Can the electric vehicle (EV) pioneer stay far ahead of rising competition through 2032?
As you consider investing in Tesla stock for the long run, it‘s worth envisioning what Tesla could grow into over the next decade if all goes well – or poorly.
Let‘s analyze the promising opportunities and potential pitfalls ahead to forecast a range of scenarios for Tesla‘s business in 2032, ultimately shedding light on future stock price levels.
TLDR: Based on reasonable assumptions for 10X production volume growth and continued disruption of the auto AND energy industries, Tesla stock could potentially trade between $500 to as high as $1,300 per share by 2032, representing upside of 150% to 550% respectively from today‘s roughly $200 price.
Tesla‘s Unparalleled Rise…So Far
To understand Tesla’s future prospects, we must first reflect on their astonishing journey so far.
Data Source: Yahoo Finance
Since their 2010 IPO at $17 per share, Tesla stock has delivered spectacular returns of over 5000% thanks to execution that has time and again exceeded skeptics’ expectations.
Tesla’s ability to manufacture EVs profitably at scale was considered virtually impossible by the wider auto industry just a decade ago.
Yet in 2021, Tesla delivered over 936,000 vehicles globally while generating industry-leading operating margins of 14.7%.
They adopted an Apple-esque integrated business model to rewrite the playbook on designing, producing and selling EVs. As the runaway early leader in EVs now, Tesla finds itself in a comparable position to early 20th century disruptors like Ford defining the future of the auto industry.
But can they stay so far ahead through the 2020s of rivals with far greater resources and manufacturing capacity?
Choppy Waters in Recent Quarters
Despite posting record deliveries and earnings recently, Tesla’s stock has been battered back 60% from all-time highs of around $400 in late 2021 to the $200 range today.
Let’s review the critical factors currently weighing on Tesla’s outlook and business fundamentals.
Data Sources: Tesla Investor Relations & Yahoo Finance
Weakening macroeconomic trends like high inflation and rising interest rates have hit high multiple technology stocks hard in 2022. But company-specific challenges have also emerged:
- CEO Elon Musk’s chaotic $44 billion Twitter deal has been a major distraction for Tesla’s leadership
- Supply chain issues and battery price hikes have impacted production costs significantly
- Competition is heating up with most major automakers pledging over $500 billion in EV investments through 2030
Nonetheless, Tesla enters this perilous stretch from a position of strength as the runaway EV market share leader, which we’ll analyze next.
The Competitive Landscape – Can Rivals Catch Up?
Despite the headwinds, Tesla still delivered over 357,000 EVs just in the first half of 2022 – which exceeds total historical delivery numbers for EV pioneer Nissan Leaf after 12 years on the market!
Ramping up production capacity to millions of cars requires massive upfront capital investments into factories, battery supply chains and charging networks which early movers like Tesla enjoy distinct advantages in today.
Here’s a view of CEO Elon Musk‘s ambitions hyper-growth production roadmap for Tesla this decade:
However, Tesla’s auto market lead today resembles large but fading leads historically held by disruptors like Netflix in streaming video and Amazon in e-commerce. So upside for Tesla hinges greatly on both growing the still-nascent EV market overall while retaining strong share within it.
Let‘s size up Tesla‘s positioning versus old guard mass-market competitors and newer EV startups emerging as potential rivals:
| Company | EV Models Launched | Projected EV Investment | Market Value |
|---|---|---|---|
| Tesla | 5 | – | $380 billion |
| Toyota | 15+ | $70 billion investment planned | $215 billion |
| Volkswagen | 7 | $100 billion+ by 2030 | $77 billion |
| General Motors | 2 | $35 billion by 2025 | $61 billion |
| Lucid Group | 1 | ~$1 billion invested to date | $21 billion |
| Rivian | 2 | $8 billion invested to date | $20 billion |
legacy automakers like Toyota and Volkswagen currently lag far behind Tesla in EVs but are now determined to catch up given their vast financial resources and production capacity. However, a core structural challenge they face is the channel conflict selling EVs that potentially cannibalize existing higher margin gasoline models.
Meanwhile, all-electric startups like Lucid boast cutting-edge EV powertrain technology and Tesla-challenging pricing, but face massive production hurdles to scale beyond advanced prototypes. Rivian is among the most promising having bought and repurposed an Illinois auto plant from Mitsubishi to begin mass delivery of their R1T electric pickup truck in 2021. But Rivian must still establish a value proposition beyond 4×4 off-road enthusiasts.
