Tesla stock is down almost 10% today, after its 2012 earnings report became public. Tesla missed its projections and investors hammered the stock in response. So what did I just do? I just bought a lot of TSLA. Why did I do it? Because I'm betting on Elon.
There's a SeekingAlpha analyst report that's very bearish on Tesla stock. The author writes:
"Tesla's current market value is 250 times higher than it would be if it were being valued as a car manufacturer rather than an idea whose time is about to come. If Tesla were valued as a car manufacturer at Ford's valuation ratio, it would have to produce about 440,000 cars each year. That's over 20 times its current production goal. Are there that many luxury car buyers out there who are willing to live with the limitations of an electric car? It seems doubtful to me."
Here's the problem with the author's perspective: He doesn't understand Elon's master plan, nor does he appreciate Elon's "relentlessly resourceful" ability to execute on that plan.
If you just consider TSLA stock based on what the company has achieved to date, I'd agree that the stock's price is still inflated beyond what its current-day business metrics would justify. As the analyst points out:
"If Tesla were valued as a car manufacturer at Ford's valuation ratio, it would have to produce about 440,000 cars each year. That's over 20 times its current production goal. Are there that many luxury car buyers out there who are willing to live with the limitations of an electric car? It seems doubtful to me."
But here are a few counter points to consider:
- Elon's plan isn't to stop at the Model S. He's meticulously created a down-market strategy, starting with a low-production, expensive luxury Roadster model to iterate on the core technology fundamentals, and now with the Model S, and soon Model X SUV, which competes in the luxury sedan market (think BMW M5 or Audi S4 buyers), and then next he'll produce a sub $30k mass market vehicle. Tesla absolutely will get to Ford's volume production numbers with this strategy; but Elon is stoking demand every step of the way.
- Speaking of stoking demand, there's a long waiting list of passionate buyers waiting to get the Model S or X. I'm one of them (that's my Model X, reservation #486, in the picture above). People want what Tesla is building, and they can't churn them out fast enough.
- That leads me to the next, and arguably most important point: Tesla is making a quality product with incredible market timing. The Model S was awarded Motortrend's "Car of the Year" award. It has many rabidly passionate enthusiasts already. Gas prices are rising, and federal efficiency standards are squeezing auto manufacturers. Tesla has a core expertise in creating batteries that other manufacturers will need, as evidenced by the Mercedes B class that will use Tesla batteries and the Toyota RAV4 that already does. The Model S can outrace a BMW M5 -- if that's not enough to get middle aged men's hearts beating like they were 14 again, I don't know what is.
But my last point is that I'm specifically betting on Elon Musk, the CEO of Tesla. He has single handedly pushed Tesla through tremendous obstacles to get it to where it is today. Above all else, I believe in Elon. I don't care if Tesla stock drops even more; I'll just keep buying it because it'll be on sale. If there's anyone that can create a new mass market car company -- which nobody has been able to do since the 1920's -- it'l be Elon.
I don't buy stocks anymore because I don't really know enough about how to value them, but I do think that Tesla is going to be massively successful. Their price/performance/charging station rollout/range/etc. is already pretty great, and will only get better.
Well, if you're pointing out that stock prices are vulnerable to short term thinking and short sighted market forces - this is both a huge problem for the market as a whole and a huge opportunity for long term investors who can see and understand a vision beyond the next quarter. It's a huge problem because it causes companies to pursue quarter by quarter strategies which are tremendously sub-optimal. But the companies that can act beyond that have a tremendous advantage. But note that those companies always have visionary leadership behind them - Amazon, Apple, et. al. And here, you're basically saying Elon provides that for Tesla. Darn tootin'. Just listening to him talk about why he's founded the companies he's founded, like Space X, he basically said I'm rich and smart, now where can I put my money, time and talent where they can have the greatest impact on the future of the human race? That's a pretty wonderful way to decide on your second act.
My favorite Jeff Bezos quote: "We're willing to be misunderstood for a long time." So he can make moves that others would be afraid of because he knows they're long term plays that will pan out eventually. Tesla is like that.
Elon is live-streaming the Model S P85D event now right over here. #DualMotor = insanely fast.
Can't wait to see what the "D" is on 10/9/14!! Anyone have a guess? And what's the 'something else'? TSLA motorcycle? Pickup? Lower cost off-grid battery storage?
Wow I LOVE this article that compares Elon to Henry Ford! And I especially love this comparison of how Model T growth exploded in the early 1900s:
As per this data, Ford (NYSE:F) production based upon the Model T growth was extraordinary, beginning with an approximate doubling each year:
1909: 10,660 vehicles.
1910: 19,050 vehicles.
1911: 34,858 vehicles.
1912: 68,773 vehicles.
1916: 501,462 vehicles.
1917: 735,020 vehicles.
1920: 941,042 vehicles.
1923: 2,011,125 vehicles (the peak year, in fact).
In ten years, Ford built 50 factories for a car that was very basic, beginning with no speedometer, poor brakes, just two forward gears and one reverse gear, no electric starter, and no fuel gauge.
