Electric-vehicle company Tesla (NASDAQ:TSLA) has been an incredible investment, up a staggering 16,000% over the past 10 years. With returns like these, investors are understandably leaving no rock unturned in the EV space, hoping to find the next Tesla before it hits it big.
Investors might be looking in the wrong place. In this video clip from Motley Fool “Backstage Pass,” recorded on Sept. 16, Fool contributor Jason Hall explains to investors why the next disruptive upstart probably won’t come from the automative space.
Jason Hall: But for me, I do think that this is going to be a tough space because I think in a way, Tesla has been like the best and worst thing for investors. It has been the best thing for investors that invested in Tesla and held. I think Tesla has a good chance to continue to be a great investment because this is a really established business, not just in EV company. The Model S has been one of the best-selling luxury sedans in North America. Best-selling luxury sedan. Outselling BMW, outselling Mercedes [owned by Daimler AG] in that category. That’s impressive. It’s established itself as a premium brand, working to build out other things with its technology to participate in high-profit autonomous transportation down the road. We’ll see how that plays out. The market is certainly expecting that with the valuation of the company.
But at the end of the day, if you’re a Ford, if you’re a General Motors, if you’re Toyota, if you’re Volkswagen, you have scale and you have the ability to manufacture at scale and you have too much to lose to not be where consumers want to be. They were following the incentives back in the late ’80s, early ’90s, and then the early 2000s, with these little cars you could put in your back pocket that cost $50,000 and would go 100 miles and would go 45 miles an hour that nobody liked because they were not fun cars to drive, they weren’t sexy. They built them entirely to meet emissions regulations, to check that box off. To meet those standards.
Tesla came in and showed everybody how to do it. Make a car that’s fast, that’s sexy, that’s fun. Sell it to people with money, make great margins, and then iterate and scale.
Now guess what? Ford knows how to do that. The Mustang Mach-E is an amazing vehicle. You’re going to see the same thing happening. The Ford Lightning pickup truck, Ford has so much to lose if it can’t get electric pickup trucks right. It has to get this right. To a certain extent, it makes it a little bit zero-sum. I think when I say Tesla is like the worst thing that happened for investors, for everybody that didn’t win with Tesla, they’re trying to find the next Tesla.
There’s not going to be a next Tesla, and it’s sure as hell not going [laughs] to be in the automotive industry. The next massive-returning company that’s going to disrupt an industry is not going to happen in automotive, Tesla has already done that. It’s easy to overlook that. You’re not going to find another big winner in that space.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.