Is Tesla the next Enron?
I love Bob Lefsetz’s blog and he is often spot on with his marketing analysis even outside of his specialty, the music business. However, he is way off on electric cars.
“So it turns out making cars the old way is very different from making them the new. The old way, perfected over a hundred plus years, is to focus on mechanics, manufacturing, but in electrics the key is software, which can be updated over the air as your car sits in its garage.
De rigueur with Tesla, non-functioning with VW.”
Where to start…
1. Tesla has problems too. It turns out that software needs hardware to run on and when the hardware breaks, you can’t just push an update.
The NHTSA wants Tesla to recall 159,000 Model S and Model X to replace their MCU, the cars main computer. One of the flash memory units has a limited life span due to being programmed and erased. This can occur in as little as 3 years, resulting in the car losing its backup camera, HVAC, defroster and limits the driver assistance functions.
2. Tesla might be losing. A lot of Tesla’s recent profits has been from selling emissions credits in Europe. In 2020, Tesla reported selling $428 million in credits in just the second quarter. However, as legacy car makers begin to product greater numbers of electric cars, this free money will start to disappear. Which brings us to sales.
3. As bad as the VW software is, it will get fixed. In the meantime, they have been flying off the dealer’s lots. VW sold 231,600 EVs in 2020, with the ID.3 leading the way with 56,500. Yes, Tesla sold around 500,000, but at the pace VW is gaining, they might pass Tesla in 2021.
More importantly, they are not alone. The top selling EVs in Europe for 2020 represented some of the largest automakers in the world. Renault/Nissan with the Zoe and the Leaf, Peugeot/Chrysler with the Peugeo 208, Opel Corsa and Hyundai with the Kona and Kia Niro.
Of Course, Europe isn’t alone. Wuling is selling an EV in China for $5000 USD and it’s become one of the countries top selling cars. Of course, the range is small, the car is tiny and basic, but Tesla doesn’t own electric powertrains. They aren’t that hard. There will be adjustment, but electric motors have existed since 1834. The heavy lifting has been done and we are in a period of optimizing the technology for vehicles, not a creating a whole new domain of knowledge.
“So people have been making fun of Elon Musk for years, now he’s the world’s richest man. Remind you of anyone? Steve Jobs!”
Maybe he is, maybe he isn’t. Frankly, Musk’s enterprises remind me more of Enron than Apple. Enron showed big profits and got lots of positive press until a few scandals showed that it was a house of cards. I have no insider knowledge of Tesla, but my BS detector says they hiding some scandals. I’m just waiting to see how bad they are.