One of the world’s largest fund managers and shareholders of Tesla (TSLA) revealed why the car and tech company led by Elon Musk has just hit a major milestone that has ramifications for the whole car industry.
In its Baillie Gifford US “Annual Financial Report,” the UK-headquartered group highlighted why it is such a major stakeholder in Tesla and how its long-term investment will pay off for clients.
“It sounds strange to say it now, but it was not so long ago that electric cars were undesirable. Tesla has, pretty much single-handedly, made electric cars cool,” said Baillie Gifford in its report.
“EVs (electric vehicles) are fast, safe, clean and increasingly affordable. Whilst true plug-in EVs still represent a small proportion of annual car sales in the US and globally, the trends are indicative of a major shift underway. In the US, EVs made up just over 2% of new car sales in 2018 representing an almost doubling of market share year over year.
“In California, arguably a leading indicator for the adoption of new technologies, EVs comprised almost 8% of new vehicle sales last year. The astonishing fact that the Tesla Model 3 was the best-selling car in the US by revenue based on the last four quarters, coming in ahead of the Toyota Camry, perhaps marks a major milestone on the coming transformation of the car industry and the end of our reliance on a major finite resource.”
Baillie Gifford is a fund manager that invests in the long-term. It focuses on industry transforming products or services and does not expect a quick return on investment.
It’s for this reason why Baillie Gifford is also one of the largest shareholders in companies that have rapidly grown over the last 20 years, such Amazon (AMZN) as well as having holdings in Netflix (NFLX), Facebook (FB) as part of its ‘patient capital-style’ US Growth Trust, which invests predominantly in listed and unlisted US companies. Baillie Gifford believes that companies within that fund have the potential to grow substantially faster than the average company.
Baillie Gifford even invested in Alibaba (BABA) before it became a $423bn listed-company as well as Spotify (SPOT) before it floated and became a $32bn behemoth that revolutionised the music industry.
Earlier this year, Baillie Gifford said that it is willing to invest more into Tesla. Nick Thomas, a partner at Edinburgh-based Baillie Gifford, said: “If he [Musk] needs more capital we would be willing to back him.” Thomas told Yahoo Finance that the comment is what Baillie Gifford “consistently” says “about supporting our companies as long-term investors.”