Nikola Attacking Tesla: Weekly Stock Analysis

Nikola Attacking Tesla: Weekly Stock Analysis

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Competition has always proved itself good for humanity. The more rivalry there is in a sphere, the quicker it develops; as a result, the consumer gets high-quality goods for acceptable prices. Today, I will speak about electric cars, Tesla stocks and how rivalry makes car producers cut down on the terms of preparation for serial production.

Until recently, electric cars mostly associated with Tesla (NASDAQ: TSLA); however, in the last five years, competition in this market increased significantly. It has become clear why Elon Musk hurried so much to increase the production capacity of his plants.

Tesla: counting on bankruptcy

For a long time, Tesla remained a losing company because all income was spent on increasing production capacities and new research. The company had plenty of rivals in the stock market. Short sellers were waiting for its bankruptcy and tried to make money on the falling of Tesla stocks. However, the losses of such traders kept growing and finally amounted to 5 billion USD.

Indeed, the company generated no profit and had huge debts that it struggled to serve; logically speaking, the stocks of such a company are worth only selling; however, this time things went different.

Using only his charisma and the trust of investors, Elon Musk sustained the company and drove it to the first profitable quarter in 2016, then in 2018 and 2019, which means the company is beginning to generate a stable net profit.

Tesla plants

Currently, Tesla has plants in the USA, China, and is constructing another one in Germany; in other words, it is becoming a world car producer that may compete with such giants as General Motors (NYSE: GM), Ford Motor Company (NYSE: F), etc.

Why have I said, “may compete”? The fact is that Tesla is facing several obstacles, which become more and more numerous every month.

Firstly, major carmakers have begun to invest in developing their own electric cars, and many companies have already organized their serial production. None can compete the Tesla car, for now, however, the companies have ready production capacities, which Tesla has to spend money on.

So, large car makers just need to use their capacities for producing electric cars, and this is it. They will easily suffice the demand, which is now a problem for Musk’s company.

A Tesla killer from China: NIO

The second obstacle for Tesla is new companies that develop and produce electric cars and are already competing with Tesla. Specifically, I am speaking about a Chinese company NIO, the stocks of which declined to almost 1 USD each after the IPO.

NIO stocks price chart
NIO stocks price chart

The reason for such a decline was the refusal of the management to build their own production capacities, which investors so hoped for. However, the company changed its tactics. They are seeking financing sized 1.4 billion USD to build their own capacities for the production of electric cars.

In June, the company reported the growth of electric car sales and decided to attract investments via secondary placement of 60 million stocks. However, the demand was so high that the company increased the supply to 72 million stocks and attracted 428 million USD.

NIO provides a life-long guarantee for each electric car; besides, it has done something which Tesla has not come up with yet. They built a network of stations of fast battery replacement. Tesla has limited itself by the Supercharger fast chargers. Judging by the latest events, Goldman Sachs analysts have lifted the rating of NIO stocks from neutral to “buy”.

General Motors lost out to Tesla

General Motors is also hard n Tesla’s heels. The company decreased the number of plants all over the world, optimized its expenses, and resigned to the research in the sphere of electric cars. GM is now serially producing quite a popular Chevrolet Bolt EV. The director-general of GM stated that they will be faster than Tesla to invent a battery that lasts 1 million miles.

However, in this competition, GM has to admit a loss.

An accumulator that lives 16 years

In May, Musk mentioned that a month later Tesla would surprise investors with what they had invented together with a Chinese battery producer. At the end of June, a Chinese producer of accumulators Contemporary Amperex Technology announced that they had managed to create a battery that lasts 16 years and 1.2 million miles (2 million kilometers).

Presently, car producers guarantee the durability of batteries for 3-8 years and 60,000 to 150,000 miles. With such batteries, electric cars will become serious rivals to combustion engine cars which resource reaches 0.6 million miles only.

Tesla stocks overcoming 1,000 USD

At this news, Tesla stocks renewed all-time highs and rose over 1000 USD per stock.

Tesla stocks price chart
Tesla stocks price chart

Serial production of Tesla Semi

However, investors had one more reason for optimism. On June 10th, the information about the soon launch of the serial production of Tesla Semi leaked to the Internet. The launch had previously been postponed to 2021. This also stimulated the buying of Tesla stocks.

Nikola Corporation

In reality, this was a cunning scheme by which Musk tried to draw attention away from another company that is ready to bring its electric truck to the market.

This scarcely known company is called Nikola Corp. (NASDAQ: NKLA) after Nikola Tesla (I guess, the day when Nikola and Tesla merge, the famous physicist will be resurrected).

Nikola lawsuit against Tesla

Nikola Corp. was founded in 2014. It develops and produces hybrid trucks. Elon Musk knows this company as he faced a lawsuit per 2 million USD: Nikola accused Tesla of stealing the patented design of its truck.

I must admit that the two designs do seem similar.

Tesla Semi and Nikola One design projects
Tesla Semi and Nikola One design projects

However, not similar enough to win the case. The lawsuit was most likely Nikola’s way to attract attention to their trucks, and they succeeded.

For your information, Nikola One trucks could be pre-ordered since December 1st, 2016, while Tesla Semi became available only a year later. Nikola is planning to launch the sales of Nikola One in 2012, before the sales of Tesla Semi start. That is why Elon Musk is trying to speed up preparation for the serial production and sales of Tesla Semi.

Nikola uniting with VectolQ Acquisition Corp.

Competition with Tesla is hard for Nikola, they have quite different scales; however, in March, Nikola management announced that they were merging with a similar company producing electric cars called VectolQ Acquisition Corp. (NASDAQ: VTIQ). The latter is managed by the former director-general of GM Steve Girsky.

In the end, the merged company got registered on the NASDAQ exchange under the ticker NKLA, and its stocks went on sale on June 4th.

Nikola Corp stocks price chart
Nikola Corp stocks price chart

By June 9th, their price had tripled, while the market capitalization of the company reached 28 billion USD, which is comparable to the capitalization of Ford Motor Company.

Tesla stocks remain strong

The rivalry is increasing every month, and Elon Musk has no right for a mistake. However, it would be too risky to count on his losing. Musk’s advantage is SpaceX developing space technology. A part of SpaceX developments can be used by Tesla, which cuts down on the expenses on research in one company. Moreover, the largest world funds managing trillions of dollars, invest the largest parts of their portfolios in Tesla. I am speaking about such funds as BAILLIE GIFFORD & CO, CAPITAL WORLD INVESTORS, VANGUARD GROUP INC., BLACKROCK INC., JPMORGAN CHASE & CO.

Bottom line

At the beginning of the 2000s, there was an increased demand for the stocks of companies working on the Internet. The agitation ended in a bubble and a so-called dotcom crisis. Then the era of tech companies started, and we are living in it. Among all tech companies, those producing electric cars are the most prominent.

Thus, we might conclude that we are witnessing the start of the growth of the demand for the stocks of the companies which electrify transport. Tesla stocks bring up a bright example of what might happen to the stocks of a losing company that produces electric cars. It is rather risky to invest in Tesla at its all-time highs; instead, look closer at its rivals. Their prices are currently available to many investors.

However, mind that there is no vaccine against the coronavirus yet, the situation may worsen in autumn. Be vigilant and never exceed the risk limits when buying stocks, better use 1:1 leverage for long-term investments.




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