Shareholders in Tesla (TSLA -1.11%) have tolerated a volatile year. The stock has popped and then dropped. Even when CEO Elon Musk has made news unrelated to the company, investors -- rightly or wrongly -- seem to move Tesla stock as a result.
The business itself has had concerns related to vehicle pricing and a downward trend in profit margins. But in the end, Tesla stock has risen 105% this year into the final week of 2023.
While that has stretched the stock's valuation to loftier levels, there are compelling reasons to want to own Tesla shares heading into 2024.
Almost an EV monopoly
Many EV sector followers believed Tesla slashed prices on its vehicles during 2023 to help ward off growing competition. Lower prices certainly helped stoke sales as both large automakers and start-ups alike added new EVs for consumers. It also cut into Tesla's profit margins.
But that's something Tesla can withstand as it continues to earn hefty profits and build on more than $26 billion in cash and equivalents it had as of the end of the third quarter. The company will use that cash and ongoing cash flow to continue to build factories and increase production capacity. But its EV competitors aren't in that same comfortable position.
Those competitors have been throttling back plans to expand EV and battery production as losses have piled up. Some have equated those moves as indications that demand isn't as robust as originally thought for EVs versus traditional options. But the data indicates otherwise.
This will be the first year that Americans purchase more than 1 million fully electric vehicles. Yet EVs were still only about 8% of all new vehicle sales in the U.S. in the first half of the year.
But most of those were Teslas, and the company has a major advantage over all other EV makers to keep broadening its lead. Charging availability and reliability are still big concerns for many consumers, and Tesla is the king of charging infrastructure.
A key advantage for Tesla
Tesla has over 2,300 Supercharger stations in North America with almost 26,000 stalls. By comparison, Electrify America, which claims to be the largest open fast-charging network in the U.S., has about 3,700 fast-charging stalls. That helps explain why more and more automakers have done deals with Tesla to enable their EVs to use its chargers. It's not just the U.S. market Tesla is tapping, either.
Globally, Tesla has nearly 55,000 open charging stalls. And there are many places where EV adoption has outpaced the U.S. In China, where Tesla has its largest factory, EVs accounted for 19% of all vehicle sales in the first half of 2023. Globally, EVs constituted 15% of new passenger vehicle sales.
Europe is the second largest EV market, and sales soared nearly 50% in the first nine months of 2023 versus last year, according to the European Automobile Manufacturers Association (EAMA).
The next phase of growth
Taken all together, that seems to contradict the narrative that EV sales are slowing. Manufacturers that have cut back on growth plans simply can't make EVs profitably like Tesla can right now.
Tesla also has a growing energy storage segment and has plans to introduce a lower-cost EV model in the next few years. Those areas, along with licensing and sales of its charging infrastructure, should power the next phase of growth for Tesla.
That helps explain why investors pushed the stock so much higher in 2023. But there are still plenty of naysayers, so more investors may be ready to bid shares higher as the company proves it is still a strong growth investment.