Amidst these threats to market share, Tesla‘s saving grace is that the overall auto market itself is growing rapidly more electric – projected to reach over 30 million annual EV sales globally by 2030. So even with flat 50% share into the 2030s, Tesla’s production capacity would still likely need to scale over 10X from today‘s levels to meet demand.
But can Tesla‘s capital investments and pace of Gigafactory openings actually keep up?
Scenarios for Tesla’s Business in 2032
Looking out into Tesla’s next chapter post-2025, the bull and bear case scenarios essentially boil down to:
Bull Case: Tesla stays far ahead of competition technology-wise through vertical integration from software to batteries while exponentially scaling annual production capacity towards 20 million+ vehicles by 2030. Plus market demand grows faster than expected.
Bear Case: Competition catches up significantly faster by leveraging existing auto production infrastructure while Tesla faces capacity growth limits or market demand grows slower than expected. Market share shrinks to 25% by 2030.
The above scenarios have vastly different implications for future cash flows. Evaluating assumptions behind both cases can guide us towards a likely base case valuation range.
My 10-year base case sees Tesla shipping ~8 million EVs by 2030, retaining 35% market share on pace to clear 100 million cumulative vehicles delivered sometime post-2035. Higher volume would drive improved profitability, targeting 10% net margins close to tech hardware peers like Apple. That translates to roughly $60 billion in annual earnings by decade‘s end, which seems justified for forward P/E multiple of 22x and resultant future market cap nearing $1.3 trillion.
There is upside risk to this base case if 4680 battery cost efficiencies and Full Self Driving progress enable higher margins. Together with multiple expansion from a proven earnings growth trajectory, this outlines a path for Tesla stock price potentially ranging from $500 on the conservative end up to $1,300 per share by 2032.
Key Factors for Realizing the Bull Case
Of course, Tesla realizing this full growth opportunity requires several things go right:
1. Mainstream EV Adoption: Faster uptake as more consumers discover EVs‘ lower maintenance and ‘fuel‘ costs outweigh higher upfront sticker prices in most countries. Greater charging infrastructure availability accelerates this transition.
2. Production Scaling: Tesla has plans for about 10 GigaFACTORIES but meeting 25-35% supply for an EV market growing 5-10X over a decade will necessitate flawless execution. Continued high demand and order backlogs gives them capital needed to build ahead of demand however. Recent quarterly results suggest the ramps of Berlin and Austin factories are progressing well.
3. Technology Leadership: While battery production has been a key advantage for Tesla to date, new form factors like Solid State promise to reshape economics further. Maintaining ~3 year lead integrating cutting edge battery cell improvements will help Tesla defend market share.
However, Tesla’s fate likely ultimately depends most on resolving important leadership questions given Elon Musk‘s polarizing, unpredictable stewardship as CEO to date.
Can Tesla institutionalize Musk’s secret sauce inventiveness to sustain innovation long after his departure? Handing off the reins to a trusted new CEO and technical chief architect supported by Musk in a Chairman role may emerge as an ideal outcome over time. History suggests founder-led companies often benefit from said founder stepping back once initial ‘scrappy’ era growth plateaus.
Ultimately in disruptive industrial technologies like automotive, executing on multi-year complex roadmaps matters more than charisma alone long-term. Musk has made Tesla the Apple of EVs today, but he doesn’t necessarily need to stick around to play Steve Jobs forever.
Conclusion: Tesla’s Lead Still Commands Bull Case Potential
Even if competition makes major strides, Tesla’s dominant market leadership today allows substantial headroom for growth if they can skillfully scale production capacity over the next decade. Technological edge especially in AI-assisted software also gives Tesla pole position to tap the full disruptive opportunity from vehicle electrification. Lastly, Tesla Energy’s solar and battery business remains a wildcard upside growth driver barely scratched so far.
There of course remain reasonable bear case concerns like economic cyclicality, battery supply shocks or competent challengers. Still, everything EV today revolves around the orbit of Tesla – much like Ford and GM dominated the early 20th century emergence of the automotive industry. So long as Elon Musk and his all-star engineering corps can keep Tesla‘s ambition aligned, their founder-led culture focused and bring future Model designs reliably to hungry customers, expect exciting revenue growth and stock returns to follow!
This analysis was provided for educational purposes only. It is not intended as investment advice for any individual stock.
