Tesla is more than just a car company, for the firm also researches and develops alternative energy technology, and the firm is also centered around the somewhat controversial personality of Elon Musk. However, considering the automotive aspect only, Tesla continues to disrupt. This disruption has led to market dominance. While Tesla is only producing around 500,000 electric vehicles per year (from cars to its must vaunted Cybertruck), its value is greater than Honda and Toyota combined (firms that are pushing along millions of vehicles each year).
Tesla has seen a jump in profits for the fourth quarter in a row, a fact that has seen its share price climb once again. The company reported net income of $110 million for the second quarter of 2020 with a net profit of $104 million, which the Fremont-based company has attributed to “fundamental operational improvement” as The Guardian quotes.
Haris Anwar, senior analyst at Investing.com tells Digital Journal that investors still need to be wary, despite the market valuation of Tesla: “After a breath-taking rally this year, Tesla shares are susceptible to any small negative surprise.”
Anwar adds: “Tesla’s valuation remains impossible to justify by any standard metrics, and clearly shows the herd mentality in play by both retail and institutional investors. There’s no doubt that this strategy has produced huge rewards, but it’s prudent to now roll back some risk and enjoy the gains.”
While the economic grass appears as green as the technology, some market commentators are wondering just how long Tesla can remain ahead of the pack with other companies moving more into the electric vehicle market. If automobiles offer similar functionality but at a lower price, then Tesla’s predominance could well be challenged over the next few years.
Rivals to Tesla include the Nissan’s Leaf e+ (2020 sees new capabilities added to the model); Chevrolet’s Bolt EV (which actually predates Tesla); BMW, which is iaiming for a fleet of 12 electric vehicle models on the market by 2025; plus start-ups like Rivian.
