These 11 EV Startups Are Chasing Tesla. They Can’t All Win

A field of electric-vehicle challengers is in hot pursuit of Elon Musk, fueled by funding from Wall Street. It will take skill, guts and good fortune to avoid a crash. These 11 EV Startups Are Chasing Tesla. They Can’t All Win


The race is on to become the next Tesla Inc. Tens of billions are riding on the outcome.

Investors from Wall Street to the Motor City are betting that a field of electric-car startups can emulate the rise of Elon Musk, who sits at the wheel of a company that is on track to sell 500,000 battery-powered vehicles this year and turn its first-ever annual profit. His Tesla—scheduled to join the S&P 500 next month—is now more valuable than Toyota Motor Corp. , Volkswagen AG , General Motors Co. and Ford Motor Co. combined.

It won’t be a smooth journey either for investors—which include the world’s largest money manager and the second-largest U.S. private- equity firm—or these industry upstarts, which face numerous obstacles. Most haven’t yet successfully built or sold a car. Those that have have struggled to do so profitably. Some are still hiring a workforce or fighting accusations of fraud. One recently posted a loss of $1.6 billion.

Their fate hinges on a number of unanswered questions. Are consumers ready to buy a pricey electric vehicle other than a Tesla? Or is it a safer bet to sell workaday vans and trucks to companies? Is it smarter to build your own cars in your own factory? Or should you rely on outside contractors to produce them?

Does it make more sense to focus on China, home to the world’s largest electric-car market, or stay closer to home? How much pressure will they face from old giants like GM, which said this week it would spend $27 billion through 2025 on the development of electric and driverless vehicles?

At stake is the future of transportation—and who gets to define it. There will be winners. And losers. There will be fortunes won. And lost. Here is our guide to the road ahead.

Rivian Automotive LLC, Irvine, Calif.

CEO: RJ Scaringe

YEAR FOUNDED: 2009

OWNERSHIP: private

CAPITAL RAISED: $5.35 billion in five funding rounds in the past two years

VALUATION: unknown

NOTABLE BACKERS: Ford, Amazon.com Inc., BlackRock Inc.

FIRST MODEL: Well-equipped versions of the R1T, an all-electric pickup, will start around $67,500, before tax incentives. Goes on sale in June 2021.

WHAT EXCITES INVESTORS:Rivian will sell battery-powered pickup and SUVs, targeting buyers with an outdoorsy, off-roading brand. The company also has a contract to build 100,000 electric delivery vans for investor Amazon. Rivian is retooling a former Mitsubishi Motors Corp. factory in Illinois.

WHAT COULD GIVE INVESTORS PAUSE: Rivian has to build both quality cars and its sales and service network. It plans to emulate Tesla’s model and sell directly to consumers, an approach complicated by state franchise laws that protect the traditional dealership model. Then Rivian has to break into some of the toughest markets. Tesla has a commanding share of electric vehicle sales, while the Detroit auto makers dominate in pickup trucks and off-road brands.


Lucid Motors Inc., Newark, Calif.

CEO:Peter Rawlinson

YEAR FOUNDED: 2007

OWNERSHIP: Private

CAPITAL RAISED: more than $1 billion

VALUATION: Unknown

NOTABLE BACKERS: Public Investment Fund of Saudi Arabia

FIRST MODEL: The Lucid Air is a battery-powered luxury sedan the company says will be able to drive more than 500 miles on a single charge in some configurations. The first Airs will cost $169,000 before tax incentives when it goes on sale early next year, with less-costly versions to follow—including an entry-level model expected to start at $77,400.

WHAT EXCITES INVESTORS: Lucid is building a factory in Arizona and aiming at the high-end luxury market. Executives hope to take on not only Tesla but Mercedes-Benz and BMW with fully-electric models. The company touts its proprietary battery and motor technology, which it says enables sports car-like performance, the ability to drive further without charging and roomier cabins in a smaller car.

WHAT COULD GIVE INVESTORS PAUSE:
Challenges raising money led Lucid to delay the Air multiple times since introducing the concept in 2016. Now, other high-end auto makers like BMW, Mercedes-Benz and Porsche are rolling out their own luxury electric cars. Ultraluxury brand Bentley recently said it would sell only plug-in models by 2026, and others are poised to follow.

Lordstown Motors Corp. , Lordstown, Ohio

CEO:Steve Burns

YEAR FOUNDED: 2019

OWNERSHIP: public

MARKET VALUATION: $4.2 billion (as of November 19)

NOTABLE BACKERS: Workhorse Group Inc., Fidelity Investments, GM

FIRST MODEL: The Endurance is a battery-electric pickup truck marketed to commercial fleet operators with a starting price of $52,500 before federal tax incentives.

WHAT EXCITES INVESTORS: Lordstown Motors took over a former GM assembly plant in Ohio planning to build battery-powered pickup trucks for commercial fleets and hoping to start production in September 2021. The company says electric vehicles operate with lower fuel and maintenance costs—especially when compared with gas-guzzling pickup trucks—making them appealing for businesses that use them in fleets.

WHAT COULD GIVE INVESTORS PAUSE: Lordstown Motors says it has to hire more than 1,000 workers and retool a massive plant before entering an increasingly crowded electric truck market. Ford’s F-150 truck is the bestselling vehicle in the U.S., and the company is rolling out an electric version also targeting fleet buyers in 2022.

Nikola Corp. , Phoenix

CEO:Mark Russell

YEAR FOUNDED: 2015

OWNERSHIP: public

MARKET VALUATION: $10.1 billion (as of November 19)

NOTABLE BACKERS: German auto supplier Robert Bosch GmbH, heavy machinery giant CNH Industrial NV, hedge-fund investor Jeffrey Ubben

FIRST MODEL: The battery-powered Nikola Tre semi-truck, built with CNH Industrial’s IVECO brand, is set to begin production in late 2021. No pricing information is available yet.

WHAT EXCITES INVESTORS: Nikola is targeting the commercial trucking market. It intends to make big rigs powered by electric batteries and hydrogen fuel cells, along with refueling stations and producing hydrogen fuel. Its business model emphasizes partnerships with other big, established companies to deliver on core parts of its strategy.

WHAT COULD GIVE INVESTORS PAUSE: Nikola has said its refueling network alone could cost it billions of dollars to complete, and its profit potential depends on the company being able to hit ambitious cost projections for making hydrogen. It is also reeling from a report by short seller Hindenburg Research that claimed it misled investors about its technology. Nikola called the report’s accusations false and misleading. Company founder Trevor Milton departed soon after and Nikola’s stock has cratered. The Justice Department and Securities and Exchange Commission have initiated inquiries.

Updated: 2-23-2021

Nikola Touts Truck That Will Run 900 Miles On A Tank Of Hydrogen


These 11 EV Startups Are Chasing Tesla. They Can’t All Win


Nikola’s Two FCEV Sleeper Hydrogen Freight Hauler.


Nikola Corp. said that its long-range fuel-cell semi truck will get as much as 900 miles (1450 kilometers) on a tank of hydrogen when it comes out in 2024, as the startup works to bolster its position in the increasingly competitive field of zero-emission freight vehicles.

The company released an update Tuesday after having said that the Nikola Two fuel-cell vehicle would go at least 750 miles on a tank of hydrogen. Nikola also affirmed that its Tre shorter-range fuel-cell truck, which can run 500 miles, remains on schedule to start production in the second half of 2023.

The update is meant to show that Nikola is making progress as rivals muscle in to sell hydrogen freight haulers. Last month, established semi-truck producer Navistar International Corp. said it plans to enter the market in 2023 using a fuel-cell system from Nikola supplier General Motors Co.

Staying on schedule is vital for startups like Nikola. The company has no revenue and relies on investor confidence to raise cash. Shares of a so-called bank-check company that is combining with electric-vehicle maker Lucid Motors Inc. plunged 42% Tuesday morning after the startup said that its battery-powered sedan would be delayed and that it would burn $10 billion in cash by 2024.

