$1,000 of Fortescue Metals at IPO would be 80,000 or 80 times your investment but if you invested in Fortescue in 2010 you would have 4X your capital.

The key point I am trying to make here is that once a company has been established for an extended period of time and its chances of going bust are close to Nil. It does not mean there is no longer an exceptional opportunity ahead.

Aside from my passion for business and investing, I also like to invest a portion of my capital in innovative concepts to stay informed on the changes and advancements in the world. This allows me to stay ahead of the curve and have a clear understanding of the speed at which the world is moving, which in turn helps me better serve my clients and prepare for potential disruption.

Why consider Electric Vehicles?

It’s good to start with a big-picture point of view of the Electric Car Market. Let’s take a deeper dive into what this currently looks like:

·????????Approximately 13.5 million cars are sold in the US each month, or over 150 million per year.

·????????Over the next two decades, roughly two billion cars worldwide will need to be replaced.

·????????Currently, only 3% of all vehicles sold are electric (an extremely small part of the market).

·????????Owning an electric vehicle means no more paying for petrol and potentially powering your car for free with home solar power.

·????????You don’t have to stop at a service station (this is my favourite).

·????????Ongoing servicing costs are lower and the software in your vehicle can be updated with over-the-air software updates without visiting a mechanic (this is also one of my favourites).

·????????Plus, electric vehicles have a smaller carbon footprint and are better for the environment.

Why Tesla?

·????????Tesla is the only automaker that can currently produce millions of electric vehicles annually.

·????????They have been growing their vehicle fleet by an average of 50% each year and are projected to sell nearly 2 million cars in 2023.

·????????Tesla boasts the highest operating margins in the industry, earning 8 times more profit per vehicle compared to Toyota.

·????????Tesla vehicles experience up to 10 times fewer accidents compared to the average car. When a Tesla vehicle is equipped with Autopilot, the frequency of crashes drops to every 6.26 million miles travelled, compared to the national average of a crash every 652,000 miles.

·????????Contrary to popular misconception, Teslas catch fire less frequently than other vehicles. Over the past decade, there has been an average of only one Tesla fire for every 210 million miles driven, compared to an average of a fire for all vehicles every 19 million miles driven.

·????????Advanced Full self-driving (FSD) technology will soon be accessible to all Tesla vehicles on the road. Legislation will eventually catch up, recognizing the benefits of advanced driver assistance in reducing accidents and saving lives. Currently, FSD generates revenue of $15,000 per vehicle with minimal additional deployment costs.

·????????The production of Tesla's Cyber truck is set to begin later this year and has already garnered over 1 million pre-orders in the US.

·????????Tesla Semi is expected to enter mass production in the near future with a $3.5 billion investment in a manufacturing plant. The vehicle is estimated to cost around $200,000, and it's believed that additional subscription services may be added to the cost. This is set to revolutionise the transportation industry by reducing costs.

·????????Tesla Bot, a humanoid robot, is under development with the potential to replace human labour and assist with basic tasks at home. Although its success and full potential are uncertain and many years away, if successful, this division could surpass the significance of the car division.

·????????Tesla is expanding its energy storage and battery division, car insurance, and solar offerings and has the potential for future growth in its Robo taxi division. These areas may not currently receive much attention, but have the potential for significant growth.

·????????Financially, Tesla is in the strongest position it has every bee, with very little debt and approximately $20 billion of cash on their balance sheet.

There are many more points that could be added to the above list, however I think that it is clear that there are opportunities ahead. That said, there is no doubt that there is always risk associated with investing in an innovator like Tesla. ?

·????????Elon Musk is a charismatic, but highly polarising and controversial leader. I see this as an opportunity, others see this as a significant risk.

·????????The world will run out of resources one day, however the recycling of batteries and key metals is improving with time.

·????????Competition in the marketplace will reduce Tesla’s market share over time.

·????????There is only one Elon Musk, and now that he has bought Twitter, there are concerns about how much attention he can spread across the numerous companies he runs.

Be Wary of FUD (Fear Uncertainty and Doubt)

Clickbait and fear-inducing headlines are meant to provoke an emotional response, often activating the "fight or flight" response in the brain. Unfortunately, I have seen individuals make impulsive decisions based on limited information and emotions running high. Money should always be approached with a level head and logical approach, rather than being influenced by emotions.

Tesla and Elon Musk are often the topic of much discussion, making it challenging for investors. This is why it's important to invest a small portion of your wealth in these opportunities where the outcome is less important. This way, you can reduce the influence of emotions and irrational decision-making in your financial decisions.

Enter cautiously but enter

There are so many great investment opportunities and whilst they can carry a great deal of risk, a small portion of your capital can also turn into a significant amount of capital in the long term and make a significant difference in your life. Applying a dollar-cost average approach makes sense until you are able to build up your conviction and understand how these investments can be extremely volatile.

Of course, if you are not interested in doing that yourself but keen on the concept – then speak with a financial adviser who can help prudently allocate your hard-earned dollars into different buckets.

Best of luck selecting your picks for the next decade

Neelan Sornalingam

The information provided in this article is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives, and requirements and seek financial advice before making any financial decisions.