I’m a big fan of Tesla. I think they’ve done a huge amount to lay the foundation for electric vehicles, which are on the cusp of being mainstream. In some ways, they’ve done what Apple did with the Apple II and Personal Computers - brought a technology from the bearded to the masses.
But people forget that after the Apple II, there was a time when Apple was considered irrelevant and the company came close to bankruptcy. Then the iPod came along and brought them back onto the forefront. So between producing the Apple II, which at the time was heralded, and today’s situation - being féted as one of the most innovative companies in the world, there was a a trough. A valley.
I think that situation is coming for Tesla sooner rather than later. And while I’m sure Elon Musk’s story will be told in breathless Hollywood movies in the future, that won’t save them from the liquidators.
There are a few reasons I’ve changed my views on this, and why I would not buy Tesla stock at current prices:
- I’ve seen nothing positive about the SunCity and solar roof acquisitions for a while. And I don’t see accelerating adoption of PV panels on the ground.
- The latest crash of a Tesla is very bad news. It’s now emerged that the car was on Autopilot, but more damagingly - this was a 38 year-old Apple Engineer. That’s bad on many levels - but mainly people assume that a 38-year-old engineer should be the very lowest risk driver of being killed by a self-driving car. This isn’t some reality star, snorting coke with the seat fully reclined. Then Tesla have openly (some might say defensively) blogged about the accident, and pissed off the NTSB whose investigation is ongoing. This incident is going to have wide repercussions.
- Finances. Tesla are burning funds at a shocking rate still. They don’t seem to be producing the cars fast enough and inevitably interest-rates are going to rise above zero and it will be harder to finance this burn.
- Other manufacturers are moving faster into electric vehicles than I expected. These companies can afford to subsidise the lessons of Electric Vehicle development with cashflow from their existing operations.
- Tesla is far too expensive to be acquired by any existing company at its current valuation.
There are positives: self-driving is inevitable and coming sooner than we think. Tesla has a real fleet of vehicles out there logging data. Uber fucked up with their self-driving recently, and their reputation is not great.
Overall I think there’s a medium to strong chance that Tesla hits massive financial problems in the next two years and has to restructure in a way that affects ordinary stockholders.