Want to recreate Tesla’s massive growth? This stock is your ticket.
Everyone wants to find the next Tesla (NASDAQ: TSLA). However, investing in the electric vehicle (EV) space can be difficult. Many EV companies have gone out of business in recent years, and it can be difficult to separate the good from the bad.
Thankfully, Tesla has established a clear template for success. And right now, there’s one EV stock that looks very attractive. But only one investment strategy is likely to be successful.
How Tesla achieved great success
In 2006, Tesla CEO Elon Musk revealed to the public “Tesla Motors’ secret master plan.” “As you know, Tesla Motors’ first product was a high-performance electric sports car called the Tesla Roadster,” his essay began. “However, some readers may not be aware of the fact that our long-term plan is to produce a wide range of models, including affordable family cars.”
Musk summarized Tesla’s basic plan as follows:
Make a sports car Use that money to make an affordable car Use that money to make an even more affordable car
Today, Tesla is a great symbol of success in executing a long-term vision. The Tesla Roadster was a success, but its market was always small given its price tag of over $100,000.
Tesla needed to prove its manufacturing capabilities and show the public that EVs could be cool and exciting. The company used this success to design, manufacture, and offer two new models: Model S and Model X. Although these models were still expensive, they introduced Tesla to hundreds of thousands of new owners.
Tesla then used its reputation and access to capital to debut two new mass-market models: the Model 3 and the Model Y. These two models were much more affordable, allowing Tesla to increase its revenue by more than 1,000% over the past decade. .
TSLA Revenue (TTM) data by YCharts.
Tesla’s master plan has done wonders for its valuation. The company is currently worth about $800 billion. Meanwhile, another company is valued at just $11 billion, but perfectly executes Tesla’s proven master plan.
Rivian could be the next large-cap EV stock
When it comes to following Tesla’s success template, few EV companies look as attractive as Rivian (RIVN 3.85%).
In 2018, Rivian announced the debut of the R1T and R1S models. Like Tesla’s early models, the R1T and R1S were ultra-luxury, high-quality, no-compromise cars that, with certain options, easily cost over $100,000. Consumer feedback has been great. According to Consumer Reports, Rivian has the highest customer satisfaction and loyalty levels of any automaker, electric or otherwise. Approximately 86% of Rivian owners said they would buy another Rivian. No other brand had more than 80%.
What will Rivian do with its newfound reputation and sales base? Exactly what Tesla did: build more affordable cars. Earlier this year, the company announced three new models: R2, R3, and R3X. Both are expected to debut with starting prices under $50,000. Meeting this price point made Tesla known to millions of people. If Rivian can execute, it should be a huge success.
If Rivian can replicate Tesla’s success, why does its market cap hover at just over $10 billion? First, the new model isn’t expected to be released until 2026 at the earliest. There is. Second, the necessary manufacturing facilities have not yet been completed. Third, the company is still rapidly losing money because vehicle manufacturing is capital-intensive. However, management expects to reach positive gross margins by the end of 2024. Finally, Rivian is trying to compete in electric vehicles, a market segment that has seen many bankruptcies over the years.
It’s clear that the market is skeptical of Rivian’s plans, even though Rivian is running on a proven growth model and has demonstrated its ability to build vehicles that customers love. But the next few years will be pivotal. If Rivian can execute, it will likely become as famous as Tesla and see its valuation expand rapidly as a result.
There can be no assurance that the Company will maintain its ability to access the capital markets affordably or that it will be able to quickly bring manufacturing capacity online. The company will have to sell vehicles in a highly competitive industry. But it’s this uncertainty that offers patient investors a favorable entry point into Rivian stock right now. If it can stay patient, Rivian’s rise could eventually mirror Tesla’s rise.
