Musk plays the vision thing, vents at myopic analysts, media

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The market’s obsessions with financial details, rather than the big picture, is driving Musk to distraction. And that should be a cause for concern.

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Clearly, Elon Musk is getting frustrated.

Tesla, the company he founded has become a household name, and a phenomenally successful company, on the quality of its products – electric vehicles and battery storage – and the audacity of the vision thing that has captured the imagination of the public, and the market.

Musk wants to bring the fossil fuel era to an end – and quickly.

And it his drive and determination to upturn two trillion-dollar fossil-fuel dependent industries – road transport and electricity – that has been primarily responsible for Tesla’s extraordinary market valuation of more than $US50 billion ($A66 billion).

On conventional financial metrics, Tesla does not rate such valuations. It is still to turn a profit and it is burning cash at a phenomenal rate.

But the market’s obsessions with financial details, rather than the big picture, is driving Musk to distraction. And it should be a cause for concern for those with a deep interest in the pace of the energy transformation at hand.

It’s clear that without Musk, the world’s car makers would be applying the brake to the shift to EVs, in the same way energy companies would rather profit from existing coal assets rather than investing in cleaner and cheaper renewables and storage.

And it’s also clear also that market analysts are struggling with this idea – how to capture the vision thing into their calculations, based as they are on minutae and spread-sheets, and how to try to jam the company into their long standing pigeon holes.

In a conference call following the release of the company’s results on Thursday morning (Australia time) Musk vented his frustration by abruptly interrupting the questions from the Wall Street analysts.

Musk described the Wall Street probing – on the finer details of margins and production set-ups – as “boring bonehead” questions. “These questions are so dry, they’re killing me,” he said. 

So instead Musk turned to a young “retail investor” called Gali Russell, who had called in via YouTube, and Musk answered a dozen questions, and spent 40 minutes, more than half the conference call duration, talking about the future.

Musk clearly felt a lot more comfortable in this mode. And he gave some fascinating insights of the sort that have excited investors and the public over the past few years.

Musk said “shared autonomous vehicles” could be a “thing” as early as late 2019, just like futurists such as Tony Seba had promised. (Read: By 2030, you probably won’t own your electric vehicle)>

The main barrier was not technology, because that was nearly ready, Musk said. The biggest hurdle would be regulators and that, in turn, would be driven by the media.

Musk then took the opportunity to slam some of the reporting on recent accidents and deaths, saying that on any criteria autonomous driving was far safer than humans, but that human car accidents just didn’t make major headlines.

“They should be writing stories about how autonomous vehicles are safe, instead of writing headlines that are fundamentally misleading. It’s really outrageous.

“It’s very irresponsible for any journalist of any integrity to say that Tesla’s autonomous driving is less safe. People might turn it off and then die.”

He also spoke about the electric Tesla semi, and how “platooning” – using autonomous driving to have the trucks follow the other just like wagons in a train – would impact the rail industry, but be great for road transport.

But after talking about these issues, including plans for the Model Y (2020), and the success of the Tesla big battery energy storage project, and the possibility of a gigawatt-hour battery (see our story here) Musk returned to the analysts.

The market is convinced that Tesla will have to raise more capital. Musk says no, it won’t. One analyst pushed him – wouldn’t you do it anyway? Just in case?

“No, I don’t want to,” Musk said. “I specifically don’t want to.”

That was the start of the downhill tone that finished with an exasperated Musk saying:

“I think that if people are concerned about volatility, they should definitely not buy our stock. I’m not here to convince you to buy our stock. Do not buy it if volatility is scary. There you go.” Thank you Wall Street.

So, what of the Tesla results?

Well, Tesla says that it still has around 450,000 orders for the Model 3, which Musk says will soon become the biggest seller in the premium mid-sized car market, EV or internal combustion engine. And may soon account for the majority.

He expects production to be improved to around 5,000 a week by the end of June, but to do that there will be another 10-day stoppage to fix up bottlenecks. Sales of the Model S and X hit record levels in the first quarter.

Musk also clarified that the production line will remain largely automated, but some “ridiculous” examples of automation gone wrong would be fixed – like the “fluff-bot” that required a machine to insert fluff in the top of a battery stack.

“The path to an electrified revolution is not easy, but what we’re trying to achieve is worth fighting for,” the company said.

The results showed Tesla’s cash reserves had fallen to around $US2.7 billion. Capex has been stripped back to $3 billion from $3.4 billion. It needs more sales to avoid any fund raising.

Before he gets where he’s going, Musk faces a battle with a market that is struggling to see the wood for the trees. Everyone with an interest in a clean energy future will be hoping Musk wins out, at least for a while longer.

His detractors, and probably those in the fossil fuel industry who see Musk’s success, and vision, as a clear and present danger will continue to short the stock, in the hope of slowing the pace of the transition.

And this exchange was particularly insightful: Asked by the YouTuber, Russell, about Tesla’s supercharger network and whether it should be available to other automakers – as Musk has suggested – or kept as a strategic moat, Musk said.

“First of all, I think moats are lame. They’re like nice in a sort of quaint, vestigial way. But if your only defence against invading armies is a moat, you will not last long. What matters is the pace of innovation. That is the fundamental determinant of competitiveness.”

There’s no doubt his competitors – and probably some analysts – would rather he did built a moat, as those competitors had clearly done for decades. But clearly Musk has no intention of doing so. And that’s good. Fingers crossed.

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30 Comments
  1. Joe 5 months ago

    “…biggest hurdles would be regulators…”, just like the man with the red flag walking in front of the first automobiles?

    • davidb98 5 months ago

      or Standards Australia building bank vaults in each backyard to hold the Li batteries

      • Joe 5 months ago

        Please don’t mention ‘The Bunker’.

    • stucrmnx120fshwf 5 months ago

      How dare you, the horseless carriage, can’t possibly succeed, distribution of gasoline, maintenance, road requirements, purchase prices, obviously horses are the future.

      • Joe 5 months ago

        Ha, ha, ha….but there is a certain romance with ‘horse carriages’.

        • stucrmnx120fshwf 5 months ago

          Ah yes, the Amish villages, I used to ride to Temple, on a horse drawn carriage, in India, rode a mule up Mt Fuji, in Japan, used to ride for fun, in Mauritius. Mind you I don’t think most people could feed, clean up after, house, a horse. Maybe with a big lift in standard of living, due to Clean Disruption, we could have a horse in the country. Get there on a magnetic levitation train, to country land, freed up by vertical agriculture. Photovoltaic LEDs, powered by photovoltaic solar panels, in the desert, low value land, turned to power and recreation.

          Parks with shady trees, instead of agricultural monoculture, biodiversity, transportation as a service, from the train station. Fresh high quality food, cheap, bring the sun to the cities, fresh air, oxygen from the high rise buildings, instead of smog and soot.

    • MaxG 5 months ago

      Well, there is a chance for this to happen… you can’t hear these EVs, we have to put some noise in it or need the man with the red flag 🙂

  2. DugS 5 months ago

    As part of the group leading to the bright clean energy future, it is incumbent upon us to walk the talk and actively demonstrate the substance of our convictions. There is no better example of this than Elon Musk but he doesn’t want our sympathy or best wishes when challenged, he wants us to seize the problem by the throat and choke the life out of the fossil fuel industry. The quicker the better. Buy an electric alternative, any make, it doesn’t matter, the point you are making is in solidarity with Elon’s grand plan and a finger in the eye of the fossil fuel industry.
    It’s a matter of choosing the future, one that is clean energy based that holds promise of a better way of life, and one tied to polluting energy that threatens to boil us alive, much like the corals.
    Tesla has broken the mold of transport norm, it is now impossible to imagine that electrification will not happen. This reality has yet to catch-up onto most people, particularly in Australia, but like the internet in the mid 90’s, to deny it will seem deeply foolish in a decade.

    • Timmeh 5 months ago

      Would love to buy a Model S, can you give me 200K? The reality is that as much as people like me would love an EV, the range and cost in this country is prohibitive. I sincerely want Tesla to drag the other behemoths into the future, but for most of us the reality is that we don’t earn enough to buy these cars yet.

      • neroden 5 months ago

        A model S only costs US$80K (that’s AUD$106K), just to correct you

      • DugS 5 months ago

        Have a look at the Mitsi Outlander PHEV. I bought a demonstrator and saved heaps (price sub 40k 2 years ago). Should be some second hand ones too as these have been around since 2014. True, not full electric, but a good step in the right direction, pretty nice tech in them as well. Regenerative braking is a revelation. Good luck with the hunt for an affordable EV, once you make the move you’ll never want to go back to ICE.

  3. juxx0r 5 months ago

    This is why I’m happy to have leant him $1500.

    • MaxG 5 months ago

      Good on you! And I might do the same simply in support of his vision; not expecting any return. We seem to rather vote for numbnuts like Turncoat than to invest in our future, or in what really matters.

  4. Robin_Harrison 5 months ago

    I confess to being a little confused. “Burning money” and “Losing money” are quite emotive terms the shorts use a lot, but are they synonymous with “Investing money”? Because that’s clearly what Tesla are doing. Ok there’s a hell of a lot of it but every dollar is accounted for, none lost or burned.

    • Electric Boogaloo 5 months ago

      Normally I’ve been critical of those who say Tesla is losing money because while it has been spending more than it has been making, the spending has been largely on capital plant and equipment while it has been selling products with a profitable gross margin.

      By Tesla’s own admission, the situation has changed and it is selling each Model 3 at a loss. Sure, Tesla stated that it expects to be breaking even on the Model 3’s this quarter and moving to a profitable gross margin in the third quarter, but this is rather concerning considering that it is only selling the more expensive version of the Model 3 currently, presumably because it should have a bigger gross margin.

      I don’t doubt that Tesla will be able to easily raise more capital if should need it, but you do have to wonder how much longer the market is going to maintain such a favourable view of the company.

      The next few months are critical and are going to be interesting to watch. I hope that Tesla can pull it off because it produces some very impressive products and pushes the state of the art in a number of areas forward.

      • Robin_Harrison 5 months ago

        I don’t see where the situation has changed, profitability for M3 was always going to have to wait till the production line could produce at least 5k/week, so that ‘loss’ is part of the ‘investment’ but is diminished a little by only having the premium model available.
        You’re quite right, the next few months are critical and it’s amusing to watch the shorts get progressively more panicky as they realise that ‘losing money’ and ‘burning money’ are not synonymous with ‘investing money’. I think using those emotive but somewhat incorrect terms only helps them.
        Burning, losing and investing money can indeed be synonymous but only if the enterprise being invested in fails. However much the fossil fools wish it that’s not the case here.

    • stucrmnx120fshwf 5 months ago

      Just like Microsoft and Google before, don’t invest your retirement money in coal soot and smog. Of course you could have invested in cathode ray tubes, instead of photovoltaic LEDs, but you’d have retired, pretty poorly.

  5. john 5 months ago

    I think like Amazon; Tesla will get through its investment to profitably problem.
    Short term gain against long term vision is the Stock Market idea how well did that work out with Amazon? well just about the most profitable company in the world at the moment.
    Tesla has yes put every dollar into expansion just like Amazon did.
    Yes I know they have a negative outcome this Quarter and possibly next Quarter as well.
    And yes they need to gain positive outcomes to meet the payment for the debt they have.
    However if they ramp up the Model 3 and the other products they make they may just about meet that demand.

    • stucrmnx120fshwf 5 months ago

      And Microsoft and Google, Musk will be the world’s first trillionaire.

  6. itdoesntaddup 5 months ago

    “Despite intense efforts to raise money, including a last-ditch mass sale
    of Easter Eggs, we are sad to report that Tesla has gone completely and
    totally bankrupt. So bankrupt, you can’t believe it.”

    “Don’t buy the stock”

    Probably good advice from Elon there.

    • stucrmnx120fshwf 5 months ago

      That’s known as a joke, you could speculate on coal and internal combustion engine vehicles, for short term gain, medium to long term massive losses. Or you could invest like Elon, in the future, short term losses, like Microsoft, Google, massive long term gains. Elons investments are future diversified, electric vehicles, household batteries, space launchers, as the price of electricity goes down, with falling renewable energy costs, battery costs, per kWh. Half of current prices in 2023, a quarter in 2028, or better, with economies of scale, not investing in coal soot and smog, will seem almost as if you had a plan to make money in the future, not the past.

      To repeat, invest for the future, make money, invest for the past, lose money, Apple just bought 100 billion dollars worth of it’s own stock, using 100% renewable energy. Of course you could have said Jobs is back, let’s not invest, he has to much vision, too much of a polished product. Musk will be the world’s first trillionaire.

      • itdoesntaddup 5 months ago

        The Tesla PR department all over this thread. That’s known as a joke.

        • Eric 5 months ago

          You are going to look like a fool in a few months when Tesla 5k+ Model 3 are pouring off the line, and the company starts making consistent profits. Add to that another 500k+ model Y orders when that is revealed.

          But I guess you will have plenty of company.

  7. Mike A 5 months ago

    While I recognize he has done something special that needed to happen, I feel sorry for Tesla shareholders as he over promised hugely on T3 sales. Its not a small over promise it is huge. Not only is he burning more capital than he said he would, but the delay is allowing companies like Jaguar to start taking market share from Tesla that threaten its future position. It is looking like, according to management theory, it is time for the marketer to move over and for a new type of CEO (a deliverer). Not sure a part time CEO is appropriate either.

    • Timmeh 5 months ago

      Not sure what a new CEO will do. The hold up is production issues which will only ever be worked out by engineers in the factory. Ghandi could be the CEO and it won’t reach enlightenment till the production issues are sorted. Musk was probably looking through rose coloured glasses with the production line robots, but who has ever started a business without issues like this? Hopefully he gets it sorted before people lose faith.

  8. Nick Kemp 5 months ago

    “It’s clear that without Musk, the world’s car makers would be applying the brake to the shift to EVs, ”

    He may have started it but if Tesla closed down tomorrow there are plenty of other EV only companies out there to step into the vacant slot.

    • Eric 5 months ago

      Lol dream on. No other BEV maker has the scale or the vision other than in China.
      And mostly the others are primarily ICE makers. It is in thier interests to slow it down.
      The only reason they are doing this is because Tesla is taking market share from profitable ICE models and government mandates.
      In reality is at every opportunity all the legacy brands try to water down pollution controls, delay and slow EV mandates and in some cases openly rort pollution controls on masssive global scales.
      The industry is being dragged kicking and screaming into the future of clean vehicle technology by Tesla. Regardless of their marketing spin that suggests otherwise.

  9. Rob G 5 months ago

    I remember when Amazon made massive loss after massive loss. Today they are one of the most profitable companies in the world. If Tesla followed this path, it would be game over for all major car makers.

    • Alastair Leith 5 months ago

      Amazon (& AWS) hasn’t put all other web services cloud computing and retail businesses out of business just yet! This is an interesting profile of Bezos:

      LINK

      Whatever the reason, when we listen to typical corpospeak there is no music, no soul, no human reaching out to us. There’s no such lack of soul in Amazon’s annual letters to shareholders. Founder & CEO Jeff Bezos rejoices, occasionally apologizes, and always expounds his company’s management philosophy and practices — and he does so with wit and good grace.

  10. Alastair Leith 5 months ago

    (Read: By 2030, you probably won’t own your electric vehicle)>

    I think Giles meant to link to this story.
    But also any of Seba’s one hour presentations videos on his website/youtube channel are excellent: tonyseba.com

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