BMW, Audi to Blitz Tesla With High-End Competition

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Sept. 13 (Bloomberg) -- Dougherty & Co.'s Andrea James, Trading Advantage's Scott Bauer and Bloomberg's Matt Miller discuss Tesla's future with looming competition from BMW and Audi. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

One year ago tesla's ceo elon musk said, "i think it is unwise to short tesla." he was right.

The stock is up almost 460% in the past 12 months.

Elon musk himself is taken aback i the huge surge here.

Last night he said, shorting tesla is not as crazy.

When a ceo hints at volatility, does that mean it is for the rest of us to get out of the stock is to mark we want to ask our panel.

Matt miller with the story.

A ceo saying maybe it is not so crazy now to short it, is he just being brutally honest?

He still thinks it is unwise, not the right thing to do.

You could make an argument as i'm sure you have heard many times that having a large short interest in the stock is good for investors who are long because whenever there is a big drop they have the shorts to cover and provide a little bit of a trampoline for that stock.

There is a couple of interesting points with the stock.

You mentioned the huge run-up and we are showing it now, 877%. it is worth $20 billion and change.

Fully one quarter the value of oaks wagon.

Volkswagen produces 90 times as many cars.

They're looking to have $2 billion in revenue in tesla for the full year of 2013 so not unlikely that they hit that target.

They will go above that target but they have certain real competition coming up.

I saw the official launch video for bmw's i8. ir is absolutely breathtakingly gorgeous.

It is a bmw.

You know it is going to have that quality.

I do not want to see that tesla doesn't because we have seen the amazing things a lot must has been able to do, but bmw and audi will come out and blow away the high-end.

Other companies like volkswagen want to put out 14 hybrids next year.

You will see the sun put out almost all hybrids.

Toyota has 21 on offer.

Taking out the middle and lower and segments and bmw and audi could have the high-end segments.

Tesla could get squeezed out and become the duesenberg of electric cars.

Is this the danger that tesla has much competition from some in the established players that it is not going to be able to make a go of it?

They are making a go of it and just to comment on the elon musk comment, he is the largest shareholder so he puts his money where his mouth is.

Looking at market share figures, there is lots -- room for lots of players.

The generation three cars, if they can get 500,000 units, that is five percent market share on that category.

We are not saying they need 50% market share.

That would be $15 earnings per share, that would be a $300 stock.

I do not think these numbers are outlandish for tesla to have a place.

Can they ramp up to 500,000 quick, right now they are struggling to produce 20,000 vehicles a year, right question mark they are on the ramp up phase.

They will do over 20,000 vehicles this year on the model s. we're talking the next years out for the higher volume.

That scenes -- that seems pretty far out to look.

You have to have a crystal ball to look that many years out, don't you?

This happens all the time with stocks.

You look at where growth companies get valued on earnings potential.

It is no different with tesla.

The fear is that there's a lot of hype your.

As matt points out, you look at a company like volkswagen which is producing 90 times as many cars as tesla.

At what point does the hype turn into something that is reality where they are producing at a much higher level and there is more oo mph behind the stock price?

It is a valid question.

The model s is a great car.

Because they have proven that out, they get credit for the next generation of vehicles just like when they were producing the roadster, that was their only vehicle.

They were getting -- their stock was eating credit for with the model s could do when that vehicle was just a concept.

They have a lot of ip and their battery technology around the uses of the lithium-ion cells they're using.

The ip is real.

You talk to a lot of other chief operating officers, i talked to bob carter from toyota.

They're not concerned about needing some ip from tesla.

They can produce electric cars that will run the same amount of time on a charge, that will you the same kind of performance figures so it is just about the design of the vehicle and i feel like tesla is not going to have a lot of competition.

Why have they not done it yet?

They are going to definitely be coming out.

The i8 will be a great example.

It will take the luxury end of tesla.

I would like to see their cost per kilowatt hour.

Challenge them and see if they can get as low as tesla.

Tesla is under $300. i do not think anyone else is there.

Tesla is still a 100,000 dollar car.

They have to come down to sell to the masses and as soon as they have achieved that they will have all the competition from volkswagen, toyota, even chevy.

Let me get over to scott.

Is there a trade in all of this as much as everybody is talking about two different sides to this company?

There definitely is a trade.

If you look at tesla, if you look at what the stock is done on a day-to-day basis and on a weekly basis except for during the day before and after earnings, on a database is the average movie is two percent.

On a week to week basis, it is not over 10%. what i am going to do, i want to take advantage of that.

I want to sell from where the stock is right now . that is about a 10% move either direction from here with one week to go.

I can collect about $1.70 to do that.

The odds are based on how the stock is traded come a that is going to be a very favorable trade.

I will continue to do that with weekly options going forward until the time comes early november for the next earnings report.

I will adjust if the stock adjust but while it is treating in that range that is from, let's call it a mathematical basis.

We will watch it.

Thanks so much.

This text has been automatically generated. It may not be 100% accurate.

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