Tesla Inc.'s TSLA market positioning and what the Elon Musk-led company has accomplished in the electric vehicle arena invariably draw praise from even rivals.
What Happened: Tesla earned a commendation from former Ford CEO Mark Fields, who discussed the fate of smaller EV companies in an interview with CNBC.
See Also: Best Electric Vehicle Stocks
Smaller EV makers such as Lucid Group Inc. LCID are now facing a demand problem rather than a production problem, Fields said. “The script has flipped,” he added.
Lucid’s cars, the former executive said, are good and its revenue has grown significantly in the fourth quarter from a year ago, given it has begun selling its cars. The top line, however, was well below what the Street expected, he said. “So, those big revenue misses really kind of augur for issues around demand,” he added.
Newark, California-based Lucid had to offer some incentives in the form of credit on some of its vehicles, and yet its deliveries to production were quite low for the quarter, Fields said. The company could deliver only 55% of the vehicles they produced, he noted.
This tells about how fast is their market going to grow and what’s the demand for their vehicles at very high price levels, Fields said. He noted that Lucid’s EVs are priced between $85,000 and $150,000, a range that doesn’t have a very big market. Additionally, at that price point, Lucid may have to compete with very established players like Mercedes-Benz Group AG MBGAF and BMW AG BMWYY, he said.
When probed what would be the fate of these smaller EV companies, Fields said these companies will continue to need capital to grow their businesses. A lot of these companies will have to go back to the markets or to other investors, he said. In some cases, they may grow along but they have to prove to investors/Street that they can get to sustainable profitability.
Tesla Rules The Roost: He also sees consolidation in the industry, as some will succeed and others will fail and may have to be bought by other larger players.
Tesla is still the benchmark in the EV market, Fields said. One of the smart moves the company made earlier on was to go for almost full vertical integration, where they are the master of their own destiny with respect to costs, he said. This combined with the Tesla brand, which is held in high regard, its first-mover advantage and its price premium help the company to be in the lead.
“Every automaker still benchmarks Tesla as the leader at this point,” Fields said.
Price Action: Tesla closed Thursday’s session up 0.60% to $202.07, according to Benzinga Pro data.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
