Tesla saw gains of over 700% in 2020 alone – can we expect a similar growth rate for years to come?
Tesla (NASDAQ: TSLA) was one of 2020’s biggest winners, providing investors with impeccable returns throughout the year and bringing its market cap to $650 billion today. But, does Tesla have the energy to continue growing at impressive rates for the next decade?
Will Tesla continue to grow?
Tesla is still in high growth mode. The company is constantly innovating and developing new products, spending $1.4 billion on research and development in 2020, and hopes to repeat that in 2021. This huge expenditure will ensure the company stays ahead of the competition regarding technological advancements, allowing for future innovation and growth. Tesla is working on the next generation ‘million-mile’ battery, which will greatly increase range and reduce costs. Tesla is also working on both a pickup truck and sports car, the Cybertruck, and Roadster, which widens its Total Addressable Market (TAM).
Despite the pandemic, Tesla delivered just under 500,000 vehicles in 2020 as promised, with management expecting annual delivery growth of 50% going forward, which is great news for investors. Tesla’s Q4 2020 revealed its sixth consecutive quarter of profits with a net income of $270 million on $10.7 billion of revenue. Tesla reported full-year revenue of $31.5 billion with $721 million in profit and revenue for 2021 and 2022 is expected to continue growing, reaching $48 billion and $62.6 billion, respectively.
Tesla has seen impressive growth in the U.S., but it’s nowhere near its peak just yet. Tesla has acknowledged that China will be a key growth market for the automotive industry in the coming years, so the company opened its Shangai Gigafactory in 2018 and hopes to double output this year to 300,000 vehicles. Tesla is only getting started in the Asian markets and we hope to see impressive growth in this space, alongside its competitor NIO (NYSE: NIO).
Tesla’s Full Self Driving (FSD) and its Robotaxi concept will help with the company’s sustained growth.CEO Elon Musk believes that the Robotaxi concept helps justify Tesla’s high valuation as FSD has been a technological breakthrough for Tesla — but it’s expensive, costing $10,000 per vehicle. However, Tesla will make this more accessible from 2021 onwards by offering a subscription to FSD. As for the Robotaxi concept, Tesla plan to offer fully autonomous car rides with an Uber-like service, as well as a mobile app where people can hail an autonomous ride from Teslas in their area.
The bear case for Tesla
The bull wildly outweighs the bear here, but the company still has its risks. Tesla could possibly see some temporary pullback on sales in 2021 as the aftermath of the pandemic continues to impact people’s finances. We are also starting to see increased competition in the space, namely with NIO and General Motors (NYSE: GM), who have been investing heavily in EV’s. Tesla enjoys a first-mover advantage, but it’s only a matter of time before other firms start to catch up. Nonetheless, I’m confident Tesla can remain at the top for the next decade.
Tesla has seen impressive and unprecedented growth in recent years, but the company’s fundamentals and its moat are still solid, which will lead to continued growth for the next decade albeit at a slower pace compared to 2020.
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