Published on April 3rd, 2017 | by Zachary Shahan0
Tesla Stock (TSLA) Soars & Passes Ford (F) On Record Production, Model 3 Progress, & Maybe Some Fake News?
April 3rd, 2017 by Zachary Shahan
There’s been a long-standing argument that the Tesla Model 3 won’t arrive on time because Tesla (TSLA) had production delays with the Model S and Model X. That argument seems to be built on faulty logic, as Elon pointed out on a conference call a year or so ago.
The problem with that argument is summarized in this 3-point list:
- Model S was delayed because Tesla was just learning how to build a car.
- Model X was delayed because Tesla was trying to design and produce the most amazing production car on the planet (which I’d say it succeeded at) and the company put too many new bells and whistles into it.
- Model 3 has been specifically designed for mass production and ease of manufacturing, without introducing fancy new tech that hasn’t been used in other Tesla vehicles and doesn’t have a super secure and reliable supply chain. Furthermore, Tesla is apparently prepared to produce any key components itself if needed.
Get the point?
But hey, Tesla at least needs to show that it can ramp up production of its premium-class Model S and Model X, right? If it can’t demonstrate annualized production of 100,000+ of its existing Model S and Model X high-powered stunners, who’s going to believe it can get 500,000 units of a new model (Model 3) out the door within a couple of years? (Not to mention a similar number of Model Y electric crossovers not too long later.)
Well, as you probably read by now, Tesla has reported that it produced a record 25,418 vehicles in Q1 2017, delivered over 25,000 (also a record), and increased its production 69% in one year (Q1 2017 vs Q1 2016). In other words: game on.
Now, some of us who have paid attention to the 3-point list above haven’t stressed so much about the likelihood of Tesla meeting its Model 3 production plans and proceeding to demolish the competition in the bottom of the premium-class car market — just as it’s done in higher segments of the premium-class car market.
However, others in the investment community and auto world have been more cynical, or more cautious if you prefer that term. It seems a day can’t go by without Tesla cynics commenting on here that Tesla can’t achieve its stated goals, even though it basically nailed a Secret Master Plan within 10 years that nearly everyone considered to be an unrealistic fantasy. Frankly, it seems Tesla has succeeded beyond anyone’s wildest dreams from the time Elon published that “Secret Tesla Motors Master Plan.”
Now, Tesla is ready to bust through the roof of that first master plan and fly into the goals of the second. EV fans, solar fans, climate hawks, tech nerds, and Tesla looney tunes are excited. TSLA shorts, on the other hand, seem to be in for a disturbing wake-up call.
Stormy weather in Shortville …
— Elon Musk (@elonmusk) April 3, 2017
One thing people may be waking up to, a topic I focus many of my conference presentations on, is that disruptive technology seems to grow slowly in terms of market share for a long time … until it’s genuinely ripe, word of mouth starts to work its magic, and this disruptive technology quickly takes over the market. It’s basically disruptive because of the exponential growth trend that routinely surprises much of society.
The other thing people seem to be waking up to, or at least the investment community seems to be waking up to, is that electric cars are the latest example of disruptive technology ripening, and Tesla Model 3s are likely to start falling off the trees this year in large numbers. The beauty that I filmed for the video below approximately one year ago wasn’t vaporware. It’s really on the verge of production, and hundreds of thousands of people should have one by the end of next year.
I’d guess that it’s no coincidence TSLA soared just as Ford’s stock (F) collapsed. People don’t have much faith that Ford is prepared to compete with Tesla (and others) in the fast-approaching EV market.
Granted, some analysts and investors still think Big Auto has plenty of time to respond and match Tesla’s electric efforts. Others disagree and think such analysts/investors are again falling for the never-ending disruptive tech trap. For the sake of conversation, here are two quotes from analysts who don’t think Big Auto has much to fear and don’t think Tesla’s current valuation is justified (via a Bloomberg article on the topic):
- Maryann Keller, an auto industry consultant in Stamford, Connecticut: “This is still the auto industry. It’s highly competitive and he will have to add plants and people just like GM and Ford do. There will be a day of reckoning at some point.”
- Dave Sullivan, an analyst at AutoPacific Inc.: “[Investors] act as if Tesla has some sort of patented product that cannot be replicated. … By the end of this decade, there’s going to be some significant choice for consumers looking for an electric vehicle.”
Ah, yes, the whole “it takes time to scale” + “the big guys can always catch up” + “Tesla doesn’t have any special competitive advantages” argument.
For TSLA shorts, Tesla haters, and simply people who have more faith in Big Auto, those arguments get less and less convincing by the day. It’s not just about Tesla opening up the market with the Model S, getting the Model X into a similar position in the premium SUV world, and getting close to Model 3 production. It’s also that Tesla has been genuinely impressive when it comes to integrating technologies and processes from other industries (like the space rocket industry), improving manufacturing efficiency, improving EV battery chemistry, massively scaling battery production, slipping into related markets (most notably, stationary energy storage and solar energy) in hypercompetitive ways, and jumping into the future quicker than others (think Autopilot and coming robotaxis).
An April 1 story I wrote about “coming” #TeslaCities was a bit fanciful, of course, but it seems the integrated and futuristic vision matched Tesla’s brand so well that many people took it for real (at least initially) and the article has landed 177,810 views within a couple of days. I hope this fake news didn’t influence the Tesla stock surge, but I do think the same thing that makes #TeslaCities so believable and enticing is what has put Tesla above Ford on the stock market. One of those companies had tremendous vision and innovation in the 20th century, and one of them has tremendous vision and innovation now. (OK, being nice, perhaps Ford still has tremendous vision and innovation, but if it does, it apparently hasn’t shown that very well to investors.)
The future is now — in that, tech that will dominate the future is already here, it is ripening, and an insanely better new era is starting. “The future is now” in another sense as well: Each moment of the day, we are making decisions that will affect the future, that create the future. We may fail much more than we succeed, but I think we’re all trying to do things that lead us into a brighter future — and that even goes for investors.
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