Tesla for Aussie Investors

Tesla. The name has become synonymous with Electric Vehicles, as the company rose to be  the largest manufacturer of EVs on the planet, offering four different models with a range of price points, performance, and features.

Although the name Elon Musk immediately conjures up images of Tesla ‘s luxury sedan – the Model X, it might surprise some investors to learn Musk is not the founder of the company, joining  in 2004 as Chairperson of the Board following an investment providing the majority of the funding needed to develop the EV sportscar – the Roadster.

Musk left day to day operations to the Tesla founders — Martin Eberhard and Marc Tarpenning – concentrating on the design of Tesla’s first entry into the market while  providing a vision for the company’s future – building a series of cars, each more affordable, and provide zero emission charging options.

A contentious period while the Roadster was in development led to the founders leaving the company and Musk taking over as CEO. Nearing bankruptcy and unable to fill the demand for pre-paid purchases of the $109,000 Roadster, Musk raised $440 million dollars in convertible debt with the first Roadster delivered in February of 2008.

A lawsuit allowed the original company employees to lay claim to co-founder status, with Musk among them.

 

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With development of the next Tesla model underway, the company went public in June of 2010, raising $226 million dollars from the initial public offering. Shares sold for $17, appreciating more than 11,000% since listing.

Tesla stock all time chart

Source: Morningstar US.

Buying Tesla Shares

Tesla along with Apple are favorites of Aussie investors who use the mobile investing platform Pearler. Tesla can be found in most diversified exchange traded funds (ETFs) but direct purchases of the stock are also available on another investing platform – Stake—and through the investing arm of Commonwealth Bank of Australia – CommSec – and in-house brokers at National Bank of Australia.

Opening a special trading account for US shares can take time, but there are other more important concerns Aussie investors should consider before finding the best platform for investing in Tesla or in any US stock.

First, the fees for international trading can be higher and sometimes are masked in “fine print.”  More importantly there are differences in the regulatory environments of the ASX and the US exchanges.

Second, US companies report earnings directly to the US Securities and Exchange Commission (SEC) quarterly in a format that may require “translation” for Australian Investors.

Third, there are tax considerations different in the two countries. There are no franking credits in the US. Then there are currency exchange rates, with Aussie investors often forced to convert US dollars reported into Australian dollars on their own.

Finally there is the practical matter of the time difference for investors who like to monitor their stocks by closely following the financial news out of the US.

For many the advantage of exposure to far more available stocks from which to choose, among them  many of the world’s greatest companies, makes the effort to gain access to US markets worthwhile.

Tesla’s Prospective Growth

Tesla’s share price has seen significant volatility stemming from internal issues like production deadlines and external issues like COVID, inflation, interest rates, and swings in commodity prices needed for batteries.

Share price is determined by investor demand for the company’s stock, which in turn is most often driven by demand for the company’s product, both now and in the future. While EV sales have gone a bit soft, future growth remains more than robust. In 2018 2% of cars sold around the world were EVs. By 2023, penetration increased to 18%, and is expected to continue growing as countries around the world grapple with a transition to clean energy.

At its inception Tesla’s official name was Tesla Motors, but to reflect its expansion beyond vehicles the name was changed to simply Tesla Inc.

Following Musk’s vision to make Tesla a clean energy company as well, Tesla added Solar City for residential solar panels. Tesla built a “corridor” of EV charging stations between Los Angeles and San Francisco with the stations powered by solar panels from Solar City. The company is building gigafactories around the world, some for the production of EVs with others adding battery technology and other electrical products contributing to the clean energy transition.

Tesla began as a disruptive company and remains so to this day. In the 1990’s US auto manufacturer General Motors introduced an electric vehicle – EV1 – to the US market. The market breathed a collective yawn and GM abandoned the project.

Then came Tesla, with naysayers doubting the viability of costly EVs and the company’s ability to meet production deadlines, leading to cynics establishing the ‘Tesla Death Watch.”

The company is still expanding its vehicle lineup, adding Semi-Trucks and futuristic electric pickup trucks called Cybertrucks. Perhaps the greatest untapped growth source remains Full Self Driving technology (FSD). Tesla’s Auto Pilot is already acknowledged as the best in class among EV manufacturers. While early developments on FSD cars have had problems, they are coming with Tesla likely to take a leading role.

For renewable energy like solar and wind to fully power the electric grids of the future, large scale capacity to store energy produced on sunny and windy days is essential. Tesla is taking a leading role here with Megapacks and Powerpacks for commercial and industrial use and the  Powerwall for consumers.

Tesla’s commercial scale Powerpacks were used to create the world’s largest energy storage system at that time at the Hornsdale Power Reserve in South Australia. The company is currently building the Gambit Energy Storage project in Texas in the US.

Is Tesla a Good Buy?

The company can add strong profit margins to its string of reasons that suggest the stock could be a good buy in the long term, but there are two risks that have little to do with finances or EV demand.

The first is the driving force behind the company, Elon Musk. Musk’s entry into other ventures, such as SpaceX, Twitter, Neuralink, and now a new company focusing on artificial intelligence – xAI – with a stated goal of “accelerating human scientific discovery.”  The company has released Grok, a conversational AI model. An article appearing in Forbes speculates that xAI will disrupt healthcare by linking with another recent Musk startup – Neuralink – a company studying brain implants for controlling computers.

Newcomers to share market investing when introduced to qualitative analysis of stocks learn the importance of solid management. Investors have valid concerns about Musk’s ability to maintain focus on Tesla with the myriad of competitive entities for his time and energy.

In 2022 a Chinese conglomerate – BVD (Build Your Dreams) – bumped Tesla from the top of the heap of global EV manufacturers, producing 1.9 million vehicles to Tesla’s 1.3 million. The BVD sub-compact EV the Seagull sells for around $11,000, well below Tesla’s Model 3 at $38,900. Tesla is already cutting prices on some of its models with the company website now pricing the Model Y at $31,490 after tax credits and gas savings,  but competition with BYD is likely to continue, even with the possibility of US tariffs levied on Chinese EV imports.

Long-term Tesla may remain a good buy, but Aussie investors buying Tesla shares should be prepared to spend more time following developments in US markets with more coverage of the coming EV wars between Tesla and BYD.

The world’s great companies are often those that expand what they produce beyond what got them started. Think Apple, Amazon, and Microsoft. Once incorporated as Tesla Motors, the company changed its name to Tesla Inc. to mark its expansion into additional applications for clean energy such as solar panels and battery storage systems for electricity grid, commercial, and consumer use.