This WSJ article that more closely links SolarCity to Tesla's upcoming Gigafactory does a great job of laying out in plain detail what those of us who have been bullish on Elon for a while already know: That TSLA isn't just a car company. It's a new type of energy platform. Storing energy (in the form of lower cost batteries) and using energy (in the form of cars).
This is a great quote:
"At the conference Wednesday, Mr. Musk disclosed that a portion of the gigafactory's capacity will be set aside for building "grid-scale storage."
In other words, Tesla is going to continue its tradition of manufacturing battery packs for SolarCity, only on a much grander scale."
+1 more reason that I'm betting on Elon.
Incredible that TSLA is at $270 today -- although I'm not surprised. As I've written below, I really believe this is a $1k/share stock over the medium-term.
The news that's pushed TSLA up 2.5% today is that China is considering a gas tax to encourage adoption of electric vehicles. As SeekingAlpha reports:
- Comments out of China from BYD Company's Wang Chuanfu are creating a stir in the electric vehicle industry.
- Chuanfu maintains that a new consumer tax on gas is being considered by Beijing.
- He notes that even a 0.2 yuan per liter tax adds up to "hundreds of billions" which could be funneled by the government to support EV infrastructure and development programs.
- Tesla Motors (TSLA +2.3%) printed an all-time high of $270.60 earlier with the China news helping to boost sentiment a bit.
With the smog issues in China a national health issue, I'm very convinced that China is going to have to do something extreme, and fast. And not just China, but India, too. These are both huge potential markets for Tesla (India further down the road than China.) It's just the perfect storm for TSLA to keep the pedal to the metal, and not just for cars, but for clean energy storage via its Gigafactory battery project, which is gunning to get storage down to $100 per kWh, a tipping point for energy storage.
I'm still betting on Elon more than ever, 2 years later!
Wow, what a great blog post comparing the cost of Model S ownership to that of a Honda Odyssey. Specifically:
"The Model S carries about $25-30K more in depreciation vs. an Ody ($55K vs. $25-30K). But you save $20-25K on gas and $5-10K on maintenance. In today's dollars, the Model S is less expensive than nearly any other luxury car, and more affordable than even the Ody."
Wow, what a different outcome for Tesla vs. Better Place (the Israeli electric car startup that raised almost a billion dollars):
"Everything we needed to go right went wrong," says one former employee. "Every cost on our spreadsheet wound up being double, every time factor took twice as long." There was profligacy, marketing problems, hiring problems, problems with every conceivable part of the business. There was questionable oversight by the company's board of directors. There was bad luck. And there was hubris.
"There was nothing normal about Better Place," says Pross. "It was spectacular. Shai always said, 'If we go down, we'll make a lot of noise.'"
Read Next
Exclusive Peek Inside Tesla's Model S and Model X
On DROdioThis weekend, Telsa held an exclusive Model X preview for reservation holders. As the CEO of a mobile startup, I have mad respect for Elon Musk, the founder of Tesla. Here's a guy who, after starting and selling PayPal, started not one, but two companies with prescient timing: Tesla and SpaceX. As gas heads towards $5/gallon (with the imminent threat of shooting up higher) and the US retires its Space Shuttle program, Elon's two startups are positioned perfectly. For more background on Tesla, take a look at the blog post I wrote after touring the Tesla Factory.
Critics are raving over the Model X. As someone who's passionate about cars & motorcycles and hopeful for the future of electric vehicles that perform as well or better than their fossil fuel burning brethern, I was originally a reservation holder for the Model S. When I saw the Model X, I immediately swapped my reservation out. Now I'm #486 on the list for a Model X. You can get a reservation of your own here -- it's a $5k refundable deposit. Your only risk, really, is that Tesla doesn't stay viable as a company, but as someone in the tech industry, I really believe in Elon, his vision, and his ability to execute. I'm willing to take that risk.
I Rented a Tesla Model S for $25/hr From Getaround. This Was My Experience.
On The Best of SettGetaround is a car sharing service like Zipcar, except that it uses people's private vehicles instead of a fleet. It's a bit like AirBnB for cars. Getaround is part of the "collaborative consumption" movement, which believes that if we could share things we don't use most of the time it would be better for us in a lot of ways. Sharing cars means less cars on the road, which means less pollution, and generally less "stuff."
I'd never used Getaround and a few weeks ago I was trying to figure out why. I pinged Jessica, one of the founders, and told her that what I'd realized was that I didn't want to have to go to someone's house and "borrow" their car. The thought of actually interacting with the owner of a car was awkward enough that it had kept me from trying the service.
Jessica told me about a new type of rental they now have called "Instant," where I can use the Getaround mobile app to rent a car instantly and unlock it with my phone, meaning I wouldn't have to meet the owner or wait for approval. (This dovetails really well into my recent blogs about the power of mobile and apps to transform businesses, and how Fortune 1000 CEOs are going to get fired for missing it.) Getaround Instant was exactly what I was looking for, so my brother-in-law Dal and I decided to give it a try.
I had a few hiccups that Getaround is still working through (for example, Getaround verifies a driver's driving history with the DMV in real-time, and since my last name has a hyphen in it, but the DMV doesn't account for hyphens, my rental request initially broke Getaround's booking system. But both Jessica and Matt were very proactive at resolving these speed bumps). Overall the process was incredibly smooth: