Is Tesla overvalued?

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JASON LEMKIN

Not if it dominates the automotive market in 2027.

Tesla bet early on two trends where it clearly was / is the market leader:

  • Electric. No one else still has a competitive product. Yet. Everyone will catch up here in terms of an 85 kWh+, 300+ mile aspirational product, but it will still take many years. And Tesla will still dominate infrastructure for many years (Superchargers). The Bolt was the first hint of others catching up, in a minor way, to where Tesla was in 2012. Much more coming soon.
  • Autonomous Driving. Autopilot was way ahead of everyone else. Maybe too ahead. FBOW. But everyone is trying hard to catch up now. This is a more important trend than electrification. GM buying Cruise for $1b+ pre-revenue (and really, pre-product) makes perfect sense now.

And has not yet tapped into the third key trend for 2027:

  • Sharing. Most of us don’t or even want to pay for or deal with a full-time car anymore.

If Tesla can build on this lead, and everyone else can’t catch up in time, it should in theory dominate one of the largest markets in the world. The Model 3 is the first piece of that future vision.

But there’s a lot of risk here, and the competition is everywhere now. They probably need to win on all 3 trends.

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Published on January 12, 2018
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