Tesla's (NASDAQ:TSLA) market cap has surged to over $400 billion in 2020 as investors have bought into everything from Tesla's growth to its future as an auto technology company. And with automotive competitors struggling to catch up in electric vehicle manufacturing it's easy to see why investors are excited about Tesla's future. But let's be honest, even the smallest disruption to the growth or technology story could sink Tesla's shares.
Three of our Foolish contributors think there are some disruptive forces coming Tesla's way in 2021 and they should make Elon Musk and the company worried. The challenges range from Cruise's autonomous technology to Rivian's competing vehicles to SolarEdge's (NASDAQ:SEDG) energy storage ambitions. Here's why these companies are worth watching in 2021.
Real autonomous driving
Travis Hoium (Cruise): Elon Musk has been claiming for years that Tesla is the industry's leader in autonomous driving and has teased unleashing a fleet of self-driving Teslas. But by any objective measure, Tesla continues to lag competitors in autonomous driving technology and there's no reason to think affluent Tesla buyers will be willing to let their $50,000+ vehicle go off driving by itself to make a few bucks on rideshares on a Friday night.
The companies that are diving headfirst into the autonomous driving business are doing so with a vision that goes far beyond vehicle ownership. They're developing the technology that will drive autonomous ride-sharing and even building the ride-sharing service themselves. The one Tesla should be really scared of is Cruise, a subsidiary of General Motors (NYSE:GM), because it's better at driving autonomously and is building a business that will make car ownership obsolete.
According to Navigant Research, there are over a dozen companies that have both a better strategy and better execution in self-driving technology than Tesla. In fact, Navigant calls Cruise a "leader" and Tesla just a "challenger" in the space. Elon Musk himself has admitted that "self-driving" isn't exactly what its name implies. Here's his comment during the first-quarter 2020 earnings call: "Regarding Autopilot, we released a new software update for traffic lights and stop signs to early access users in March and to all U.S. customers with full self-driving package just last week. Our cars will now automatically stop at each stop sign or traffic light until the driver gets a confirmation to proceed."
Teslas are just now starting to recognize stop signs and traffic lights. Meanwhile, Cruise logged 831,040 autonomous miles in California during 2019 while Tesla logged 12.2 autonomous miles. You read that right, 12.2 miles. When it comes to fully autonomous driving, Tesla is far behind Cruise and that should be a concern for investors.
What's ultimately the bigger concern is what autonomous driving could bring to transportation. Cruise showed the Origin concept vehicle earlier this year, which has no driver and is built to comfortably transport people around cities. The vehicle is designed not to compete with Tesla for space in people's garage, but to replace vehicle ownership altogether.
Not only is Cruise beating Tesla in autonomous driving, but it's also trying to upend the entire business model behind manufacturing vehicles, which is Tesla's core business. In 2021, if Cruise launches its self-driving service as planned, it's something Tesla should be very worried about.
Going after a profitable niche
Howard Smith (Rivian): One of the more promising players in the electric vehicle (EV) sector looks to be one that isn't trading publicly yet. But some big names have already taken notice. Ford Motor (NYSE:F) may have been hedging its bets on its popular -- and profitable -- F-150 when it invested $500 million into electric truck start-up Rivian in 2019.
Rivian plans to begin delivering its electric R1T pickup truck and R1S SUV in the summer of 2021. The company is billing both as "adventure" vehicles, and EV fans with the means may stray away from Tesla for them.
The R1T pickup will start at $69,000 and the R1S at $72,500. For EV devotees, there is a lot to like. Both will accelerate from 0 to 60 mph in 3 seconds, and provide up to 750 horsepower. They will also be able to wade through three-foot-deep water, the company says, and have a battery range up to around 400 miles. The vehicles will be produced at Rivian's 2.6 million-square-foot manufacturing facility in Normal, Illinois.
Besides the two adventure trucks, Rivian also aims to supply Amazon (NASDAQ:AMZN) with last-mile delivery vans. Amazon led a $700 million investment round in the company in February 2019. It also participated in a $1.3 billion investment round in December, along with Ford and others. Rivian announced its most recent investment round in July 2020, where it secured an additional $2.5 billion. It's clear the company is well funded going into production with several interested parties.
Rivian is not a recent start-up. It was founded by RJ Scaringe in 2009. Rivian has designed a "skateboard" chassis, which houses four electric motors, air suspension, battery management, and other systems all below the height of the wheels. It's designed for off-road capabilities.
While these features may not take business away from Tesla's Model 3 customers, Rivian looks like it will be on the radars of high-end EV customers. If this EV design of the popular truck and SUV categories are as profitable as the internal combustion engine versions, Tesla will have a new competitor in less than a year that should have it looking over its shoulder.
Another big winner entering storage and EV business
Jason Hall (SolarEdge): Since going public about five years ago, SolarEdge shares are up an incredible 806%. That's nearly Tesla-like gains over the period, and a remarkable run on the company's success in dominating the module-level power electronics business for distributed residential and commercial solar in the U.S.
So far, it hasn't been a threat to Tesla at all; the electronics it makes are actually important for solar panel makers and installers like Tesla, since they're how the solar power gets to the grid.
But as we head into 2021 and beyond, SolarEdge represents, if not a threat, then definitely the reality that Tesla isn't going to have the energy storage and electric vehicle markets all to itself. SolarEdge has made huge strides to diversify into the EV and battery markets, and 2021 will be a big year for both.
As a major supplier of solar electronics to the residential market, SolarEdge has an immense network of installers and distributors it works with, and a strong reputation. Its StorEdge residential battery system is a lock to take market share from the fast-growth battery business Tesla has been a leader in so far.
Tesla's leadership in EVs is in part due to its vertical integration. Traditional automakers have spent a few years trying to catch up, working with suppliers to establish supply chains for EV components. This represents a huge opportunity for SolarEdge, which is already in pre-production with multiple leading automakers to supply powertrain components.
2021 is expected to be a very important year for EVs and energy storage. Tesla will face more competition than it ever has, and SolarEdge is a big winner that will threaten Tesla's dominance in its two most important businesses.
Threats to Tesla are on the horizon
Tesla has been the disruptor for its entire history as a company, but it's now the most valuable automaker in the world and that makes it a target. Whether you're looking at autonomous driving, electric trucks, or energy storage, there may be threats in 2021 that Tesla isn't ready for.