Why I am not "all-in" on Tesla stock, and only carry a 5 year investment time horizon on it for now.
Updated: Apr 23, 2022
🔑 Majority of Tesla's revenue comes from vehicle sales, and global passenger vehicle sales are on a sharp decreasing trend.
🔑 It is unrealistic to assume that Tesla (or any single car brand) will acquire more than 11%of the auto market share, due to the nature of auto buyers' behaviour.
🔑 Competition in the EV space is fierce as it will ever be, and will continue to intensify.
Main limiting factor of Tesla's future growth.
Majority of Tesla's revenue comes from their vehicle sales.
Global passenger vehicle sales are on a sharp decreasing trend (reducing the market size available).
Reducing at a rate of 7% since 2017 to 2020.
for further reading.
And the declining trend is expected to persist due to inevitable factors like improved:
Public transportation services
Ride hailing services
Tesla is projected to own 10% of the global passenger vehicle market share by 2035.
According to this financial model I created, click here to view.
Past that, it is unrealistic to assume that a single car brand can take up to more than 10% of the auto market share.
Cars being symbol status products,
owners will want to have differentiation element.
It is unlikely that most people are ok with driving the same car models as their neighbours'.
To put things into perspectives, Toyota currently owns 10.5% of the global auto market share
It is not improbable for Tesla to obtain more than 10.5% of the auto market share in the future,
but it is not realistic.
Cannot deny that competition in the EV space is fierce as it will ever be.
Not only by upstarts like Lucid and Rivian.
But by the likes of legacy automakers too.
Although Tesla is better positioned from
Ability to scale their production compared to their peers
I believe that human beings are not completely rationale when it comes to purchase decisions,
especially when it comes to something like cars.
Factors such as aesthetics and branding power
may have the same weightage (or more) over car buyers' decisions
over more important functions such as:
Mileage per charge/ gallon
For whom it will make more sense to do an "all-in" strategy for Tesla stocks?
There are no shortages of Tesla bulls out there
Influential & knowledgable youtubers out there like:
already have considerably larger sum of capital compared to most retail investors out there (myself included)
gaining 30% returns over the next 5 years is enough to multiply their net-worth significantly.
Hence for someone who has lower capital in their portfolio
and are focusing on dollar cost averaging method
Going "all-in" on Tesla stock without an adequate diversification strategy in place
may not be a wise strategy
considering the various risks present at the stock.
What does it take for Tesla to remove their growth ceiling (after commanding a significant market share in the auto industry)?
2 key main drivers for Tesla to sustain their high revenue growth rate in the coming decades will be their:
which is still at infancy stage at this point
Tesla Bot (Optimus)
still a concept at this stage.
What is my strategy for Tesla stock?
As of the point of writing, Tesla is about 1/5 of my portfolio.
My investment time horizon for this stock will be 5 years time.
I shall continue to monitor the development of Tesla's expansion for
their energy segment
and development of Tesla bot.
until I decide to increase my investment time horizon for it again later.
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