Tesla revs up supercharged tech rally

Companies like Tesla have also been widely misunderstood by the mainstream business media. The public narrative over the past five years has been dominated by short-sellers and buy-side asset managers looking in the rear-view mirror.

The reality is Tesla might impress a young Warren Buffett today. Arguably it has a wider moat than any other tech company.

Led by Elon Musk the amount of capital it sucked up getting to where it is today is a formidable barrier stopping others investing enough to develop a serious electric-vehicle-only commercial car company.

How much would it take to build a rival to Tesla? Fifty billion, $US100 billion, or double that? Even then a rival has no guarantee of success.

The big tech companies with the deepest pockets have tried to compete.

Google under its Waymo self-driving car unit has made pitiful progress versus Tesla since 2009.

And that's arguably the world's best tech company with almost infinite capital. Apple under its Project Titan also looked at electric vehicle development, but threw in the towel.

It's true that Tesla has electric vehicle rivals among the big European and Japanese car makers. Toyota, Hyundai, Volkswagen, BMW, and Audi, among others, are all having a go.

The problem is they're all conflicted as legacy automakers between focusing on what makes profits and what requires huge investment to potentially run at a loss. If any of these companies announced plans to shift completely into the electric space the valuations would likely bomb over the medium term.

Even if the hardware and vehicle performance was comparable, which is unlikely, could they sell the vehicles at prices competitive to Tesla's Model 3? Moreover, Tesla is literally billions of miles ahead and almost uncatchable on the software and data front.

Tesla's software is leading it into the self-driving space as an Uber competitor. The software and data thread advance the argument that Tesla is producing computers on wheels. It could do for software and hardware over the next decade, what Apple (market value $1.5 trillion) has done over the past decade.

Smartphones dominate today, it'd be unthinkable to carry a dumb phone around. Tesla will widen the gap between smart cars and dumb cars ahead.

The applications and services it can offer through its vehicles is also set to expand unimaginably. Ten years ago it'd have been unthinkable to use a smartphone to hail a stranger in their own car to pick you up from home and deliver you to the office, with the trip mapped and paid for via apps on your phone.

Tesla has never even advertised the advantages of its smart cars, energy storage systems, or environmental credentials. However it has the future on its side.

Australian hopes

Australia's own tech index is a good start in corralling investors towards some of the best companies on the local market.

Unfortunately the rush to include too many companies within it leaves a credibility gap. Some constituent members have no revenue, while others are not tech businesses.

The market-thumping returns so far are down to the accelerated adoption of structural shifts towards e-commerce and a work-from-home economy. Both trends are part of the growing digital economy.

E-commerce player Afterpay has risen five-fold since March 23 to a $14.6 billion valuation, while cloud-accounting player Xero is worth $12.1 billion and competing with Intuit, which boasts a $US77 billion market value.

Hedge fund manager John Hempton has tipped Xero as a potential $100 billion player one day.

Since listing in 1994 on a market cap of $36 million Computershare is up more than 200 times in value. REA Group is up from $1.11 in 1999 to $105.40 today.

Tech will produce losers and capital killers as well. So inclusion in the ASX's tech index brings no guarantee of being a good investment.

But while rates remain low, with the US Fed not even thinking about lifting them from close to zero until 2022 , it looks a good bet tech stays on top.

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