Nikola dropped 11% to $18.59 at 9:42 a.m. in New York. The shares had almost doubled in the 12 months through Monday.

Nikola said that the first Tre FCEV prototypes are scheduled to begin assembly in Arizona and Ulm, Germany, in the second quarter of this year and that testing and validation would continue into 2022. The Nikola Two 900-mile truck will have a sleeping cabin for drivers and a new chassis designed for North American highways.

Nikola plans to start production of a battery-electric semi called the Tre next year. It will be built in Ulm, Germany, as part of a joint venture with CNH Industrial NV and based on that company’s Iveco S-way truck platform.

Bloomberg was first to report that the first production versions of fuel-cell trucks would also be based on the S-way platform and could use either GM or Robert Bosch GmbH fuel cells.

Fisker Inc., Los Angeles

CEO: Henrik Fisker

YEAR FOUNDED: 2016

OWNERSHIP: public

MARKET VALUATION: $4.7 billion (as of November 19)

NOTABLE BACKERS: Apollo Global Management Inc., Magna International Inc., Louis Bacon

FIRST MODEL: The Ocean, a compact SUV made with sustainable materials, is slated to begin production in 2022. Pricing starts at $37,500 before federal tax incentives.

WHAT EXCITES INVESTORS: Much of Fisker’s manufacturing and engineering will be contracted to outside vendors. Auto-parts supplier Magna, which holds a 6% stake in the startup, will build the company’s first model while Fisker focuses on the design and software. Fisker is also developing a flexible lease model that functions more like a monthly subscription. Customers will have the ability to terminate at any point and the company can re-lease the car, creating recurring revenue.

WHAT COULD GIVE INVESTORS PAUSE:This isn’t Henrik Fisker’s first attempt to get an electric-car startup off the ground. In 2007 he founded Fisker Automotive, an early rival to Tesla that ultimately went bankrupt. And his latest venture isn’t without stumbles. The company promised a battery-technology breakthrough before ditching the effort, saying it couldn’t be commercialized. Analysts say Fisker’s contract-manufacturing approach is risky and other car companies have struggled with monthly-subscription plans for vehicles.

Canoo Inc., Torrance, Calif.

CEO:Ulrich Kranz

YEAR FOUNDED: 2018

OWNERSHIP: private but expected to go public through a reverse merger known as a SPAC by the end of the year

VALUATION: $2.4 billion (valuation estimate at the time reverse merger was announced)

NOTABLE BACKERS: Daniel Hennessy, BlackRock, AFV Partners

FIRST MODEL: A microbus-like all-electric “lifestyle” vehicle the company describes as a “loft on wheels” will be called the Canoo. Pricing for the model, set to hit the road in 2022, hasn’t been announced.

WHAT EXCITES INVESTORS: Canoo’s technology integrates the batteries, chassis, motors and steering components. From that foundation, the company plans to make distinctive “lifestyle” vehicles for consumers available through a monthly subscription starting in 2022, and delivery vehicles starting the following year. The company has also joined with Hyundai Motor Co. to co-develop technology and expects to outsource the manufacturing of its cars.

WHAT COULD GIVE INVESTORS PAUSE: Before finding its merger partner, Canoo spent more than $300 million since inception and last year its auditor warned it was at risk as a going concern. Its first model’s success depends on buyers embracing its subscription service, which is still novel in the car business. Additionally, Canoo has yet to lock-in a deal with a contract manufacturer to build its first vehicles.

NIO, Inc., Shanghai

CEO: William Li

YEAR FOUNDED: 2014

OWNERSHIP: Public

MARKET VALUATION: $66 billion (as of November 19)

NOTABLE BACKERS: Chinese mobile gaming behemoth Tencent Holdings Ltd. , Scottish hedge fund (and major Tesla investor) Baillie Gifford & Co., Chinese state investors

MAIN MODEL: The ES6 is a five-seat SUV with a starting price of roughly 358,000 yuan ($52,000).

WHAT EXCITES INVESTORS: NIO’s stock gains outpaced Tesla’s share-price surge this year, and the company’s market value has eclipsed GM as of Thursday’s close. Sales of its luxury electric SUVs, made and sold in China, are growing. It has also started providing subscription plans for batteries which allow users to buy cars without batteries at a lower price and swap them out for a monthly fee based on their energy needs.

WHAT COULD GIVE INVESTORS PAUSE: Despite a strong 2020, NIO’s future seemed in doubt last year. It posted a net loss of $1.6 billion in 2019 and laid off roughly a fifth of its employees. It got a 7 billion yuan (roughly $1 billion) lifeline from Chinese state investors this spring, but it will need to boost sales and margins to remain competitive with Tesla, which opened its Chinese factory last year.

Li Auto, Inc., Beijing

CEO: Li Xiang

YEAR FOUNDED: 2015

OWNERSHIP: Public

MARKET VALUATION: $30.7 billion (as of November 19)

NOTABLE BACKERS: Chinese e-commerce heavyweight Meituan Dianping, TikTok creator ByteDance Ltd., BlackRock

MAIN MODEL: The Li ONE is a plug-in hybrid luxury SUV that uses a small gasoline engine to generate power for lithium-ion batteries and lists for around 328,000 yuan ($49,500).

WHAT EXCITES INVESTORS: Li Auto can appeal to drivers in parts of China where charging stations are less plentiful while still qualifying for some state subsidies. Li’s hybrids require smaller and cheaper battery packs, saving the company on costs.

WHAT COULD GIVE INVESTORS PAUSE: Li’s focus on hybrids may help it alleviate drivers’ worries about charging in the short-term, but analysts say the company will need to successfully manage an eventual transition to an all-electric future over the longer term. Hybrids also don’t get the same favored treatment that pure battery-electric vehicles do from some local governments.

XPeng, Inc., Guangzhou, China

CEO: He Xiaopeng

YEAR FOUNDED: 2015

OWNERSHIP: public

MARKET VALUATION: $35.3 billion (as of November 19)

MAJOR BACKERS: Chinese e-commerce giant Alibaba Group Holding Ltd. , Chinese phone company Xiaomi Corp. , Qatar Investment Authority

MAIN MODEL: The P7 is a battery-electric sedan that starts at 250,000 yuan ($37,000).

WHAT EXCITES INVESTORS: Xpeng makes SUVs and sedans that undercut Tesla’s Chinese models on price. The company is also developing its own autonomous-driving software and has an in-car operating system with its own network of apps. Like its Chinese competitors, the company has a deep-pocketed tech backer in Jack Ma’s Alibaba.

WHAT COULD GIVE INVESTORS PAUSE: The Chinese government has helped stimulate electric-car demand with subsidies that are expected to be fully phased out by 2022. XPeng’s software focus is both capital-intensive and highly competitive, and the company has warned in filings its efforts could be hindered by further deterioration of the U.S.-China relationship.

Faraday & Future, Inc., Los Angeles

CEO: Carsten Breitfeld

YEAR FOUNDED: 2014

OWNERSHIP: private

VALUATION: unknown

MAJOR BACKERS: Birch Lake Holdings LP, ATW Partners

FIRST MODEL: The FF91 is a luxury SUV with over 1,000 horsepower and more than 300 miles of range. The company says it can deliver the SUV nine months after raising more funds. Pricing is expected to start at more than $100,000.

WHAT EXCITES INVESTORS: Faraday has tried for years to develop a luxury SUV that will compete directly with Tesla. The company recently secured a bridge loan of $45 million as the company looks to raise more funding to make the FF91. Mr. Breitfeld is known in the auto industry for his development of BMW’s i8 hybrid sports car.

