- Tesla boosters watch their story being tested by a barrage of negative news about the company.
- This distracts from what Tesla actually achieved.
- The company does not have to take over the world to be successful.
Gene Munster, a former technology analyst, now a venture capitalist, thinks Tesla will take over the world.
But after a recall last week, along with some other negative news, Munster admits his patience is being tested.
"[D] o do we still believe in history?" he asks in a research post on the Loup Ventures website. "The answer is yes, our support is based on the belief that the company is capable of making a dramatic change in the automotive industry (computers on wheels), innovating both in electric vehicles and in autonomy and creating a new paradigm of manufacturing efficiency. "
That's wrong, of course. Tesla is no longer uniquely positioned as Waymo and Jaguar, who announced a self-driving vehicle partnership last week, or General Motors, which has sold thousands of all-electric Chevy Bolts, a car under $ 40,000 that the automaker rolled out in 2016, more than a year before the Tesla Model 3.
Tesla is part of a transportation ecosystem that has a tremendous amount of experimentation and investment. And by and large, Tesla is a small player. Yes, it attracts exaggerated buzz because of CEO Elon Musk's fame. But this is a carmaker that took 15 years to break the production barrier of 100,000 cars a year.
Tesla is also an automaker, seeing fans as both disturbing and competitive, which is wrong. A company that sells 100,000 vehicles a year at an average price of $ 100,000 does not bother. Rather, it complements the mix of luxury vehicles on the market.
Also Tesla is attacked by competitors. In fact, unlike what Musk often says about traditional companies that want to kill Tesla, the rest of the auto industry is happy to see Tesla taking all risks with electric vehicles and admiring the emergence of a bold new brand.
Inventing a story that does not correspond to reality
Tesla enthusiasts such as Münster, however, find themselves in a strange position again. Profitability is a measure of success in the highly capital-intensive automotive industry. But Tesla has never really made money. Growth in the auto business is driven by sales, but with the exception of China, revenue growth is limited in most markets. But Munster believes that Tesla could sell 11 million cars a year in the US alone, a market share of 65% in a market where the largest company, GM, now has less than 20%.
As a result, Tesla boosters have invented a story that involves a radical redesign of mobility and our relationship with cars. This goes far beyond Tesla and markets a propulsion technology that has been around for over a century. I even bet that it is strangely wrong to call it a "story". In extreme cases it is a fantasy.
A lucrative fantasy, as it turns out. Even with Tesla's stock weakness last month, close to 30%, if you had bought after the IPO in 2010, you would still be sitting on a near 900% return. For eight years, Tesla has been a great way to look to the future.
It's worth knowing when a fantasy or a story collides with reality and becomes something else. From the perspective of Tesla, the cars are not the whole story: since the end of 2016, when Tesla SolarCity took over, the company was a holding company with an integrated vision for sustainable energy. Electric cars are only part of this strategy.
But right now Tesla is still mostly a car company because that's where the money is spent and spent. And that aspect of the narrative is the one that comes under tremendous pressure.
An Information Vacuum for Investors
Why? Quite simply: investors have nothing else to do. It's easy to say how Toyota and GM are doing. Take a look at how much money they earn, how much capital they have invested, how many assets they have and how much cash they have raised to survive a decline in sales.
Tesla will not even tell investors how many vehicles it sells each month – we have to wait until the end of the quarter to get those numbers – and the earnings reports every three months are simply opportunities to gauge how much money the company has has lost and receives updates about ambitious production targets that are not reached.
The cars are cool, Musk is an exciting personality, and Tesla has ridden a story that's very much about Silicon Valley and its values, rather than the more daunting, performance-based narrative that has spurred Detroit for decades. But ultimately, the Tesla Investment story starves to meaningful action points. So Munster can have a little bit of a crisis of confidence over something as trivial as a power-steering recall – a defect that a big car maker could cope with in a month and carry on.
Actually, that's the only thing unique about Tesla. If the company exceeds the expectations of a few thousand sales, the markets go crazy. Accidents can cause the stock to spin. The basics are not very good objectively. Recently, everyone wants to talk about the financial situation of the company, which is technically not far from bankruptcy (although bankruptcy is unlikely for the time being).
There are now many wonderful stories from Tesla that have nothing to do with computers on wheels or how seductive the company is. The Model 3 was a fight, but the Model S and Model X luxury business is actually pretty solid. Tesla is far from what Waymo does with self-propelled technology, but its autopilot technology is the best cruise control you can buy with the Cadillac Super Cruise System.
It hurts to see through the good Tesla story of the need to turn this nonsensical, global fantasy into more and more skeptical investors. Tesla has been a great story for a decade and a half. It can stay that way without taking over the world.