Today should remind investors why Tesla (NASDAQ:TSLA) is leading the electric vehicle (EV) race. The company caught the attention of many this week when it announced a price increase for electric vehicles. Some pundits wondered what this would mean for TSLA stock, but so far it hasn’t backfired. It was also revealed today that the electric vehicle innovator will be forced to temporarily close its Gigafactory in Shanghai due to rising Covid-19 cases. However, we’ve seen other reports recently that point to continued dominance in the EV sector and a flat road for Tesla.
Source: franz12 / Shutterstock.com
What’s going on with TSLA stock
A few days ago, the Wall Street Journal reported that some of Tesla’s competitors are trying to emulate the company’s retail strategy. As it turns out, the company that revolutionized the automotive industry years ago is still doing just that, forcing older automakers to rethink how they sell cars. Earlier today, Inside EVs noted the importance of the article when discussing the same topic.
For the second day in a row, TSLA shares rose nearly 3%. While stocks fell earlier today, they have since rebounded and are catching up.
Why is it important
Over the past years, Tesla has shown its industry that it needs to go electric. Now it shows that the future of car sales is online and without intermediaries. The company’s sales model is based on a direct-to-consumer approach that eliminates the need for independent dealerships used by legacy automakers.
“The success of Tesla’s retail strategy is becoming a threat to traditional auto companies that are trying to increase sales of electric vehicles by selling them through independent dealers,” according to the Wall Street Journal.
Tesla isn’t the only automaker to use this tactic. Since their inception, electric vehicle startups such as clear (NASDAQ:LCD) as well as Rivian (NASDAQ:RIVN) also imitated him. For fashion startups, a digital strategy makes sense. However, according to the WSJ, the list of names considering this has expanded to include Ford (NYSE:F) as well as General Motors (NYSE:grandmaster), two pillars of the industry that fought hard to compete with Tesla.
Tesla doesn’t have to worry when its competitors plan to emulate its strategy. In this case, it should be remembered that companies imitate only those competitors who are doing better than themselves. In short, they wish they had thought of it first. Tesla has kept its place as the leader of the electric car race because it came first and innovated from there.
What does it mean
Consumer trends are shifting towards an industry landscape where cars are purchased online. In this world, new cars are bought directly from the dealer. Adopting such a retail strategy will help companies like Ford and General Motors stay competitive. However, it is unlikely that this will allow them to grab some of Tesla’s market share.
Even the recent closure of the Shanghai Gigafactory did not lead to today’s drop in TSLA shares. The trend of competitors mimicking Tesla’s strategy should remind investors that TSLA remains a safe bet even in turbulent times and market uncertainty.
As of the date of publication, Samuel O’Brien did not hold (whether directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com publishing guidelines.