Major Fire at Tesla
Dear Wealth Watch Reader,
Tesla’s cash burn is a 5-alarm fire. If Elon doesn’t right the ship soon, it’ll be underwater.
Today, why the smart money in electric cars might be heading elsewhere.
Read on below…
The Smart Money Is Shifting in This Tech Sector
There are some stocks on the market that mainstream media just can’t get enough of.
But pull back the curtain and you realize the hype is just that.
There’s no question, electric automaker Tesla and it’s founder and tech quiz boy-genius Elon Musk garner a lot of attention.
Don’t get me wrong. Electric cars are going to be huge and there’s a mountain of money to be made.
However, in addition to opportunity, there is even more peril when it comes to investing in this trend.
And here comes the unpopular opinion I’m sure you’ve gathered by now: Tesla is the absolute WORST way to invest in the electric vehicle revolution.
Sure, Tesla produces beautiful cars that not only look fast; they are fast! The Tesla Model S can go from zero to 60 mph in a stunning 5.9 seconds and travel more than 300 miles on a single charge.
Tesla cars are also very popular with the environmentally conscious crowd. But as an investment, Tesla is a car wreck waiting to happen.
Recent headlines haven’t missed a beat.
Source: Seeking Alpha
Tesla’s Got Problems
Tesla is burning through cash like nobody’s business; roughly $1 billion per quarter.
Worse yet, there seems to be no end in site for this cash burn. Tesla is also suffering from a manufacturing bottleneck of its own doing. Battery production at Tesla’s Gigafactory in Nevada is creating havoc with its production schedule.
The two charts below tell it all:
And Tesla has the growth rate of a snail. In 2016, Tesla sold 47,119 cars and increased that to 50,145 in 2017, only a 6.4% increase. On top of that Tesla lost $23,697 for EVERY car that it sold in the third quarter of 2017!
Rounding out the list of problems is that the incentive to “go electric” is waning. Electric car buyers currently receive a $7,500 credit against federal taxes, but those subsidies are slowly disappearing. Every carmaker is limited to credits on the first 200,000 cars they sell, after that the tax credits disappear one year later.
These are some serious problems, but Tesla’s biggest is that it will soon face a tidal wave of competition.
Competition Is Heating Up
Detroit, Germany, Japan, and China are spending billions of dollars on R&D and every major manufacturer has plans to release at least one fully electric vehicle by 2020.
Toyota, Mercedes, Nissan, Mitsubishi, Volvo, Kia, Hyundai, BMW, and most U.S. manufacturers all will soon offer electric cars. In fact, Volkswagen plans to offer as many as 30 different all-electric cars!
Some auto observers argue that Porsche, Audi, BMW and Mercedes are producing electric vehicles that are just, if not more beautiful and are mechanically superior to Tesla.
In short, the established auto industry is set to collectively zoom right past Tesla.
And if that isn’t enough reason to make Tesla investors soil themselves, the nail in the coffin is its failure to gain a foothold in the largest auto market in the world: China!
Electric vehicles make up 3.3% of the entire China auto market, compared to just 1.2% in the U.S., according to CleanTechnica.com.
In December, a total of 102,000 new electric cars were sold in China, a 130% year-over-year increase. That was just in December, the number jumps to more than 600,000 for 2017 as a whole.
In fact, Chinese drivers bought roughly half of the 1.2 million electric cars sold in the entire world last year. And get this; Chinese automakers made 47% of those 1.2 million electric cars sold.
The Chinese electric vehicle market is highly protected, which is why foreign brands — such as Tesla — only captured a measly 4% of the Chinese market.
As I’ve said a few times now in past articles China is a rising star economically.
And a lot of smart money is betting on China today because it has a tremendous growth advantage. Its economy is expected to grow 6% per year on average for the next decade, and perhaps beyond.
China is opening up with huge new wealth make opportunities, including in the electric car market. You may want to consider sending some of your electric car investments East.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch