As years go, 2021 definitely wasn’t the worst for Elon Musk and Tesla (NASDAQ: TSLA). The auto giant finally joined the trillion-dollar club in late October, and by the end of Q3, it had already surpassed its total revenue and profit from 2020. Sales continue to rise, and the company just seems to be able to do no wrong (despite the best efforts of Elon’s Twitter account).
We’re very excited about what Tesla has to offer for investors going forward. The electric vehicle (EV) producer is one of the most talked-about and most traded companies in the world, and for good reason. As MyWallSt analyst Anne Marie put it recently in an episode of our Stock Club podcast, “Tesla isn’t a car company. It’s a tech company that happens to sell cars.”
With this in mind, we thought we’d share some of the things investors should be looking forward to regarding the company as the new year approaches. So here are our top five reasons to be excited about Tesla in 2022.
1. Over the profitability hump
One of the biggest marks against Tesla has always been its ability to generate a profit. 2020 marked only the first year that the company reported a profit, however small, for every financial quarter. Those days seem to be in the past for Elon Musk and co., however, as this year has really seen the company ramp up its profits. Q2 saw profits more than double from an already all-time high before Q3 marked the company’s most successful quarter ever with profits of $1.62 billion.
The outlook for the holiday season and beyond reads well for any Tesla investors, as analysts predict the profits will keep rolling in at a record rate. If Tesla can keep up this amazing level of growth, we could be looking at the next most valuable company in the world! That might be a bit of a stretch, with both Apple and Microsoft still having market caps that double Tesla’s, but if 2021 taught us one thing it’s that Tesla is capable of just about anything.
2. No longer reliant on credits
The second reason to be excited about Tesla is very much linked to the first. Tesla, in an attempt to increase profits over recent years, was heavily involved in the selling of regulatory credits to other car companies so they could meet emissions guidelines. While this proved quite lucrative for the company, it essentially propped the firm up. A profitable car company is great, but not when it can’t make any money actually selling cars.
Thankfully, July of this year saw Tesla report profits without having to count even a single sale of emissions credits. This marks a huge win for the company as questions had been looming that it was just never going to be able to sell enough cars to survive. Tesla certainly proved its doubters wrong and is now on a path to automotive profitability that shows just how lucrative the EV market can be.
3. Giga Berlin/Texas
The third reason we’re excited about Tesla for the upcoming year is the hotly anticipated opening of two new Gigafactories in Berlin and Texas. Both factories are expected to open at similar times, despite construction on Giga Berlin starting earlier. The factories are expected to greatly increase the production of Tesla vehicles, particularly the Model Y initially, followed by the notorious Tesla Cybertruck.
The whole concept of a Gigafactory came from the realization in 2014 that the company just simply couldn’t meet its lofty target of 500,000 cars produced per year with existing methods. For one, that number of cars would have required the entire world’s supply of lithium-ion batteries at the time. Tesla decided to start producing batteries in-house and was able to drastically cut both lead time and battery cost.
Following the completion and opening of Giga Berlin and Giga Texas, Tesla will have five fully operational Gigafactories on three separate continents, enabling it to rapidly produce more vehicles while supplying more diverse markets quicker than ever before.
4. Tesla set to disrupt the insurance industry
The fourth reason to be excited about Tesla for 2022 is the surprise revelation that Tesla is set to focus on conquering the insurance industry. A July announcement saw Musk detail plans for the company to take advantage of its monumental amount of vehicle data to create a major insurance company.
Industry insiders see Tesla as having a huge advantage in comparison to the existing players in the space. The auto firm can see a whole host of important statistics related to each vehicle and, more importantly, each driver. Average speeds, acceleration profiles, and autopilot usage are just the tip of the iceberg for the swathes of data Tesla has at its fingertips to be used to determine just how safe a particular driver is.
Tesla initially rolled out a form of basic insurance in California earlier this year but had to pause sales for a period due to a reported algorithm update. Despite these initial growing pains, Tesla has the capacity to build a truly data-driven insurance network as the world moves further and further towards EVs and semi-autonomous driving. And speaking of that shift in the auto industry, that brings us to our final reason to be excited for Tesla in 2022.
5. The world’s going electric
The world is accelerating (pardon the pun) towards an all-electric future. EV purchases now account for 26% of new sales in the global automotive market, and that number is only going to increase. Auto executives believe that as soon as 2030 we’ll see more than half of all new vehicle sales in the United States be electric. This monumental shift in the auto industry is unlike anything we’ve seen in our lifetime, and Tesla looks set to be one of the big winners as the first-mover in the space.
Even Herbert Diess, the CEO of Volkswagen Group, one of Tesla’s biggest rivals in the EV space, admitted earlier this year that Tesla is setting the benchmark for EVs. This is the advantage gained by being the first real innovator in any field. Tesla has had time to perfect its offerings compared to other companies. Its battery tech, software, productivity, and vehicle performance are all the envy of the industry.
As the world continues on the path towards zero emissions, Tesla looks set to lead the charge for years to come. Competition certainly exists, and it will become only more abundant as more automotive stalwarts invest further into developing top-class EVs. But, they all still have to climb the mountain that Tesla currently sits at the top of, and I very much doubt Tesla will go down without a fight.
Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.