I’ve changed my mind about Tesla shares. Here’s what I’m doing now

I thought Tesla (NASDAQ: TSLA) shares were one of the best ways to invest in the green energy revolution for a long time. 

The company has almost single-handedly reinvented the electric vehicle market. Its sporty vehicles and extended charging range have helped throw off the image of slow and cumbersome electric cars.

No matter what one thinks about the company and its founder Elon Musk, there is no denying that since Tesla started rocking the boat, almost the entire automotive sector has shifted to building electric vehicles. 

For much of the past decade, Tesla shares have benefited from this. They have seemed to defy gravity, despite the company’s losses. The market has been more than willing to give the enterprise the benefit of the doubt, which has helped the electric vehicle manufacturer gain traction and raise new money. 

But now we are entering the next stage of the EV revolution. I am not so sure Tesla shares can keep up now the big beasts of the automotive industry are taking action. 

The outlook for Tesla shares

I am not saying the company will fall by the wayside any time soon. Looking at the latest electric vehicle sales numbers, it is clear consumers are still rushing to get their hands on Teslas.

I think there will always be a number of consumers who want to buy these vehicles, but now that companies such as VW and Ford are starting to get in on the action, I think it is likely the market will become diluted. 

Electric vehicle launch figures give an idea of the sort of competition the company is facing. Worldwide about 370 electric car models were available in 2020, a 40% increase from 2019. There are at least 20 new models set for launch in 2021. 

Put simply, Tesla is facing more and more competition. This suggests the company is going to have its work cut out to remain relevant.

Opportunities for growth

Considering all of the above, I do not think Tesla shares are a particularly bad investment. The company still has a significant share of the global electric vehicle market. It is also increasing production to meet rising demand.

If the company can continue to invest in its product line-up and meet rising demand, I see no reason why it cannot continue to grow in line with the rest of the electric vehicle market. 

However, it is clear to me that the group is facing more and more competition. This suggests the enterprise may have to reduce costs or increase giveaways in order to entice consumers.

As such, I would still buy the stock, but my rating of the business has changed from being an outright buy to more of a speculative investment. I will be keeping an eye on the risks outlined above to see if they start affecting growth.