Model S. Source: Tesla Motors.
The comparisons between automotive stocks and Tesla Motors' lofty valuation continue. But Tesla CEO Elon Musk insists that the company is an automotive tech company -- not just an automotive company. Though the claim is odd, Musk is right that Tesla, and the other automotive players, aren't necessarily driven by the same underlying dynamics. And this is the primary reason so many bears shorting Tesla's stock continue to miss the point. Particularly, Tesla has three unique factors driving the company forward that other automotive companies can't count on.
Tesla's charging stations aren't the typical electric vehicle charging station. On average, Tesla's Superchargers are about 16 times faster than most public charging stations. In fact, Model S owners can get a 50% battery charge in just 20 minutes at a Supercharging station.
Source: Tesla Motors.
Then there's Tesla's aggressive expansion of Superchargers to cover 98% of the U.S. population by 2015. Internationally, Tesla just began opening Superchargers in Europe, and already has 90% of the population covered in Norway.
The combination of faster charging speeds, convenient coverage, and exclusivity, not only sets the foundation for Tesla's planned mass-market car, but it also gives the company a temporary competitive advantage. In a way, it hedges the company's ambitious aspirations.
A swappable production strategy
This point is rarely brought up in both bullish and bearish Tesla investment theses, but it's crucial to the company's business model. Tesla cars are manufactured in a far different manner than traditional vehicles. They have one standard battery platform on which they can mount varying motors and bodies. Even more, Tesla's motor is a paltry one-foot in diameter. This swappable production strategy could very well give the company an advantage in achieving production efficiencies.
Tesla battery platform. Source: Tesla Motors.
"When we designed the Model S, we created a platform. So it's not just a single car; we created something on which we could build many cars, and we are able to leverage that and bring a car to market fast," Musk explained at the Model X unveiling.
Musk has expressed aspirations to eventually achieve gross profit margins that rival Porsche. Before Volkswagen acquired the luxury sports-car maker, Porsche was reporting a gross profit margin of about 50%. Already, Musk says the company should hit its 25% gross profit margin target, excluding zero-emission vehicle credits, by the fourth quarter of 2013.
Thanks to investor optimism for the stock, Tesla's $20-billion valuation has infused the company with capital to aggressively invest in Superchargers, production, and international expansion. The valuation itself is a strategic asset to the company. Its $20-billion valuation means that management has even more cash than they had planned for to make necessary investments, or even ramp up production and expansion more rapidly.
Securing the future
All three of these factors are building the foundation for the company's eventual mass-market affordable car. And each factor helps to secure Tesla's spot among the big automotive companies -- and change the auto industry forever.
Another Growth Stock Stunning Investors
This incredible tech stock is growing twice as fast as Google and Facebook, and more than three times as fast as Amazon.com and Apple. Watch our jaw-dropping investor alert video today to find out why The Motley Fool's chief technology officer is putting $117,238 of his own money on the table, and why he's so confident this will be a huge winner in 2013 and beyond. Just click here to watch!
The article 3 Reasons Why Tesla Is an Industry Game Changer originally appeared on Fool.com.
Fool contributor Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.