WHAT COULD GIVE INVESTORS PAUSE: Faraday Future has spent more than $2 billion and has yet to sell a single vehicle, after originally targeting 2017 to bring its first model to market. Founder Jia Yuetingdeclared personal bankruptcy last year from personal debts in China and the company is still looking to raise the funds needed to start production.

Arrival Ltd., London

CEO:Denis Sverdlov

YEAR FOUNDED: 2015

OWNERSHIP: private but expected to go public through a reverse merger known as a SPAC by end of the year

VALUATION: $5.4 billion (valuation estimate at the time reverse merger was announced)

MAJOR BACKERS: Hyundai Motor Co., Kia Motors Corp. , BlackRock, United Parcel Service Inc.

MAIN MODEL: an electric passenger bus expected in the fourth quarter of 2021

WHAT EXCITES INVESTORS: Arrival plans to build electric buses for urban transit or delivery vans at smaller, automation-intensive assembly plants the company calls microfactories. The factories, it says, can be built for tens of millions of dollars, far less than a conventional assembly plant. The company has an order from UPS for 10,000 vans.

WHAT COULD GIVE INVESTORS PAUSE: Many of its prospective customers—cities and transit authorities—are in fiscal trouble due to the pandemic and dropping urban transportation ridership. Arrival also faces a strong set of existing competitors due to widespread acceptance of electric buses in certain parts of the world. Most new buses sold in China are already electric, analysts say.

Updated: 11-24-2020

China’s Kaixin Nears 1000% Annual Gain On Electric Vehicle Rally

A jump in premarket trading for Chinese electric vehicle maker Kaixin Auto Holdings will bring total gains to the stock close to the 1,000% mark as investors’ euphoria with the sector lifted industry shares across the globe.

Kaixin surged 50% in premarket trading Monday after gaining over 963% since the end of September as investor optimism ballooned amid Tesla Inc.’s S&P 500 inclusion last week.

The company also announced a deal earlier this month with China-based car e-tailer Haitaoche would take a controlling interest. Haitaoche is looking to cut deals with electronic vehicle manufacturers in China.

Kaixin’s market valuation has swelled to almost $400 million from about $40 million in September.

Tesla Hits $500 Billion Mark After Soaring 547% This Year

Tesla Inc. is smashing through records as its impending addition to the S&P 500 Index has sparked a buying frenzy among investors, pushing the company’s market valuation over the $500 billion mark for the first time on Tuesday.

Shares of the electric vehicle company have soared this year, rising nearly 550%, with gains accelerating over the past week after S&P Dow Jones Indices last Monday said Tesla will be added to the benchmark. The stock surge helped co-founder Elon Musk add $100.3 billion to his net worth this year and overtake Bill Gates to become the world’s second-richest person.

Tesla shares rose as much as 4.1% in New York in early trading, touching an all-time high of $543.17, and pushing its market capitalization to over $506 billion. Crossing the treshold valuation brings true a prediction from Musk, who is said to have made it 18 months ago in a call with investors.

With Tesla set to join the index on Dec. 21, money managers and investors who closely track the S&P 500 will now have to buy the stock in order to accurately mirror the gauge. Goldman Sachs Group Inc. has said Tesla’s inclusion could result in $8 billion of demand from active U.S. large-cap mutual funds.

Tesla’s ascension and entrance into the group of blue-chip investments is also good news for the broader sector. Nio Inc., Workhorse Group Inc., Nikola Corp., Lordstown Motors Corp., XPeng Inc., Li Auto Inc. and Ayro Inc. have also rallied and some are now trading at new record highs.

Electric-vehicle makers and other related companies across the world have also enjoyed frenzied buying on optimism the auto sector will be dominated by electric-powered cars in the decades ahead. That combined with high valuations for Tesla is pushing investors to lesser known names that can benefit from the sector’s growth opportunities, but with a smaller share price.

Tesla’s Relentless Surge Propels EV Peers Amid Growing Optimism

The rally in electric-vehicle stocks received a fresh boost of confidence on Monday from Wedbush Securities, which said there is now a “major inflection” in EV demand globally.

Wedbush analyst Daniel Ives raised his best-case price target on Tesla to $1,000 from $800, reflecting a 104% premium to Friday’s close. Tesla shares rose as much as 6.7% Monday, touching an all-time high of $522.22. The shares have set fresh records in two of the last three trading days.

Smaller upstarts followed suit, with Nio Inc., Workhorse Group Inc., Nikola Corp., Lordstown Motors Corp., XPeng Inc., Li Auto Inc. and Ayro Inc. all rallying and far outperforming the broader market’s gains. The EV supply chain and other related stocks also benefited, with shares of financial technology firm Ideanomics Inc. jumping as much as 87%. The company’s EV division provides group purchasing discounts on commercial vehicles, and it said Monday morning that it’s increased its stake in e-tractor company Solectrac Inc.

While many electric-vehicle stocks attracted investor attention earlier this year, the rally reached a fever pitch last week after it was announced Tesla will soon become a part of the S&P 500 Index, suggesting index investment is gaining momentum. A strong focus on EV adoption in China and U.S. President-elect Joe Biden’s pledge to develop the industry also helped sentiment, as evident in a surge of new companies trying to enter the public markets.

Updated: 11-29-2020

Tesla’s S&P 500 Debut Is Set To Put $100 Billion In Trades In Motion

Asset managers and trading desks will be scrambling next month to account for the market juggernaut.

Additions and subtractions to the S&P 500 are normally a ho-hum affair. The 509th biggest company in the U.S. might jump to 497th place, and thus into the index. Investors who track it buy the one stock and sell another.

But no one has ever tried to add Tesla Inc., TSLA 2.05% a $555 billion company prone to huge swings in price. That’s happening next month, and it’s causing headaches across Wall Street.

To avoid missteps, S&P polled big investors on whether they would prefer adding Tesla’s weight all at once on Dec. 21 or split over two trading days in December—an unprecedented move for S&P.

Asset managers and trading desks across Wall Street have held virtual summits to debate the matter. The vote from many appears to be for the two-day option, partly because of Tesla’s size, along with the potential for elevated volatility in the stock market.

“If we begin to anticipate a worst-case scenario from what could happen from the Thanksgiving holiday, we could expect greater than usual volatility,” said David Mazza, a managing director and head of product at exchange-traded-fund manager Direxion, referring to a possible further surge in coronavirus cases. He endorses Tesla’s addition to the S&P 500 over two separate trading sessions.

Tesla’s addition to the index is expected to be particularly challenging because the company will be the largest to ever join, and it is expected to make up at least 1% of the gauge. At its current value, it would be the sixth-largest company in the S&P 500, just bigger than Berkshire Hathaway Inc. and smaller than Facebook Inc.

The stock, which has a cultlike investor base, has surged more than 40% to $585.76 since Nov. 16, when S&P announced its intended inclusion, extending its gains for the year to sevenfold. The S&P 500 itself is up 13% in 2020.

The decision rests with S&P, which said it intends to announce results of the consultation on Monday. Regardless of the outcome, investors and traders expect the market for Tesla shares to heat up even further ahead of the inclusion. Goldman Sachs Group Inc. GS -0.48% predicts shares will eventually touch $600, a 2% gain from current levels, by the time Tesla joins the index.

Tesla’s inclusion is expected to put more than $100 billion into motion. Index funds will have to sell smaller stocks already in the S&P 500, somewhere between $60 billion and $80 billion depending on Tesla’s market cap, and use that money to buy shares of the car maker, asset managers and traders said.

Actively managed funds benchmarked to the S&P 500 are projected to buy $8 billion of Tesla shares, Goldman said in a recent note. The move will also spur trading within separately managed accounts that use the S&P 500 as a benchmark, as well as hedging activity by trading firms that buy and sell ETFs.

Those sums are big, but investors say Tesla’s addition to the index would normally be manageable in a single day. Shares of Tesla are widely traded, with daily volumes reaching as high as nearly $65 billion in mid-July, suggesting there is enough liquidity to cover the trade.

