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Tesla’s record-valuation is based on lack of “real competition,” researcher says

(Photo: Andres GE)

Tesla (NASDAQ: TSLA) will see a shift in valuation when competing automakers with “know-how” come to the forefront with comparable electric models, Anna-Marie Baisden of Fitch Solutions said.

Baisden, head of Automotive Research for Fitch, appeared on CNBC’s Street Signs on Wednesday morning ahead of Tesla’s Q2 2020 Earnings Call.

The researcher said that Tesla’s valuation as a company would begin to “shift” when automakers with experience begin producing electric models for their fleet of vehicles. Baisden specifically mentioned European automakers, such as BMW, who are slotting out time in production facilities to make way for the manufacturing of sustainable, electric cars.

Baisden was sure to give credit where credit was due, however. She recognized Tesla’s surge to superstardom and indicated that the company’s performance throughout the past few quarters has helped it develop into a notable force in the automotive industry.

“At the moment, if you look at it as a standalone company, it performed in terms of its deliveries, in terms of what was expected. It started meeting goals. It started becoming profitable,” Baisden said.

But she is skeptical that Tesla will be able to keep its skyrocketing valuation when other car companies begin producing cars that can compete with Tesla’s fleet.

“I think where the question comes in is when its competitors start to also have their electric models available, and you start to see some real competition. Then we might start to see some shift on valuation.”

Currently, Tesla has a $293.58 billion valuation as its stock price sits at $1,569.28. It is the most valuable automaker in the world, leading the second-place company, Toyota, by around $120 billion.

Tesla is the industry leader in electric vehicles, and it isn’t a very close competition. While the company has continued to evolve its products into high-performance, long-range machines capable of updating themselves over the internet, other automakers have struggled to produce an electric vehicle with suitable or acceptable range.

Other companies who have already embraced the electric revolution have had issues with infrastructure. Volkswagen is likely the most notable company to have problems with electric cars because of extensive software problems that have delayed the release of its ID.3.

Meanwhile, BMW has tried to develop the iX3 and the i4 to compete with Tesla’s vehicles. The iX3 was scrapped for the U.S. market, and the company recently abandoned its self-driving partnership with Mercedes-Benz because of plunges in demand.

Competition will continue to drive Tesla to be better, but no company has emerged as a favorite to dethrone the Elon Musk-led automaker. Perhaps Tesla’s most significant advantage is the fact that it focuses specifically on electric vehicles, while others are still working to advance internal combustion engines.

The specific focus that Tesla holds with electric cars will give the company a significant advantage for years to come. Volkswagen executives have already admitted that Tesla holds a substantial lead in terms of tech, and the fact that the electric automaker is the only company that owns a specific focus on electric cars gives it an advantage for years to come.

Tesla will hold its Q2 2020 Earnings Call at 2:30 PM PDT today, July 22.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Tesla’s record-valuation is based on lack of “real competition,” researcher says
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