Tata Owns Electric Cars, is Tesla Doomed?
Tata Motors (NYSE: TTM) not Tesla Motors (NASDAQ: TSLA) is poised to dominate electric cars.
That is very good for value investors and bad for Elon Musk who is buying huge blocks of Tesla’s overpriced stock. Tesla shares were trading for a moronic $347.51 on 21 June 2018 while Tata stock could be picked up for just $22.19.
Tata’s first electric model the Jaguar I-Pace is getting glowing reviews from the auto press. The Drive’s Mike Guy called the I-Pace so “good that it will keep you up at night.”
The I-Pace is so impressive that Alphabet’s (NASDAQ: GOOG) Waymo subsidiary picked it for self-driving car experiments in Arizona. News reports indicate that Waymo intends to develop a ride-sharing service around the I-Pace and Fiat Chrysler (NYSE: FCAU) Pacifica vans.
Electric Cars without the Tesla Drama
More importantly, Tata’s Jaguar-Land Rover subsidiary built the I-Pace without any of Tesla’s production drama. There are no labor troubles, tent cities in the parking lot, and media circus. Tata achieved that because it has well-established auto factories with staffs of highly-experienced workers.
Unlike Tesla; which is trying to build a sedan for which there might be no market in the United States, Tata is concentrating on one-quality model for which is a market. High-end SUVs like the I-Pace, sell well in America, sales for basic sedans are so bad in the United States companies like Ford (NYSE: F), Fiat Chrysler, and Honda (NYSE: HMC) have stopped making them or cut production.
Musk is likely to end up with a parking lot through of Model 3 Sedans he cannot sell. A likely outcome is that Tesla will have to sell the Model 3 to rental car companies and other fleet operators at a deep discount.
Note: this might be part of Musk’s plan to force widespread adoption of electric cars. A good way to do that is to make them cheap and easy to use.
Another advantage that Tata has is that it has a well-established network of dealers and a distribution system in place across the United States to move the I-Pace. More importantly, Tata does not have to build a gigafactory to manufacture batteries or provide a network of charging stations. Musk has already taken care of those chores.
Is Tata Motors Making Money?
The worst thing about Tesla, from a value investment standpoint, is that it is losing a lot of money. Tesla reported a -$709.55 million net loss, and a -$596.97 operating loss for 1st Quarter 2018 despite a $3.409 billion revenue.
Tata reported a year to year net income of $1.395 billion on annual revenues of $45.80 billion on March 31, 2018, ycharts reported. Tata was making a lot of money, while Tesla was deep in the red.
Given that history Tata investors are likely to make money on their investment soon. Tesla shareholders, such as Musk, are likely to see the stock price collapse at some point.
Why is Elon Musk Buying Tesla Stock?
Musk himself is likely to take a bath on the 72,500 shares of Tesla shares he reported buying on 13 June 2018. Strangely enough, Musk knew he would lose money but bought the shares anyway.
Elon bought all that stock in order to keep in himself in control of Tesla Motors. Musk wants as large an ownership position as possible to preserve his control. He also wants to keep the stock price to discourage somebody else like Tata from buying Tesla out from under him.
Purchasing Tesla would make a lot of sense for Tata, or Volkswagen, or Ford (NYSE: F) or General Motors (NYSE: GM) if the company was cheap. Whoever bought the company would get their hands on the Gigafactory, the Tesla brand, and a lot of great technology.
How Trump Might Hurt Tata and Help Tesla
The purchasers also get Tesla Energy, the solar-panel and battery subsidiary which might make a lot more because of U.S. President Donald J. Trump’s tariffs on Chinese made solar panels. Tesla Energy is also well-positioned to cash in on the growth of solar electricity.
Some observers like Varun Sivaram think solar will soon be the cheapest form of electricity. That means demand for solar should skyrocket, for an interesting view of solar and Tesla Energy’s future see Sivram’s intriguing book; Taming the Sun: Innovations to Harness Solar Energy.
Will the Trump Tariffs Hurt Tata?
Trump’s trade war which is primarily directed at Europe and the UK, can hurt Tata. The I-Pace is manufactured in Graz, Austria, in the European Union which has been the main target of Trump’s trade policy.
Tata’s Jaguar-Land Rover (JLR) subsidiary is exploring the possibility of building a plant in North America, but has no concrete plans, The Raleigh News and Observer reported. Tata’s decision to build plants in China and Slovakia instead of the United States in 2015 might have been a terrible mistake.
Beneficiaries from higher-priced Land Rovers might be Fiat Chrysler; which manufactures Jeeps and the Dodge Durango in the USA, and Ford which owns Lincoln. A smart move for Chrysler might be to start building an SUV under its’ Alpha Romero or Maserati brand names in the USA.
Ford and GM; which owns Cadillac, will have a tougher time. The affluent buyers that have spurned their luxury brands for Land Rover and Jaguar will probably switch to American-made models of competing European luxury brands.
It is hard to imagine most Land Rover drivers suddenly going to Jeep, Cadillac, Chrysler or Lincoln. If it is any consolation, Japanese luxury brands like Lexus might be an equally tough sell to JLR customers.
Despite the tariffs Tata is still a value investment because it owns strong brands and has a tremendous manufacturing capability. Tata is still the value investment in electric cars.
Yes, the Elon Musk show makes for great entertainment but it is no way to run an auto company. Tata will win the electric car battle because it lacks the drama.