The trade date, Dec. 18, coincides with a once-quarterly event known as quadruple witching, the Friday near the end of each calendar quarter on which options and futures on both indexes and stocks expire simultaneously. Volume is usually heavy on those days and would help boost liquidity on the day of Tesla’s inclusion, investors said.

They said the curveball is accounting for other potential volatility in the stock market tied to Covid-19 or signs the economic recovery is faltering. The market has been particularly rocky this year. There have been more single-day stock moves of at least 3% for the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite than in any year since 2008.

Investors who had shared their opinion with S&P have offered another suggestion that appears to have earned broad support: breaking the trades up over two different quarters, according to people familiar with the discussions.

A longer break between the trades would help asset managers digest any sharp moves related to Covid-19 or other news the market doesn’t take well and help keep funds in line with benchmarks, investors said.

“A stepped approach over multiple quarters helps with the liquidity challenges. There’s good precedent for it,” said Chris Johnson, head of ETF capital markets at Charles Schwab Corp. , referring to MSCI’s two-phased inclusion of China A-Shares to its emerging-markets index in 2018.

There are also concerns that the flurry of buying that comes with index inclusion will temporarily drive up Tesla’s share price for firms forced to buy around the addition. That means the stakes are high for S&P and index funds, which account for about 41% of the assets that track the S&P 500.

“The people who will pay the price if S&P screws up are the investors in passive S&P” funds, said Ben Inker, head of asset allocation at investment manager GMO, which oversees about $60 billion in assets.

If the huge burst of demand ahead of inclusion disappears, Tesla’s shares could fall dramatically after they join the gauge, he added.

Timing is hard for investors and indexers alike. Yahoo’s market capitalization peaked less than a month after it was added to the S&P 500 in December 1999—just before the burst of the dot-com bubble. Qwest Communications’ market cap peaked the same day it was added to the index in July 2000. Neither stock trades today.

“Why am I the sucker who has to buy it after the stock is up fivefold?” is what one might wonder if forced to buy Tesla shares after such a tremendous run-up, said Mike Bailey, director of research at FBB Capital Partners, which oversees some Tesla shares.

Updated: 12-02-2020

Elon Musk’s $139 Billion Fortune Leads Massive EV Wealth Gains

Elon Musk’s dizzying ascent in 2020 hit a new peak this week as he’s about to become the head of an S&P 500 Index company. That’s just days after surging to the second-richest person on the planet with a $139 billion fortune.

But the Tesla Inc. chief executive officer isn’t the only electric-vehicle entrepreneur to have turned fabulously wealthy this year. Some rivals are growing their net worths at an even quicker rate, according to the Bloomberg Billionaires Index.

Nio Inc. founder William Li has gotten 12 times richer in 2020 through his holding in the U.S.-listed carmaker, the fastest pace of gains among the world’s 500 richest people. The net worth of He Xiaopeng, chairman of XPeng Inc., has jumped more than 600%. Overall, fortunes of the handful of people tracked by the Bloomberg index in the EV industry have increased by more than $140 billion — including Musk’s $111 billion surge.

That doesn’t take into account the ancillary parts required for electric cars. The top shareholders of battery maker Contemporary Amperex Technology Co., for example, are worth $40 billion collectively, up about $23 billion this year.

“The No. 1 technology in vehicles in the future is software, and the chips that you have,” Henrik Fisker, co-founder of electric-vehicle maker Fisker Inc., said in a recent webcast. “So it’s not anymore who makes the axles of a car or who stamps this piece of metal.”

Traditional automakers and parts manufacturers are mostly playing catch up. Ford Motor Co., Volkswagen AG, Continental AG and Toyota Motor Corp. — all down or barely up this year — are among those seeking to shift their business to comply with stricter emission rules. One exception has been General Motors Co., whose ambitious goal of rolling out 30 new EVs by 2025 has helped buoy its shares to a three-year high.

The pandemic has sharpened the focus on the future of transportation, with experts confident that EVs will dominate the global auto market. Joe Biden’s win in the U.S. presidential election and China announcing plans recently to keep bolstering the industry have also raised expectations. That’s even as some of the companies have yet to report profits, with some market watchers questioning whether this is a bubble.

“Major countries around the world have been encouraging EV development as their main measure to cut carbon emissions, especially after the pandemic,” said Andy Wong, a fund manager at LW Asset Management in Hong Kong. “Tesla, Nio and XPeng saw improvements in autonomous driving recently, and it also helps lift their valuations.”

Musk’s rivals may be growing their wealth faster, but he’s sitting on the biggest total gains this year thanks to a 580% rally in Tesla shares. After Musk, the second-richest person among EV makers is Wang Chuan-Fu, founder of BYD Co., whose net worth has more than tripled to $14 billion.

Fisker, Lordstown

In addition to Tesla and its bigger rivals, investors have also bet on newer firms in the sector with potential for rapid growth, creating another wave of self-made fortunes.

Fisker and Lordstown Motors Corp. founder Steve Burns have both become billionaires after taking their companies public this year through special-purpose acquisition vehicles, according to data compiled by Bloomberg. The firms’ U.S.-traded stocks jumped more than 85% last month, bolstered by the announcement of Tesla joining the S&P 500.

Representatives for XPeng and Lordstown Motors declined to comment, while a BYD spokeswoman said China’s recent plan adds potential to the industry. A Fisker spokesman said the company is focused on its first vehicle, the Ocean SUV, which is scheduled to go into production in 2022. A representative for Nio didn’t respond to a request for comment.

“The size of the EV market seems to have gotten much bigger, creating an opportunity even for newer, smaller players to vie for a piece of that pie,” said Bloomberg Intelligence analyst Steve Man.

Updated: 12-17-2020

Tesla-Style Rally Puts Chinese Electric-Vehicle Makers On Par With GM, Ford

Chinese EV companies—most of them unprofitable—have seen their valuations soar to levels similar to those of the American auto giants.

China’s electric-vehicle makers have surged in value, boosted by bold national green-energy targets and individual investors hoping for a repeat of Tesla Inc.’s stunning performance.

American depositary receipts in NIO Inc.,the best known Chinese company focused solely on electric vehicles, have jumped roughly 11-fold this year, lifting its market value to nearly $70 billion as of Wednesday, according to FactSet. In Hong Kong, shares of Warren Buffett -backed BYD Co., which produces hybrid electric- and gasoline-powered cars, as well as batteries, have more than quadrupled, valuing it at $69 billion.

The meteoric rises put these companies in line with large traditional car makers, such as General Motors Co. and Ford Motor Co. , which had market values of $59 billion and $36 billion, respectively, on a fully diluted basis.

For now, though, most Chinese upstarts are unprofitable—and they are also selling far fewer vehicles than major automobile groups. Xpeng Inc., for example, delivered more than 14,000 cars in the first three quarters of 2020. By comparison, GM sold more than 1.9 million cars in China during the same period.

Tesla’s success has fed investor enthusiasm, as has China’s pledge to become carbon-neutral by 2060, said Elizabeth Kwik, investment manager for Asian equities at Aberdeen Standard Investments. “China is very serious about achieving this goal,” she said, citing President Xi Jinping’s personal endorsement.

To help cut carbon emissions, China aims for electric vehicles to make up 20% of car sales by 2025, and 50% by 2035. According to Principal Global Equities, those goals imply annual growth of 30% to 35% through 2025 in unit sales for what China calls new-energy vehicles, a category that includes hybrids, as well as battery- and fuel-cell-powered electric cars.

While the sector once relied heavily on subsidies to boost sales, investors and analysts say prospective buyers are now more focused on other issues, as cars have become cheaper and energy costs have come down. Tax breaks, longer driving ranges, and easier access to license plates—which can be hard to get in the major cities—have also helped stoke demand. The government has cut the scope of an earlier subsidy scheme, but extended it for two years.

