Tesla shares surge to more than $US500, becomes “existential threat” to carmakers

Tesla is now an “existential threat” to legacy carmakers, a major US investment firm said overnight (US time) as the Californian carmaker’s stock values surged again to pass $US500 ($A724) on Monday.

The latest 10 per cent jump in the share price means that its value has nearly trebled since May 2019 – with the shares leaping from a low of $US176.99 ($A256.50) to close on Monday in New York at $US524.86 ($A760.66).

That puts a market value on Tesla of $US94 billion ($136 billion) – more than the combined value of US legacy car makers General Motors and Ford combined.

According to stock analysis company Shortsight, the latest jump in the share price has seen short-sellers lose another $US1.25 billion. Tesla had been the most “shorted” stock on the market – but much of the latest price rise is credited to short sellers covering their positions after realising their strategy was not the best idea.

And the share price and market value of Tesla is likely to go even higher.  Colin Rusch, an analyst for US investment firm Oppenheimer has reportedly raised his price target to $US612 ($A886.94) a share, becoming the biggest Tesla bull on Wall Street.

Rusch told CNBC that Tesla now represents a major risk to legacy carmakers – a conclusion that others may have come to previously, but which is confirmed by the current valuations and market views.

“Tesla has really proven to be an existential threat for those companies,” Rusch said in  explanation of his price target hike to CNBC’s “Power Lunch.”

Like another investment firm, Piper Sandler, which last Thursday raised its price target for Tesla from $US423 to $US553, Rusch cites Tesla’s move into China and the rapid 10 month build of its Shanghai Gigafactory 3 as a specific reason behind his price hike.

In the first Shanghai delivery event on December 30, Musk declared the key role China would play in Tesla’s growth, including the start of its Model Y program as well as a new car that would be designed in China for the global market.

“First ground to first car was less than a year. I think that put a lot of automakers on notice,” Rusch told CNBC.

Legacy American carmakers General Motors and Ford have made moves to enter the age of electric transport, with GM finally acknowledging the shift in November 2018 when it said it would shut down factories and slash staff to fund a transition to electric mobility.

Notably, it has committed $US300 million ($434 million) towards upgrading its Michigan plant to develop a new EV to join the Bolt, whilst shutting down manufacture of its hybrid Volt. It has also invested in a $US2.3 billion ($A3.33 billion) venture with battery maker LG Chem.

Ford, in addition to funding EV startup Rivian to the tune of $US500 million ($A724 million) in April 2019, in November 2019 unveiled its Mustang-inspired electric Mach E. It also has an electric F-150 truck (or ute) in the pipeline.

Other carmakers – most notably Volkswagen, which laid the foundation for its own massive move to electric mobility with the start of production of its electric ID3 hatchback in September 2019 –  rare also making commitments towards electric mobility. Even Toyota is looking to an electric future.

But can they catch Tesla?

As discussed yesterday, 2020 may well prove to be another pivotal year for Tesla, given it will begin construction of its fourth Gigafactory 4 in Berlin in 2020, although there are reports of a small number of protestors opposed to the clearing of forest on the Brandenburg property on which Tesla intends to build.

Tesla has reportedly committed to planting an area three times the size of the area it intends to cut down (legislation only requires the same size).

Tesla will also introduce the Model Y electric vehicle which Musk believes will be more popular than the groundbreaking Model 3. And while the polarising Cybertruck is some years off, it is likely that leaps forward in battery density may also be on the cards.

Meanwhile, it would seem that other carmakers are rushing to fill gaps lacking in their own approaches to automotive design, such as updating vehicle software to improve functionality, an approach that has enabled Tesla to value-add to current owners instead of superceding with upgraded models.

The latest example of this is BMW, which on Monday claimed it was “pioneering” the luxury car segment with “downloadable vehicle upgrades”, the first of which adds a Sentry Mode-like capability it refers to as “BMW Drive Recorder”.

Jaguar also recently released a software upgrade for its all-electric I-Pace using data gleaned from its I-Pace eTrophy which runs in conjunction with the ABB Formula E racing championship, which increases range of the I-Pace by allowing access to 8% more of the battery capacity.

Now the question is, who will survive, as Tesla accelerates the transition to a future of clean transport, and clean energy.