Tesla and NIO are just two of the many firms poised to profit from the fast-growing electric vehicle market. Numerous nations around the globe are attempting to shift toward the implementation of clean energy alternatives in order to mitigate the negative environmental effect that has resulted in a significant increase in climate change over the previous decade. Governments are actively supporting sustainable energy initiatives by constructing the necessary infrastructure and giving subsidies for these products in order to increase demand.
Currently, the electric vehicle (EV) segment is one of the most appealing sustainable energy industries. This market has already attracted plenty of participants, such as Tesla, NIO, and a slew of other established automakers like Ford and Volkswagen. According to Allied Market Research, a global electric vehicle market was priced at $162.34 billion in the year 2019 and is expected to reach $802.81 billion by 2027, implying a compound yearly growth rate of 22.6 percent during that period.
Asia-Pacific continues to be the world’s largest market, with sales of $84.84 billion in 2019. By 2027, sales in this region could reach $357.81 billion. Although the total addressable market is rapidly expanding, established players like Tesla are well-positioned to profit from these secular tailwinds.
Tesla’s stock has dropped 26% from its all-time high
Since going public in July 2010, Tesla has gone on an incredible tear. In just over eleven years, its stock has returned a total of 16,950 percent to stockholders, greatly outperforming the overall markets. Despite these incredible profits, Tesla’s stock has dropped 26% from its all-time highs, presenting an opportunity for investors to purchase the dip.
Tesla sales are expected to increase by 58.6% to about $50 billion in the year 2021 and by 35% to about $68.5 billion in 2022, according to Wall Street. The EV heavyweight will be able to improve its earnings for every share from $2.24 in the year 2020 to $6.97 in the year 2022 as a result of this.
Economies of scale
Tesla has raised its production from 50,000 pieces in 2015 to over 500,000 units by 2020. According to the company, it is on target to ship 800,000 pieces this year, with quarterly production numbers exceeding 200,000 units.
In a pandemic that hit 2020, Tesla increased its shipments by 36 percent year over year. Shipments increased at a faster rate in the first part of this year, with increases of 109 percent and 121 percent in Q1 and Q2, respectively. The scarcity of semiconductor chips has impacted various businesses; therefore, its supply numbers could be even higher.
Tesla’s sales have increased at a 45 percent annual rate over the last three years, reaching $41.9 billion in the June quarter. In Q2, the company’s gross margin increased to 22 percent, up from 14.4 percent in the same quarter last year.