Drivers appear ready to go along. A recent CLSA survey of Chinese consumers found more than half of those planning to buy a new car would prefer to go electric, thanks to falling prices and improving quality, up from one-third of respondents in a 2018 poll.

As with Tesla, individual investors have helped fuel the rally. Thirty-four year-old Dennis Coyle, from Morris County, N.J., has bought more than $50,000 worth of stock in NIO since June, and said he has almost quadrupled his money. “There’s not much that would get me to sell right now,” said Mr. Coyle, who runs a landscaping business.

Ashar Qureshi, a 27-year-old product manager in Toronto, has bet on both NIO and Xpeng in recent months. His bets using options have netted him tens of thousands of dollars, and he holds close to $100,000 worth of stock in NIO, he said.

The run-up means Chinese EV stocks trade at high valuations, compared with near-term expectations for sales and profits. Li Auto Inc., for example, trades at an enterprise value—a measure that includes both debt and equity—of about 7.7 times expected sales in the next 12 months, according to FactSet, versus 1.1 times for GM.

For those lofty values to be justified, the companies will have to maintain rapid growth, while competing effectively with Tesla and big car manufacturers, both domestic and foreign. Principal Global said while the new-energy specialists would keep growing, valuations are already very generous, and likely factor in future expectations.

CLSA’s polling shows while Tesla’s Model 3 is popular in China, many prospective Chinese car-buyers favor domestic brands. “The local makers have a clear advantage in terms of producing relatively cheap and value-for-money cars compared to foreign brands,” said Ken Shin, the broker’s head of Asia energy research.

Fast take-up of electric cars in China made it a good time to consider investing, said Winnie Chwang, a portfolio manager at Matthews Asia. Still, she said the firm was mindful of intensifying competition, as conventional car makers broaden their electric offering. Xpeng was a Top 10 holding for the company’s Asia Growth Fund as of end-November.

Mr. Qureshi, the individual investor in Toronto, said he was reminded of dizzying price moves in cryptocurrencies.

“I feel like I’m still trading crypto,” he said, “just because of the returns.”

As with digital currencies previously, he said he saw signs of froth in electric-vehicle stocks, and was intending to use put options to hedge against potential losses. “I think it’s gotten a little bit out of hand,” Mr. Qureshi said.

Updated: 12-17-2020

Tesla Upgraded by S&P After Cash Levels Soar To Record High

Tesla Inc. was upgraded by S&P Global Ratings — putting the company two steps from investment-grade — after a recent share sale boosted its cash to record levels.

The rater raised Tesla one notch to BB, in line with that of Moody’s Investors Service. S&P assigned a positive outlook, saying there is at least a 33% chance that Tesla could be upgraded again in the next year if its competitive advantage “strengthens meaningfully,” analysts Lawrence Orlowski and Nishit Madlani said in a report Thursday.

Tesla raised $5 billion in an equity sale earlier this month to capitalize on a surge in its shares that pushed the company into the S&P 500. It’s had five consecutive quarters of profit and a growing recognition on Wall Street that battery-powered electric vehicles are here to stay. The Palo Alto, California-based company aims to deliver 500,000 cars this year, which would be a huge milestone for the 17-year-old company led by Chief Executive Officer Elon Musk.

This is Tesla’s third upgrade during the pandemic, a feat “almost unheard of in the sector,” according to Bloomberg Intelligence analyst Joel Levington.

Updated: 12-18-2020

Tesla Joins The S&P 500: Five Things To Watch

Traders are bracing for big swings in stock, options markets ahead of electric-car maker’s addition to index Monday.

Tesla Inc. will officially join the S&P 500 Monday, likely precipitating a frenzied Friday afternoon in markets.

The electric-car maker will be by far the largest firm by market value ever to join the S&P, the most widely tracked stock index. Tesla’s inclusion will prompt the dozens of index funds that track the S&P to seek to purchase tens of billions of dollars of stock at Friday’s closing price, in a bid to track the index as closely as possible. Because of the firm’s size and the volatility of its shares, Tesla’s addition may ripple through the market in additional, unpredictable ways, traders said.

A spokesman for S&P Dow Jones Indices, which oversees the S&P 500, said the company consulted with market participants and communicated the addition to the market “far in advance of typical index changes.”

Here Are Five Things To Watch:

1. Quadruple Witching

Tesla’s addition to the S&P 500 coincides with quadruple witching, which occurs four times a year and refers to the day that options and futures on both indexes and stocks expire simultaneously. These heavy volumes will boost liquidity and will likely help smooth the addition of Tesla to the S&P, traders have said.

Tesla will be the sixth-biggest company in the index, worth $622 billion, after soaring almost 700% this year. RBC Capital Markets estimates that about 3% of the roughly $4.7 trillion in assets that passively track the S&P will trade Friday. That is more than triple the figure at the last S&P rebalancing in September.

Traders say the heavy activity could stoke big moves across the market, as shares of companies across the index will have to be bought and sold to accommodate Tesla’s roughly 1% index weighting. The real-estate investment trust Apartment Investment & Management Co. , for example, will be dropped from the index. RBC estimates shares of companies like Xerox Holdings Corp. , Berkshire Hathaway Inc. and Intel Corp. could face selling pressure, reflecting considerations such as index weightings and other factors.

Tesla’s ascension will also affect the S&P Completion Index, which tracks all U.S. stocks except those in the S&P 500. Other indexes such as the S&P 400 and S&P 600, which track midsize and small-cap companies, and the Nasdaq-100 will also readjust their holdings.

2. Tracking Errors

Index funds tracking the S&P 500 have a small window Friday to buy a lot of Tesla stock. If they end up with too much or too little, or can’t get the closing price, the difference will register as a so-called tracking error, reflecting the price gap between a fund’s purchases and those of the index it tracks. Fund managers don’t like those because they make it harder for them to match their benchmark.

Index funds are planning to do most, if not all, of their buying of Tesla at the close on Friday to match S&P’s price, several traders and investors said. But expectations of heavy demand may make that difficult, traders added. In recent weeks, some investors have questioned whether enough sellers will come to the table, given Tesla’s famously passionate fan base and the sheer amount of buying passive investors must do.

All this could stoke big swings in shares of Tesla. Exchange operator Nasdaq Inc., where Tesla shares are listed, and regulators discussed increasing price limits on the stock to allow it to move more than the maximum 10% currently allowed before a pause in trading, said a person familiar with the matter. The limits haven’t been changed.

3. Last 30 Minutes of Trading

Tesla’s addition stands to add to the importance of the closing auction that determines end-of-day prices for thousands of stocks. Nasdaq will accept so-called market-on-close orders throughout the day. At 3:50 p.m. EST the exchange operator will start disseminating information on market imbalances, or outsize demand to buy or sell Tesla. At that point, traders will step in, likely vaulting an already crazy day to new heights.

“A few minutes before the close, when the imbalance feeds come out, a ton of algos will start pairing off imbalances or positioning their trades,” said Shishir Gupta, global index strategist at RBC Capital Markets.

4. Derivatives Market

Traders are also watching how the giant addition will ripple through the derivatives market. Tesla shares are nearly three times as volatile as the S&P this year, averaging a 4.1% daily move vs. the index’s 1.4%. Volatility is a key input to options pricing, meaning Tesla’s addition may influence prices of options contracts tied to the S&P 500 alongside other derivatives measures, traders and analysts said. The exact impact is unclear, and will depend on how volatile Tesla continues to be as well as how correlated it is to the rest of the index constituents, traders said.

“You have a much more volatile member—at a significant scale—joining an index and no real proof or historical precedent for it,” said Cem Karsan, a senior managing partner at volatility hedge fund Aegea Capital Management LLC, who has been trading Tesla options. “They have to affect each other.”

