Is Tesla Becoming the Amazon of the Auto Industry?


Oct. 29 2019, Updated 10:01 a.m. ET

  • Tesla stock has been on a tear this month. The stock’s market capitalization has surpassed that of General Motors, which sells far more vehicles.
  • Automakers have praised Tesla for two reasons: establishing itself as a serious competitor for established automakers and internal combustion engine cars, and for mainstreaming EVs (electric vehicles).

Tesla stock (TSLA) has risen sharply this month, and its market capitalization has now surpassed that of General Motors (GM). While a month of upward price action doesn’t necessarily signal a change in a company’s long-term fundamentals, there have been some interesting developments.

Tesla has established itself as a serious automaker. During its third-quarter earnings release, the company shared pictures of its Chinese Gigafactory, which it has managed to bring online quickly. The company now plans to choose a location for its European Gigafactory before the end of the year.

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Gigafactory locations

Whereas Amazon’s (AMZN) invitation for proposals for its second headquarters brought heavy competition, Tesla may not generate as much euphoria. However, it will be interesting to see how far European countries go to get the Gigafactory.

China allowed Tesla to go solo in the country, while other US automakers such as Ford (F) and GM had to take the joint venture route. Furthermore, China exempted several TSLA models from its purchase tax earlier this year. The country likely sees EVs as a key strategic industry under its Made in China 2025 plan. Interestingly, China’s plan to develop its high-tech industry has been a bone of contention with the US.

Tesla is now a serious automaker

Not many retailers may have given Amazon a chance in its early days. Similarly, some auto executives saw Tesla and EVs as a niche segment. While retailers paid the price by missing out on the e-commerce wave, automakers have been quick to spot the opportunity in EVs.

With its Chinese Gigafactory ramping up, Tesla has established itself as a serious competitor in the automotive space. And this progress hasn’t gone unrecognized: Volkswagen’s CEO Herbert Diess has defended the EV maker and admired Tesla’s software abilities. Volkswagen is also launching several EVs, including the Volkswagen ID.3 and Porsche Taycan. Last year, Volkswagen was the largest automaker based on shipments.

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Mainstreaming EVs

Not long back, EVs were just a passing reference in automakers’ product portfolio. However, EVs are now turning mainstream. Leading automakers are betting heavily on EVs and experimenting by offering electric versions of their bestselling models. A case in point is Ford’s F-150 pickup, for which Ford released a prototype video earlier this year.

Tesla is the gold standard

It wouldn’t be unfair to say Amazon is synonymous with e-commerce. The company’s cloud business is also growing rapidly. Similarly, Tesla is synonymous with EVs, having established itself as the gold standard. Could it grow as big as Amazon? For more insights, read Could Tesla Eventually ‘Amazon’ Gasoline Carmakers.

Undoubtedly, there are several similarities between Tesla and Amazon—even Elon Musk and Jeff Bezos (not the best of friends) have a lot in common. Meanwhile, some TSLA bulls also compare the company with Apple. To learn more, read Is Tesla Stock the Next Apple or Amazon?


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