“Consequently, can we plug the car into the wall?” my daughter asked me.
“Yep,” I told her. “But if we want, it can plug into the wall right here at home without the need for a special outlet.”
Big eyes appeared in my daughter. “That’s so cool!” she said.
I wholeheartedly concur. I’d just told her about the brand-new electric car I’d preordered, but I warned her that it wouldn’t arrive right away and she would need to exercise patience.
Naturally, I’m referring to the Tesla Model 3.
I became aware of Tesla Inc. (I jumped at the chance to reserve my own Model 3 when Nasdaq: TSLA) began taking orders because I anticipated that demand for the vehicle would be extremely high.
I was right, it turned out. Within days of the company’s newest model becoming available for preorder, more than 400,000 customers had paid a $1,000 deposit to secure their place in line.
I think Tesla’s Model 3 will completely upend the auto industry because it is the first useful, reasonably priced, and highly desirable electric self-driving vehicle on the market.
The Model 3 represents a turning point for Tesla because it positions the business at the forefront of the next big automotive revolution: the adoption of the electric engine.
There are already indications that this trend is starting.
The Demise of the Combustion Engine
The Chinese-owned Swedish automaker Volvo announced last week that it will only produce fully electric or hybrid vehicles beginning in 2019.
The president of Volvo, Hakan Samuelsson, said in a statement: “The solely combustion engine-powered car has reached its end thanks to this announcement.” Although this claim might strike you as a bit extreme, I can assure you that it only represents the beginning of this new trend.
By 2040, plug-in hybrid and electric vehicles are expected to represent 54% of all new car sales worldwide, according to a Bloomberg prediction. This increase will be fueled by more accessible models and government-sponsored incentives for those willing to make the switch.
For instance, France recently unveiled an ambitious plan to completely phase out gas and diesel-powered vehicles by the year 2040, and it is helping lower-income populations make the transition.
This is a result of the mounting urgency to address the dangerous air pollution that is choking not only France but also many other nations worldwide.
Better Performance, Better Quality
Although it’s inevitable that more rivals will enter the electric vehicle market, I think Tesla will stay at the top of the heap.
According to Inside EVs, the company already holds 29.9% of the market for plug-in vehicles. That is almost twice as much of the market as Ford, the automaker that came in second, with just under 16% of the total sales.
The great thing about these figures, though, is that the new Model 3 isn’t included, so once mass production of the Model 3 actually begins, Tesla should continue to dominate the market.
The new Model 3 will go a stunning 215 miles on a single charge and will be something that fits into many people’s price ranges, which is one of the reasons that Tesla has such a leg up over its rivals.
The Model 3 can open up a whole new market for people who were previously worried about an electric vehicle that comes with a hefty price tag because it is also very affordable, coming in at $35,000, which is the estimated average price of a car in 2017.
Finally, Tesla has become a well-known brand thanks to the introduction of the Model 3. In fact, according to Interbrand’s ranking of top 100 brands, Tesla is the only brand-new automaker in the modern era to do so.
So, in addition to my belief that Tesla will lead the automotive industry, I also think it has the potential to grow to be as significant as Apple was when it first introduced the iPhone.
According to a BMO Capital Markets analyst’s estimate, there are currently more than 700 million iPhones in use worldwide, demonstrating how widely used the iPhone has become in recent years.
One More Important Note
Now that I’ve told you what I’ve just said, I don’t advise that you go out and purchase a Tesla right away. This is due to Tesla’s extremely volatile stock, which is sensitive to shifts in public opinion. Additionally, it requires time for cutting-edge businesses like Tesla to demonstrate to the stock market that their operations can produce long-term profits.
However, I am keeping an eye on Tesla to see if and when I should make a future recommendation. In the meantime, you can still get in on the general trend toward electric and self-driving cars by owning the VanEck Vectors Semiconductor ETF (NYSE Arca: SMH). I’ve been following this exchange-traded fund since June 2016, and it has delivered outstanding results.
