According to the management at Tesla Motors Inc. (NASDAQ:TSLA), the company is the best manufacturer of electric cars in the global automobile industry. There is a lot of research that actually backs the claim as well; however, lately the company is facing challenges in selling its cars. There could be two possible reasons behind the company’s lowering selling rate; one could be the distribution issue and another could be the growing competition.
Despite the difficulties in the sales of the cars, the fact remains that the company has a brand value. Keeping the brand value as well as the technology in mind, one would think that Tesla (NASDAQ:TSLA) would be a promising takeover target for any global car manufacturing company. The only problem is that the company has a market capitalization of more than $27 billion.
The huge market cap of the company might decline, but chances are that it will not be happening anytime soon. In the recent quarter, the company reported sales of just 7,785 cars. The company’s non-GAAP revenue was reported to be $932 million. The sales went up 55% from last year and the company had anticipated the sales of 33,000 cars for the year.
On the upside, Tesla (NASDAQ:TSLA) is planning to come up with a new car that is likely to refurbish the company’s image. The company’s S P85D is supposed to go to 60 from zero in a matter of 3.2 seconds. The problem with that is that the car is expected to be priced at $100,000 which means that the car is not meant for the masses. However, the founder of the company, Elon Musk has said that there will be a car that will be priced at 40,000 and while talking to the press he revealed that the cheaper Tesla (NASDAQ:TSLA) will be released in a couple of years.
However, while Musk is taking the time in the release of the cheaper Tesla (NASDAQ:TSLA), other companies are either working towards releasing their cars for lesser value or they have already released them. One example is the BMW i3 which is being sold for a price of below $45,000. Another car Chevy Bolt, which is a product of General Motors Co. (NYSE:GM) is said to be priced at $35,000 at the time of its release which will be in two years for now.
The pricing of these cars will definitely give Tesla (NASDAQ:TSLA) a tough competition. All the huge manufacturers want to cash in on Tesla’s (NASDAQ:TSLA) success and that is the company’s biggest challenge. However, the company will have to bring its market cap down. The competition is increasing and the market is getting crowded by the day as more companies are trying to bring electric cars in the market.
Investors would not want to invest in a company that is unable to sell 100,000 cars per year. Clearly, any company that is selling fewer cars in a year would not be able to generate profits for a long time.
