Published on May 27th, 2018 | by Maarten Vinkhuyzen0
Spoiler: Business Insider Is An Outsider — #Pravduh
May 27th, 2018 by Maarten Vinkhuyzen
Business Insider decided to join the chorus of Tesla-bashing media. It did give the job to an excellent writer who had no idea what he was writing about, so it might have convinced others he was right who didn’t quite know what they were reading about. We can’t all be experts, but a real “insider” would not write this misinformed and misleading piece.
Even for an outsider, there are easy ways to verify key figures about a company. The first mentioned in the article, Tesla’s age, is correct, but in the second paragraph, the first easily avoidable mistake is made. The writer mentions “its monumental losses (something like $20 billion for the life of the company).” Just visit Wikipedia and it is clear that the losses are less than a quarter of that. Still a lot of money, but expected of a fast growing company like Tesla and something the investors have no problem with (those that actually invest in Tesla as opposed to money managers who don’t want to touch Tesla, not even with a long stick).
The third paragraph opens with a more forgivable misunderstanding, stating, “Tesla, at base, is an automaker.” This misunderstanding is the basis of errors in the rest of the article. To the writer, an outsider, Tesla looks like an automaker because some of its products are cars, but that does not make Tesla’s core the core of an automaker. It is like saying that a surgeon, because he cuts into flesh, at base, is a butcher. Or it is like saying a butcher, at base, is a surgeon.
This mischaracterization leads to many mistakes. Every time the writer compares Tesla to carmakers, it is an apples-to-oranges comparison. A company is defined by the way it operates, the technology and methods it uses, the corporate culture, and partly by the products it makes.
When Tesla launched, it started to make electric cars, because it knew how to make cars electric and carmakers did not. The critics made the same mistake as the writer of this piece — they “knew” Tesla could not succeed because the automakers didn’t know how to make cars electric and Tesla didn’t know how to make cars. No new carmaker succeeded in the last half century or more, because car making is really hard.
But Tesla did succeed because Tesla is a high-tech company. Tesla had technology the carmakers didn’t have, and are now still struggling to master. Tesla knows how to make an electric drivetrain and the best batteries on the market (with partner Panasonic). Tesla’s main competence is outside the realm of the expertise of the carmakers, and the carmakers really don’t like to learn it — a strong argument to not consider Tesla a carmaker.
Tesla’s next step was not learning to make cars on a massive scale. It was developing technology for autonomous driving. Tesla is not finished yet and carmakers have also dabbled in it for many years. It is essentially making a robot — again, not a carmaker’s core competence.
Tesla’s third main product was energy storage systems (ESS). Some carmakers have tried to enter that market too, without much success.
When we look at the first product of Tesla, the Tesla Roadster, Tesla made the drivetrain and the energy storage system and all the high technology needed to make it work, and it bought the car parts from an established carmaker.
Nowadays, it also
walk dogs make cars.
After some nonsensical talk about the profits of other carmakers and the lack of Wall Street appreciation for Tesla (it’s about potential future profits, dummy), the intro finishes by citing the current fad of the Tesla bashers.
“… it’s falling short on fundamentals, such as being able to effectively build a mid-size sedan in the Model 3. Any other established carmaker could crank out hundreds of thousands in short order, but Tesla spent a closely watched year trying to manufacture a few thousand per week.”
Where do I start? At the comparison of yearly production to weekly numbers? By reiterating that the Tesla ramp is 10 times as good as the Bolt ramp? Should I point out that no carmaker has succeeded at producing an electric car at high volume and high quality, something not even done by the champion of electric car production Nissan with the Nissan LEAF (battery cooling and aesthetics)?
And this is just the intro.
Next is the comparison between Tesla and GM.
First he compares leadership, but not really. He mentions only one leader, GM CEO Mary Barra, and compares her generally to her predecessors. She might be the best GM has ever had, but it’s odd to mention her skills without mentioning Elon Musk. Musk is a phenomenon with a string of successful companies to his credit (zip2.com, x.com, PayPal, SpaceX, and Tesla of course). He also inspired others, like SolarCity and Hyperloop. Musk is not really a cash-burning failed entrepreneur.
Second, the article compares scale, but doesn’t mention that GM is shrinking and Tesla is growing faster than any carmaker ever did.
Third, the article touches on speed of developing new models. The standard in the car industry is a product cycle of 7 years. What did Tesla do 7 years before start of production of the Model 3? It was looking for a location to produce the Model S. GM proved that carmakers can act faster than the 7 year product cycle suggests with the development of the Chevy Bolt. The company did it by outsourcing the difficult parts to LG, a smart move, but that still doesn’t place GM in the same class as young Tesla.
After this comes a comparison to Ford, which recently replaced its CEO because milking the cash cows is not the best way to prepare the company for the disruptions of the next decade — advances in electric and autonomous technologies. But Ford somehow wins the competition in the writer’s mind. “Tesla, by contrast, has probably topped out in its luxury segment and now has to pull off a potentially impossible stunt: sell hundreds of thousands of electric sedans to a market that has shown limited interest in EVs (they’re only 1% of the global market) and that … doesn’t want sedans.”
The market doesn’t want EVs? In an industry that advertises more than any other, the Model 3 hasn’t been advertised and has ~450,000 reservations at $1,000 a pop. Reservations on opening weekend equaled the biggest single-product launched in history — not just for cars, but for any product.
The Ford comparison is followed by a comparison to FCA, whose CEO is desperately looking for a white knight because FCA doesn’t have the money or technologies to survive the next decade. FCA somehow comes out the winner in the writer’s opinion. Furthermore, “If you were looking for a CEO to run Tesla in the event that it, too, goes bankrupt and Musk is deposed, Marchionne would be first on your list.” Ah, yes, Tesla’s balance sheet would surely go in a better direction under Marchionne.
What Ferrari is doing in the Business Insider article I don’t understand. It is a small boutique sports-car maker, not in the class of current and future mega corporations.
The article finishes with an old tale about profitability. not understanding the difference between profitable products and a profitable company. He’s never heard the maxim that a dollar in profit is a dollar not spent on growth. This has been debunked before, so click the link above for more on that.
And, as usual, the rumors of Tesla’s demise are grossly exaggerated.
h/t William Meyer
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