The auto industry was convinced electric vehicles (EVs) were impractical, that the technology could not achieve critical mass to upset the internal combustion engine.
When Tesla (NASDAQ: TSLA) filed for its initial public offering (IPO) in January 2010, it was a six-year-old start-up best known for its Roadster EV that would set back consumers a cool $109,000. A bet on Tesla and its quirky CEO Elon Musk was anything but a sure thing, but if you were convinced EVs would be big, buying into the hype surrounding its IPO wouldn't have been crazy.
Today, you definitely would be sitting on a profit, but let's look at Tesla's market debut 11-plus years ago and see where that would leave you as an investor now.
A Tesla Model Y. Image source: Tesla.
An EV in every driveway
Big Auto might have dismissed EV technology, but there was a lot of excitement over the competition between Tesla and companies like Fisker, which also sold sleek EV sports cars.
The Karma was another high-end EV that sold for over $100,000, but whereas Fisker was popular among the glitterati in Hollywood, Musk wanted to build EVs for everyone and promised to develop cars for $30,000 or less, a move that could launch sales skyward.
That's pretty much how it worked out. Fisker went bankrupt in 2013 and its assets were sold to Chinese auto parts maker Wanxiang Group. Tesla, on the other hand, went on to become the most valuable auto manufacturer in the market today, valued at over $633 billion. In comparison, second-place Toyota is worth just over $276 billion and third-place General Motors is worth $71 billion (Fisker comes in at 14th at under $4 billion).
Rolling off the assembly line
Today, Tesla is cranking out cars. Last year it produced more than a half-million vehicles, a 15% increase over the year before, which was achieved during a pandemic. And the top EV maker is poised to beat that mark soon, having already cranked out more than 386,000 vehicles in just the first two quarters of 2021.
In fact, Tesla produced 206,000 cars in just the second quarter alone, a record for the carmaker. But like GM, Ford (NYSE: F), and other manufacturers, it's running into problems because of the chip shortage, and customers are experiencing delays.
Ford is delaying deliveries of its Mustang Mach-E crossover because of the shortage, and Rivian, the EV maker backed by Amazon, has delayed its R1T pickup until next month.
High-powered returns
Tesla went public at $17 per share back in 2010 and today goes for over $700 per share, adjusted for stock splits that have happened along the way. That's good for a better than 14,600% increase. In comparison, the S&P 500 has "only" quadrupled in value over that same period. So that initial $1,000 Tesla investment made over a decade ago would be worth some $147,400 today for a compound growth rate of over 45% annually. Not too shabby.
TSLA data by YCharts.
But that raises the question of whether you've missed the boat on Tesla. Not at all. The leading EV maker still has a long, open road in front of it.
Although a new Fisker (NYSE: FSR) is back on the market (auto designer Henrik Fisker retained some rights to the brand after his original car company was sold to Wanxiang), Big Auto has jumped into EVs with both feet, and Chinese EV automakers are pushing sales, Tesla is expanding as well. Its record production numbers are a testament to its capabilities, and even if deliveries might be challenged because of supply chain issues and chip shortages, the carmaker should have the financial wherewithal to persevere.
It's no longer an untested start-up, but a leading automaker in its own right. With Tesla's stock down 20% from recent highs, now could be time to get in for the EV maker's next 14,000% rise.
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