- One automaker is already dominating Tesla at its own game.
- And this same company is one of our best-rated stocks to buy now.
Tesla Inc. (Nasdaq: TSLA) showed the world an electric car could be both luxurious and powerful. Investors immediately understood its ability to transform the new car market.
Since its blockbuster IPO in 2010, Tesla's share price exploded 1,400% higher.
Investors think Elon Musk's car company could be the dominant carmaker of the future, but an overlooked company could be beating Tesla at its own game...
So far, investors have been willing to pump money into a company that isn't making a profit in hopes it can take over the car industry in the future. Tesla lost $785 million dollars in the first quarter of 2018 alone, even as the company's revenue has never been higher.
And investing in Tesla stock could make sense if it does squeeze the major automakers out of market share. Right now, Tesla only accounts for 1.4% of the U.S. car market, while General Motors Co. (NYSE: GM) controls 17.6%.
Tesla's revenue would skyrocket if it could capture even a fraction of GM's market share.
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This scenario is perfectly plausible, as rising fuel costs and pollution concerns will eventually phase out combustion engines.
But Tesla investors could be backing the wrong horse.
In fact, one automaker is already dominating the research behind electric cars.
They've also been one of the most innovative companies in the field, even before Tesla arrived on the scene.
And unlike Tesla, this company is already raking in billions in profits every quarter...
This Chart Shows You Why Tesla Is Outgunned
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Between Elon Musk's controversial tweets and the eye-catching looks of Tesla's Model S, we can't blame investors for overlooking Toyota Motor Corp. (NYSE: TM).
But check out just how drastically Toyota is outpacing its competition when it comes to electric car research.
Not only is Toyota throwing serious resources behind its electric car research, it controls the intellectual property behind its discoveries too. That gives it a competitive advantage as rivals try to catch up.
This chart is just the tip of the iceberg for Toyota's electric car innovations.
Toyota released the first mass-produced hybrid-electric vehicle in 1997, more than a decade before Tesla's Model S was first announced.
And Toyota was the first company to develop a method for observing the behavior of lithium ions in lithium ion batteries, the most popular option for electric cars.
Now the company plans to take its electric and hybrid vehicle expertise and slash carbon emissions in its vehicles by at least 90%.
That's why Toyota set up an "Electric Vehicle Business Planning Department" in 2016, which the company treats like an "internal start-up" designed to develop and release zero-emissions vehicles.
But Toyota isn't content with the current state of lithium ion batteries, which have a short driving range and require the development of charging stations to allow drivers the freedom to go on longer trips.
Toyota is now leveraging its years of battery research into creating a new, high-performance solid-state battery, which will allow for longer driving distances and faster recharging.
On top of that, Toyota is also developing the technology for hydrogen-powered cars as a zero-emissions alternative to gasoline and diesel motors.
This means one of the most profitable car manufacturers on the planet is already ahead of the curve on electric car development. And investors might want to look at Tesla's first-mover advantage with an air of caution.
While demand for electric vehicles is certainly going to rise, the combination of price and convenience still makes combustion vehicles the choice for the vast majority of buyers.
And Toyota has shown it's already laying the groundwork for its first all-electric vehicle for when consumer demand makes those offerings profitable.
Tesla still has a long way to go before it can carve out significant market share from established car companies, making buying its stock at today's prices more of a gamble. In fact, our proprietary stock evaluation tool, the Money Morning Stock VQScore™, doesn't even rank Tesla stock thanks to its lack of earnings.
We can't write the stock off entirely, but it has the potential to fall to $0 just as much as it has the potential to rise to $1,000.
Meanwhile, Toyota has our highest VQScore of 4, making it one of the best buys on the market.
Analysts agree with our bullish take on Toyota, too. They're giving it a high price target of $179 a share over the next year, implying a 47% gain over today's share price of $122.02.
Combined with a healthy 3.27% dividend yield, which you simply won't get from Tesla, Toyota will be a moneymaker for you for years. And it could fare even better when the competition for electric vehicles really starts to heat up.
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