Tesla Inc. (Nasdaq: TSLA) launched its IPO back on June 29, 2010. The company priced shares at $17 each.
At least measured by its 1,629% return since that time, Tesla is a roaring success. But I believe Tesla’s success story is just getting underway.
[ad#Google Adsense 336×280-IA]So far, Elon Musk’s firm hasn’t made a profit. And its three cars – the Roadster, Model S and Model X – are expensive by just about any measure.
Tesla doesn’t expect to start deliveries of its much-touted entry-level Model 3 sedan until later this year. That hasn’t stopped more than 400,000 people from plunking down deposits on one.
It also hasn’t stopped China’s Tencent Holdings (OTC: TCTZF) from taking a 5% stake in Tesla. Why would Tencent make an investment of that size in Tesla today?
I think I know the answer. But first, let me tell you a little bit about me.
I am the Energy and Infrastructure Strategist for The Oxford Club. I am a regular contributor to Energy & Resources Digest and Oxford Resource Explorer.
And I have my own subscription research service called Advanced Energy Strategist. I am a degreed electrical engineer and spent 25 years in the semiconductor industry designing and testing integrated circuits.
I’ve managed my own investments for more than 40 years and have been writing and speaking about it for more than 10 at The Oxford Club. Perhaps you’ve met me at one of our conferences.
Because of my background, energy, energy infrastructure and technology fascinate me. In fact, I’ve developed “Fessler’s Three Laws of Technology.”
The first law simply states… technology marches on.
No matter what anyone thinks, technology continues to advance, even during economic downturns.
Engineers and scientists know this to be true, because they are the ones making it happen. Even during the Great Depression, we had the invention of traffic signals, frozen food, insulin, Band-Aids, aerosol cans, electric shavers, Scotch tape, car radios, penicillin and jet engines.
Fessler’s second law of technology states, “When it comes to technology, changes happen much faster than you expect they will.”
All you have to do is look at any 10-year forecast for solar energy adoption, EV sales or energy storage prices. I’ll guarantee that two years from now, they will all turn out to be conservative, and not by a little, but by a lot.
Fessler’s third law of technology is my favorite… “New technology is almost always disruptive and transformative.”
Don’t believe it?
Reach into your pocket and take out your smartphone. There are more than 2 million apps available that run on it.
Where would you be without yours? How many times an hour do you check it?
How about energy storage? Last year, it shifted to a commercially viable market.
Think about this: We’ve never been able to store electricity cheaply enough to use later. The advantages of being able to do this are many.
Solar and wind farms can store excess power for use during peak periods. And utilities can level out their demand curve with stored power, lessening the demand for expensive natural gas-burning power plants.
Tesla: Beyond the Cars, Beyond the Hype
Let’s get back to Tencent’s investment in Tesla. First, Tesla isn’t just an electric car company.
Tesla is a sustainable energy company, and it wants to accelerate our transition to it.
There are three keys to addressing the climate change problem: electric vehicles, energy storage and sustainable power generation.
Besides electric vehicles, Tesla sells a product called the Powerwall. The Powerwall is an energy storage unit for home and business use.
One of them can store enough energy to power the average two-bedroom home for a day. It’s compact, stackable and includes a built-in inverter.
Finally, in true Elon Musk fashion, Tesla is redesigning America’s rooftops. Next month, you’ll be able to order a replacement roof that looks just like your old one.
Except Tesla’s solar roof will generate electricity to power your home. Just look at the beautiful solar roofs Tesla has to choose from.
(Photo courtesy of Tesla Inc., used with permission.)
There’s no question that Elon Musk is a visionary. He’s disrupting not only the transportation industry, but also the traditional utility model of generating and supplying energy to the homeowner.
Now, for the first time ever, homeowners will be able to generate and store their own power and supply it to their cars. No gas stations, no power plants, and no greenhouse gases.
And before you realize it, this will be the norm, rather than the exception. Technology marches on.
Would I invest in Tesla today? You bet. Its cars are fantastic, and I’ll bet its solar roofs and Powerwall storage units are too.
So before you dismiss Tesla and even electric vehicles, think of how quickly smartphones became something everyone had to have. Technology is indeed disruptive and transformative, but almost always to the benefit of mankind.
Good investing,
Dave
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Source: Investment U