By Giles Parkinson on 3 May 2018
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.