5. Smaller Stocks

Tesla’s addition could also drive moves in smaller-capitalization stocks that will be sold to make room for it, traders said. A bout of selling could lead to a liquidity crunch, potentially driving prices of some shares sharply lower.

Updated: 12-18-2020

Elon Musk Has Made Millionaires Out of His Most Loyal Fans

They bought Tesla shares early and kept the faith. After a dizzying year, is it time to cash in?

Brandon Smith does not own one of Tesla Inc.’s sleek electric cars. In the small town south of Milwaukee where he lives, even seeing one on the road is rare.

But in late June 2017, Smith poured $10,000 of savings into Tesla’s stock. He said it was the first time he’d ever invested in a company. That was just the start. Each paycheck, Smith, a video producer, would pay his bills and then buy additional shares with the rest.

“I don’t make six figures, and I don’t know anything about puts and options,” Smith, 32, said in a phone interview. “I’ve just bought and held the entire time. I’ve never sold a single share.”

Now Smith has joined the ranks of the “Teslanaires,” as some of the company’s investors call themselves, with a holding that he says has ballooned to over $1 million, fueled by a rally of nearly 684% this year as of Thursday’s close. On Monday, Tesla will join the S&P 500 Index, a huge milestone for Elon Musk and the company he’s led as chief executive officer since 2008. It’s also a big day for the legions of retail investors who flocked to Tesla’s clean-energy mission and rode out numerous storms — production misses, Elon’s tweets and even the pandemic market crash.

Those who held on have been handsomely rewarded: Tesla’s shares have soared this year after five consecutive quarters of profits and growing sentiment on Wall Street that the shift toward electric vehicles is accelerating.

Where the stock heads from here is up for intense debate. To begin with, investors and analysts still wrangle over what Tesla is: A car company? A clean-energy behemoth? A technology company? There’s also disagreement over how it should be valued. Goldman Sachs has a price target of $780, while JPMorgan Chase’s is down at $90.

You don’t have to work on Wall Street to get deeply into the weeds on Tesla’s operations and finances. A dense, sprawling ecosystem of podcasts, Reddit threads and YouTube channels dedicated to nearly every facet of Tesla makes it possible to learn about the company without ever reading an analyst report.

There are countless forums and regional owners’ clubs that gather on Zoom or meet up to check out Tesla’s latest Supercharger station. Ryan McCaffrey’s weekly “Ride the Lightning” podcast is in its fifth year, and Rob Maurer’s “Tesla Daily” drops every weekday. Smith said he probably spends two to three hours a day learning about Tesla, often scrolling through the forums on his lunch hour.

Tesla has fully embraced retail investors like no other publicly traded company. Its quarterly earnings calls regularly feature crowd-sourced questions. During a contentious earnings call in May 2018, Musk chided Wall Street analysts for asking dry and “boring, bonehead” questions. “We’re going to go to YouTube,” he said, and then allowed Gali Russell, the host of a financial talk show geared toward millennials, to ask questions for 23 minutes.

On a January earnings call, Musk said he thinks retail investors have “deeper and more accurate insights” than many institutional investors and analysts.

Laura Goldman, 62, says New York-based analysts missed how much appeal the company holds for a younger generation that’s deeply worried about the climate crisis. Goldman, a former stockbroker, doesn’t even own a car — let alone a Tesla. She bought 300 of the company’s shares in the fall of 2010, a few months after its IPO, and picked up more stock over time.

All the while, Goldman says that legacy automakers like General Motors Co. and Ford Motor Co. appeared to sit on the sidelines as the electrified future arrived. “I have rich Republican friends,” she said. “When they started buying Tesla cars, that convinced me to hold onto the stock.”

As of Thursday, she was close to joining the ranks of paper millionaires, saying her Tesla shares were worth nearly $984,000. She notes how Musk is often portrayed as crazy — as if that’s a negative. But the billionaire’s version of crazy is a willingness to push boundaries, she said, and she believes that’s the reason Tesla has succeeded.

Then there are the investors in Tesla’s stock who are also proud owners of the company’s cars.

Basel Termanini, 60, took delivery of his first Tesla — a Model S — on Christmas Eve 2012. He’s owned seven and currently drives a Model Y in Pittsburgh, where he is a doctor. “Driving a Tesla is like the difference between a black-and-white TV and color,” Termanini said in a phone interview. “Once you drive a Tesla, you can’t go back.”

Termanini invested in the company a few months after the June 2010 IPO and says his investment has grown to over $2.5 million, between options and stock. He has traded over the years but he’s not selling now, a decision that’s made easier by the fact that he has a diversified portfolio.

Investing in a single company — particularly one as historically volatile as Tesla — is risky. But the appeal of the sector is easy to understand.

“Electric vehicles are one of the areas of the energy transition that individual people can very much relate to,” said Colin McKerracher, head of transport analysis at BloombergNEF. “Mobility is personal in a way that decarbonizing electricity supply, for example, is not. The way you turn on your lights is still going to be the same whether it was powered by solar or gas and coal in the past. The way you drive looks and feels different in this new era, and I wouldn’t underestimate the excitement that’s creating for investors.”

Holy smoke’s I’m a $TSLA-naire! It was @Gfilche that got me inspired to invest 42 months ago, @truth_tesla‘s deep dives that bolstered my confidence, @TeslaPodcast kept me regularly informed. TY to @Tesla employees & @elonmusk for executing. The journey just started, HODL pic.twitter.com/9jCEFgzcDv

— Brandon Smith (@BLSmith2112)  December 8, 2020

The question for many of these Teslanaires is what to do now. Spread some risk into other investments? Sell to pocket some of the gains? Or stick with Musk?

Goldman said she’ll be watching closely to see how the stock trades as part of the S&P 500, since that means Tesla will appear in more mutual funds and large institutional holdings. “The volatility and the fanatics in the stock are part of what made investing in Tesla so fun,” she said. “It was fun to be part of the anti-establishment. It’s not as fun to be part of the S&P.”

Smith doesn’t have an exit strategy for his Tesla investment, though he’s begun thinking of finally building, or buying, his own house. Currently, he and his brother share a house that their grandfather built in Cudahy, Wisconsin. Monday — the day Tesla joins the S&P — is his 33rd birthday. He remains bullish on Tesla’s future, pointing to what he sees as the growth still to come.

“The next big thing is fourth-quarter deliveries, when Tesla could reach 500,000 deliveries for the year,” said Smith, who has a Cybertruck T-shirt and was able to get a bottle of “Teslaquila” before it sold out. “Then you have the new battery production in Texas and the Cybertruck, which doesn’t even need a paint shop. There’s the energy side of the business. I don’t think people realize the scale of Tesla’s ambitions.”

Updated: 12-24-2020

Nikola, Republic Services End Collaboration On Garbage-Truck Development

Longer-than-expected development time and unexpected costs are cited.

Nikola Corp. said Republic Services Inc.,its partner in an effort to develop zero-emissions garbage trucks, has agreed to terminate the collaboration, marking a setback for the electric-truck startup as it tries to re-establish credibility with investors.

The Phoenix-based truck maker said Wednesday the two companies will no longer work together to develop battery-electric garbage trucks, and the move will result in the cancellation of Republic’s order for potentially several thousand vehicles.

In August, Republic revealed the Nikola partnership, saying it would purchase at least 2,500 or as many as 5,000 trucks. Republic also said at the time it expected to begin integrating the trucks, which were meant to have a range of 150 miles, into its fleet beginning in 2023.

In a statement Wednesday, Republic said it remains committed to an electrified future and still plans to work with other manufacturers on electric trucks.

Nikola, which went public in June through a reverse merger, has attracted investor attention with its hopes to transform the trucking industry. But in recent months, the company has struggled with a range of challenges, leading executives to fall short on meeting objectives they set for the year—among them securing a large order for trucks still under development.

Nikola shares fell 9.8% in Wednesday afternoon trading.

In a letter to employees, Nikola CEO Mark Russell said Nikola executives decided to end the Republic collaboration after realizing that fulfilling the order would require Nikola to design an entirely new truck, rather than use designs already in the works.

The five-year-old startup was rocked in September when short seller Hindenburg Research released a lengthy report casting doubt on the company’s ability to deliver on its technology and calling Nikola an “intricate fraud.” Shortly after, Nikola founder Trevor Milton abruptly stepped down, and Steve Girsky, a veteran auto-industry executive, was named chairman.

Nikola has called the report’s claims false and misleading.

More recently, General Motors Co. has pulled back on a plan to take an equity stake in Nikola in exchange for building an electric pickup truck for the company, called the Badger.

After surging this summer, Nikola’s stock has taken a beating in recent months as executives continue to deal with the fallout of the short seller’s report and the scrutiny it has brought to their operations.

Nikola’s shares closed at $16.83 Tuesday, down roughly 60% since the Hindenburg report was published in early September.

Nikola executives have said collaborations like the one struck with Republic are central to its business plan, which aims to build zero-emissions trucks and lease them to fleet operators.

Since Mr. Milton’s departure, they have worked to reorient the business, sharpening its focus on heavy trucks and pivoting away from some projects championed by the founder, such as the Badger pickup truck with GM and a plan to sell zero-emissions personal watercraft.

Analysts said the canceled order was a short-term setback, but it would allow the company to better focus on its core business of semi-trucks for long-haul transportation.

“This is likely the last of the ‘restructuring’ that was required to refocus,” Chris McNally, an analyst at Evercore ISI, wrote in a note Wednesday.

Nikola also said Wednesday that it has laid out a road map that has deliveries of its Tre semi-truck starting in the U.S. next year. It said it is planning to break ground on its first commercial hydrogen fuel station in 2021.

Executives have promoted the Republic order, and another one placed in 2018 by Anheuser-Busch InBev SA’s U.S. subsidiary for as many as 800 hydrogen-electric trucks, as a validation of its strategy, which aims to disrupt the commercial trucking industry—a sector that has long been dependent on fossil fuels.

A spokesperson for AB InBev didn’t respond to a request for comment.

In September, Ingrid De Ryck, the company’s vice president for procurement and sustainability, said AB InBev would continue to work alongside all its partners, including Nikola, to reach its sustainability goals.

Nikola is trying to overcome other challenges as well.

The allegations raised in the short seller’s report have become the subject of investigations by the Justice Department and Securities and Exchange Commission, the company has disclosed in regulatory filings.

Nikola has said it is cooperating with the inquiries. The Justice Department and SEC declined to comment.

The company is also still trying to secure a partner to build a network of hydrogen-fueling stations, another goal executives had hoped to achieve in 2020. Talks with potential partners, including oil giant BP PLC, stalled this fall following the release of the short seller-report, The Wall Street Journal has previously reported.

Mr. Russell said last month Nikola still hoped to conclude a pact with a hydrogen-station partner in 2020, but disruptions caused by the Covid-19 pandemic had slowed progress.

Updated: 12-29-2020

Tesla’s Dominant Position In China Could Be Threatened Next Year



Tesla Inc. is coming to the end of its first year selling China-made cars with a commanding position in the world’s biggest electric-vehicle market, but Elon Musk shouldn’t rest on his laurels.

While Tesla regularly topped monthly premium EV sales tallies this year, helped by the sedans churned out from its multibillion-dollar plant opened to much fanfare in Shanghai last December, 2020 was also marked by rivals catching up. In 2021, the breadth of the competitive attack that Tesla faces will be greater than ever.

Whether Tesla can defend its lead in China will be key to its wider growth and earnings trajectory. While still in its infancy, China’s electric-car market dwarfs that of other countries and the government is intent on further expansion amid commitments to reduce fossil-fuel use.

Tesla’s fate in China will also show whether it can grow into a truly global carmaker, an ambition investors are banking on after pushing the company’s shares up almost 700% this year.

A trio of local champions Nio Inc., Xpeng Inc. and Li Auto Inc. has emerged as the front line against the Palo Alto, California-based company.

All traded in the U.S., and enjoying backing from government entities or internet giants, the three startups are quickly winning fans, with sales of their electric SUVs, sedans and crossovers also rising in 2020 and their shares surging on Tesla’s coattails.

“Since June, you’ve seen a steady rise in sales by Nio, Xpeng, and Li,” said Bill Russo, founder and chief executive officer of advisory firm Automobility Ltd. in Shanghai. “Can you stay competitive with these fast-moving, internet-backed, very deep-pocketed companies?”

China is Tesla’s largest market after the U.S., with sales in Asia’s biggest economy topping 120,000 units this year, according to local registration data. And Tesla keeps ramping up production in Shanghai, prompting analysts to forecast that China will account for a bigger slice of its sales and earnings in the years ahead.

The Model 3 sedans Tesla sells in China have higher profit margins than its vehicles in the U.S. and Europe, and China could make up more than 40% of Tesla’s sales by early 2022, Wedbush Securities analyst Dan Ives said in a Dec. 21 research note. That compares with about 20% now.

“China could see eye-popping demand into 2021 and 2022 across the board with Tesla’s flagship giga 3 footprint a major competitive advantage,” he said, referring to the Shanghai plant.

Expansion Push

Waiting in the wings for Tesla is the Model Y, which Musk says has the potential to outsell all other vehicles it makes. The crossover is already being built in California, and a Shanghai-assembled version is clearing the final regulatory stages to start selling in China as soon as next year.

Earlier in December, drone footage captured around 40 Model Y vehicles being driven out of the factory and wrapped in protective covers.

“China will continue to fuel Tesla’s global growth in 2021, more so than ever,” Sharon Li, a JL Warren analyst, said in a recent note.

The carmaker is also expanding its geographic footprint, recently opening multiple Tesla centers in China’s lower-tier cities including Weifang and Linyi in northeastern Shandong province. Meanwhile, it’s bolstering its public and government relations teams in smaller hubs including Shijiazhuang and Haikou, in addition to larger cities.

Tesla is starting local production of chargers in Shanghai too, part of an effort to expand its charging network in more cities. The company recently completed its 500th super-charging station, marching toward an annual target of 650.

Crowded Field

Trade group China Passenger Car Association predicts that Tesla will sell as many as 280,000 vehicles in the country next year. While that represents impressive growth over 2020, it would still leave more than 80% of the market up for grabs. PCA predicts total sales of 1.7 million new energy vehicles for 2021.

hat means local premium brands Nio, Xpeng and Li are increasingly a threat — combined, the three companies already approach Tesla’s monthly sales tally. SAIC-GM Wuling Automobile Co. and BYD Co., which sell less expensive electric cars, are also gaining momentum.

Nio, the biggest of the Chinese trio, has steadily boosted sales of its electric SUVs that it sells at a price as much as 40% higher than Tesla’s Model 3. The company’s retail strategy includes clubhouses with showrooms, lounges, work spaces, theaters and even camp activities for customers’ children.

A Tesla price cut earlier in the year added some pressure, but a subsequent reduction failed to have a similar impact, Nio CEO William Li said on a recent earnings call.

“We didn’t see any specific impact on our order intake,” Li said. “This proves that we have our own unique advantages.”

Xpeng similarly has seen brisk sales growth, helped by lower prices than Tesla’s. The company, which touts the smart features of its vehicles, raised $2.2 billion this month selling additional stock, capitalizing on a recent share-price surge.

“I would call 2020 Year One of an intelligent electric-vehicle market in China,” Xpeng Vice Chairman Brian Gu said in a phone interview on Nov. 27. “We’re seeing really good sales of many good products.”

Common Enemy

But Tesla and its Chinese rivals also face a common threat: conventional carmakers swiftly moving to electrified autos. Volkswagen AG plans to introduce eight ID series electric models in China by 2023, while Daimler AG, the maker of Mercedes-Benz luxury cars, has launched the EQC electric SUV and plans to expand its lineup of purely battery-powered vehicles to at least 10 in coming years.

While their EV volumes in China are still small — they’ve yet to break into the Top 10 — the traditional giants have the advantage of vast dealership, service and supply-chain networks.

China’s government, meanwhile, is doing its best to lure consumers and old-school automakers away from gas guzzlers with subsidies and restrictions. The target is to have NEVs account for 20% of the market by 2025, up from about 5% currently.

Tesla will have its work cut out to ensure it’ll be among the beneficiaries of that push. Lu Bin, a fund manager at HSBC Bank (China) Co. and an early buyer of a China-built Model 3 sedan, said he opted for a roomier Li Auto model when he purchased a new EV in November. The range is better, plus the six-seater is more suitable for families.

“Tesla had the early-mover advantage and has shown the way to consumers,” said Russo. “But now, there are more options.”

Updated: 1-28-2021

Tesla’s Model S Plaid Is Fastest-Accelerating Production Car

Remember when Elon Musk said Tesla only continued to build the Model S and X for sentimental reasons? (during an earnings call, October 2019).

Now we have refreshed, updated ‘Plaid’ versions of each. Tesla has given the cars all-new interiors, with updated screens and climate controls. It’s also redesigned the battery pack and modules in the new cars and has been making upgrades to the plant in Fremont ahead of their launch later this quarter.

The Model S Plaid is quite something. Tesla says it’s capable of 0-60 in less than 2 seconds, claiming in the earnings presentation that it’s the fastest-accelerating production car in the world. It will cost $112,990, including potential incentives.

That will get you 390 miles of range and a top speed of 200 miles per hour. Deliveries will start around March, according to the company’s website.

There’s a higher-spec $132,990 Plaid+ model which has a greater 520-mile range on a single charge. The company estimates it will be set for delivery in late 2021.

The plaid version of the Model X has had a similar makeover and injection of speed and power. In fact, Tesla claim it’s the “highest performing SUV ever built” in terms of power and acceleration, according to its website. Starting at $113,190, inclusive of incentives, it has a maximum range of 340 miles (less than the more standard Long Range model) and can do 0-60 in 2.5 seconds.

Three high-performance motors give the X plaid peak power of 1,020 horsepower. Musk said in the earnings call deliveries of the Model S Plaid will be in February.

For more on Tesla Fourth-Quarter Earnings, click here for our TOPLive blog.

Updated: 2-7-2021

Electric-Car Buzz Pushes Up Shares In Company With Nothing But Cash

Churchill Capital Corp IV’s stock has more than tripled on report it is in talks with Lucid Motors.

When news emerged in December that Churchill Capital Corp CCIV 14.66% IV, a blank-check company with no assets beyond its $2 billion in cash, had made an offer to acquire DirecTV, its stock barely moved.

After a report in January that Churchill was in talks to merge with the buzzy electric-vehicle startup Lucid Motors Inc., it was a different story.

Speculation about the possible combination spread on Reddit and other social-media platforms, fueled by Tesla Inc.’s TSLA 0.26% surge and a bet on a post-gasoline future. Traders sought additional information online and pointed to myriad bits of information to infer a deal was imminent.

One online discussion prompted a trader to drive to an airport to photograph a jet that other traders conjectured was connected to the deal.

The stock has surged more than 220% since the report last month, the biggest-ever stock increase of a special-purpose acquisition company before announcing a merger, according to SPACinsider.com. Talks between the two companies are continuing, though a deal isn’t imminent, according to people familiar with the matter.

Such stock run-ups historically have been uncommon for SPACs, and even after they announce merger targets, their shares rarely jump so significantly. That is because the SPACs are paying what they believe to be a market price for the company they are merging with, so in theory, the shares shouldn’t surge unless they are undervaluing their target company.

Churchill’s experience illustrates the extraordinary appetite among stock-market investors for electric-vehicle startups today, where even the prospect of a merger can send a SPAC stock soaring. The fervor is being fed by the rise in Tesla’s shares, which has pushed the auto maker’s market capitalization to above that of Facebook Inc. as investors bet on a rapid global transition to electric cars and believe the time is ripe to invest in the next growth opportunity.

Tesla has a market value of more than $800 billion, about seven times that of Ford Motor Co. and General Motors Co. combined, though its U.S. market share in 2020 was about 1.2%, according to LMC Automotive.

Churchill said last month in response to unusual trading of its stock that it is “always evaluating a number of potential business combinations.” Lucid declined to comment.

Several companies planning to make electric cars, including Fisker Inc. and Lordstown Motors Corp. , are valued above $4 billion; they haven’t produced any products or revenue.

The clamor has sparked comparisons to the dot-com bubble of 2000, when a similar rapid run-up of stocks with little or no revenue was common. It has led to more voices calling the combined electric-vehicle and SPAC mania unsustainable.

“It has gotten very frothy,” said David Erickson, a senior fellow at University of Pennsylvania’s business school and a former investment banker who took tech companies public in the dot-com boom. The broad SPAC and electric-vehicle frenzy “is gonna end badly—it’s just a question of when and how,” he said.

Churchill IV is headed by Michael Klein, a former star investment banker at Citigroup Inc. and adviser to Saudi Arabia’s sovereign investment fund. Mr. Klein’s Churchill Capital Corp. has created several SPACs, including one that merged with health-care company MultiPlan Inc. in an $11 billion deal last summer.

Churchill IV raised $2 billion in July, making it one of the largest SPACs ever, and began looking for a target company with which to merge.

In December, The Wall Street Journal reported the company was making a bid for DirecTV, a unit of AT&T Inc. Churchill’s stock, which had been hovering around $10 per unit since it went public at that level, rose 0.6% for the day.

On Jan. 11, Bloomberg News reported Churchill was in talks to merge with Lucid, and Churchill’s stock soared 50% to $15. Lucid is backed by $1 billion from Saudi Arabia’s Public Investment Fund and is further along in development than many young rivals in the electric-vehicle space, with plans to start producing cars later this year.

Little is known about the terms of any potential deal or Lucid’s finances, information that would normally be crucial to assessing how a combination should affect Churchill’s stock.

The report spurred users on Reddit, Twitter Inc. and the finance social-media platform StockTwits to point out apparent connections between Churchill and Lucid. There are some factual commonalities, such as an executive who worked with both companies. Other possible links have been more tenuous, and in some instances inspired real-world sleuthing.

One online poster noted a private jet was going on a multi-leg trip from San Jose, Calif., to Phoenix, to Teterboro airport near New York City—all places with operations for Lucid or Churchill. The observation spawned speculation on Twitter and Reddit that the jet was ferrying executives involved in an imminent deal.

One user on StockTwits drove to Teterboro and waited for two hours, photographing the jet upon landing. The user, who declined to be named, said he didn’t think the jet was connected, as it appeared to be a family exiting the aircraft.

The stock soared as high as $27 in January before surging again Tuesday to close above $32. Trading last month was halted multiple times amid volatility.

Buyers include Reddit users like Fred Rosa.

Mr. Rosa, a 21-year-old based in Amsterdam, recently finished college and has been investing for about six months on the side, finding he could make far more trading individual stocks than index funds.

He found out about Churchill, which has the ticker CCIV, by reading a channel on Reddit—a so-called subreddit—devoted to SPACs.

“I just opened Reddit one day and literally every comment on the SPAC subreddit was CCIV,” he said. He knew he was buying on speculation, he said, but “the way it was being framed at the time was it was the trade of a lifetime.”

As days ticked by without an announcement, he grew nervous. Perhaps the commenters were wrong, he thought, realizing he could lose a lot of money if a deal didn’t materialize. He sold, taking a roughly $950 profit on the $3,500 he put in.

“This is a meme market,” he said. “That is just how things are right now.”

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