In just two short decades, Tesla (TSLA +2.40%) has risen from an unknown and obscure start-up to the preeminent electric vehicle pioneer. The company's embrace of research and development and strides in innovation have helped its stock grow more than 20,000% since its debut on the Nasdaq Stock Market.
After such a massive run, it's reasonable to wonder if Tesla can maintain this pace. However, recent advancements suggest that Tesla will continue to be a long-term growth superstar. Here are two reasons why Tesla's best days remain ahead and why its stock is a perfect choice for investors looking for a genuine growth opportunity.
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The undisputed EV champ
For most of this century, drivers looking to ditch the fuel pump had no other option than Tesla. The company's ability to master the difficult task of mass-producing affordable, high-performance electric vehicles (EVs) as early as 2008 made it the most alluring and affordable choice in the emerging industry.
However, with estimates projecting a 500% increase in the number of EVs on the road by 2035, new competition has entered the picture to try and capture market share. With legacy automakers and young start-ups making their foray into the EV space, drivers have more options than ever.
Yet referring to these new participants as "competitors" might give them too much credit. Make no mistake, Tesla still completely dominates the EV market in just about every meaningful category. For example, let's look at sales of EVs in the U.S. during the first six months of 2023. In what was barely even a competition, Tesla outsold a crowded field of the next 19 EV makers combined with more than 325,0000 vehicles sold. The next closest was Chevrolet, with just under 35,000.
The harsh reality is that joining the EV race has proven more difficult for Tesla's rivals than they may have thought. Take Ford Motor, for instance. The company recently disclosed that it expects a $4.5 billion loss in its EV sector this year. Even Rivian, one of the more notable up-and-coming EV makers, is struggling as it reported an average loss of $33,000 per vehicle.
The simple fact is that Tesla's position as the champion of EVs remains firm. The company raked in a profit of more than $4 billion from EVs alone in the second quarter of 2023, producing almost 480,000 vehicles. Tesla's industry dominance becomes even more apparent when considering its "competition" struggles to make barely 20,000 vehicles in a quarter.
NASDAQ: TSLA
Key Data Points
Harnessing the power of AI
While Tesla can attribute most of its success to the EV industry, the most compelling aspect of its long-term value proposition lies in its development and integration of artificial intelligence (AI).
Consider autonomous driving. Even though considerable refinement remains before Tesla makes drivers obsolete, the company has achieved a breakthrough in how it trains its full self-driving (FSD) software. With the help of its supercomputer, Dojo, Tesla can now feed video collected from millions of cars worldwide through its AI-powered neural networks that interpret the data and learn how to drive.
With this advancement, Tesla can achieve greater vehicle autonomy at a much faster pace than before. This is because programmers are no longer required to hard code responses to account for the near-infinite randomness that occurs on the roads. Instead, the AI-powered systems can learn proper responses on their own without the need for tedious hard coding. Now, the only obstacle separating Tesla from greater autonomy is its collection and processing of more video data, a challenge it is uniquely built to overcome thanks to its massive fleet of vehicles.
Once Tesla can achieve the coveted Level 4 or 5 of autonomous driving, CEO Elon Musk plans to unveil a robotaxi business. In his usual optimism, Musk has said that he believes Tesla will reach this goal by the end of 2023. More realistic trajectories would likely put this at some time in 2024.
Regardless of how soon the robotaxi business launches, there is no denying its potential to transform Tesla's sources of revenue. Musk has told author Walter Isaacson that he believes self-hailing autonomous ridesharing is a product with "quasi-infinite demand" and will make Tesla a "ten-trillion [dollar] company." He added that once it is operational, "people will be talking about this moment in a hundred years."
The opportunity at hand
Considering the increase of demand for electric vehicles and Tesla's leading position in the industry, investing in the company for these reasons alone would be a wise choice. However, labeling Tesla solely as an electric vehicle manufacturer would be a mistake. The truth is that Tesla is a technology company with the potential to make roads safer, harness the power of AI, and create entirely new business models.
When you add in the transformative impact that AI will have, Tesla becomes a no-brainer for investors seeking long-term growth opportunities. With the development of more capable autonomous driving being a matter of when rather than if, investors can grab Tesla shares today at a discount relative to its future potential while Wall Street continues to view it as merely an EV company.
