In this segment of "3 Minute Stocks Updates" on Motley Fool Live, recorded on Jan. 5, Fool contributors Brian Feroldi and Toby Bordelon discuss some of the competition facing Tesla (TSLA 2.08%) in 2022.
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Brian Feroldi: In 2021, Tesla saw two of its direct competitors, upstarts, come public, and they are now well-capitalized. Rivian (RIVN -3.56%) and Lucid (LCID -5.49%), which by the way, have market caps of, let's see, Rivian, [laughs] I know its stock is down but its market cap is still $80 billion, and Lucid, $60 billion.
Say what you will about those valuations, that gives them plenty of room to dilute shareholders and raise tons of capital. Should that be something that concerns Tesla shareholders?
Toby Bordelon: Yeah. I have concerns about Tesla's market cap myself, but Rivian and Lucid make Tesla look like a value play by comparison when you really think about it.
But to your question, I think Tesla should be concerned but I think the bigger threat is honestly for GM (GM 0.60%), Volvo (VLVO.F -27.93%), all the legacy carmakers now bringing all their resources to bear on electric vehicles. I think the big issue for Tesla is there is now more competition in general.
The start-ups need to be worried about, sure, but I think that's less of an issue for them. When you are the only game in town, that's fantastic, but that's not the case anymore when it comes to electric vehicles. Ford (F -1.83%) F-150 Lightning coming out soon, GM's already got the Hummer out. Rivian is delivering vehicles to customers, although slowly right now.
With Ford, demand was so high for that truck that they doubled production again we found this week. These legacy automakers, Ford, GM, Volvo, they got so many more resources than Rivian and Lucid, I think, at their disposal.
You want to write those two off, but I think that would be my concern, the legacy automakers who have finally woken up as it were and are making a big push in this area. Now, on one level, this is the realization of Elon Musk's dream. He had said in the past that if Tesla goes out of business but that electric cars become a big thing, that's awesome. That's what he was trying to do.
You look at that and you say, great, let's not lose sight of this amazing transition that Elon Musk and Tesla have sparked the auto industry, fantastic. On another level though, from the business of Tesla, if you're a shareholder, I think competing is going to get more difficult. It's not the only option, and in some cases, we talk about trucks right now today, not necessarily the default option for people who want an electric vehicle.
They're going to have to up their game a little bit, but it's good to see the industry revolutionizing and transforming.
