In all the excitement generated by Tesla (TSLA) the stock, we often seem to forget about Tesla the company and what it stands for. Elon Musk has a vision and that vision is to make a car that doesn't destroy the environment. He has had this market pretty much to himself for several years and, like a Netflix (NFLX) or an Amazon (AMZN) , the company's sales hit a level of scale that allows Tesla to fund its business at very inexpensive levels in the stock market through incredibly eager buyers. In this case Tesla's doing it with stock sales -- $5 billion at the market right now, second tranche by the way.
Now, though it has a challenger, NIO (NIO) , the Chinese company that unveiled a new electric vehicle luxury sedan this very weekend that people are going gaga about. Its got tons of features, including an Nvidia (NVDA) based self-driving solution. Lots of bells and whistles that could rival Tesla in the electric vehicle market.
Right now it is being viewed as very zero sum - Tesla versus NIO, with only one winner, hence why NIO's stock is up and Tesla's is down. I have to laugh about that. Electric vehicles comprise just 3% of the entire market. Does anyone really believe that these two are going to duke it out and there will be only one winner?
Here's what I am thinking. The buyers of the Tesla stock think they are making a statement about the need to slaughter the combustion engine. Tesla stock buyers, particularly younger buyers, genuinely believe that they are helping to fuel the anti-combustion engine movement. They want to destroy the fossil fuel industry and Elon Musk is their champion. They see a virtuous circle: the higher the stock the more money it can raise, the more money it can raise, the more cars it can build, the more cars they build the higher the profits, therefore the higher the stocks.
I do not think NIO will disrupt that process. It 's not clear about NIO's funding - it is a Chinese stock after all - but I know they could easily do the same thing.
It should come as no surprise, especially to those who watch my Bull Market Fantasy show, that I am a huge football fan and I watched pretty much every minute of television this weekend. All six games. I, of course, watched the endless car ads. I always marvel that there's no need for Tesla to advertise. Too much demand, again because the car is cool but also to destroy the combustion engine tyranny.
With the incoming president, Joe Biden, perhaps the most vociferous spokesperson on the need to reverse global warming, I think you may see big subsidies for buyers of Tesla, even as they aren't even needed. But if we get them and Tesla puts the money it is raising into more factories to meet demand, the virtuous circle will accelerate.
Which brings me back to the NIO versus Tesla food fight. The younger generation has spoken with its endless buying of Tesla's stock and now NIO's: combustion engines are going away and while analysts believe that as much as 10% of the market might be EV in four years, it's really up to how many factories NIO and Tesla can put up. If they can raise capital at little or no cost, which is the case, then I think the combustion engine's going to die out far more quickly.
I don't think I can recall a time when individuals bought stock in part because they are simply rooting for the company. And when I have seen it, there are usually disastrous consequences.
Now, when a company in this space raises money it's welcomed by younger investors, according to the data, and those who root have been massive winners.
That's because the buyers are riding one of the great tidal waves of our time: the need to stop fossil fuels before they destroy the planet. The buyers of the car and the buyers of the stock? They are rebels with a cause, and they rebels are winning.