Dave Lee, who has a YouTube channel covering Tesla, investing, and more, recently shared some thoughts about Tesla’s regulatory credits, profits, and even the departure of Jerome Guillen and what all of these could mean for Tesla. While sharing his thoughts, Dave also debunked some fear, uncertainties, and doubt (FUD) about Tesla and likened the FUD wars to a video game — a great analogy, actually.
“Sometimes I feel like we live in a world filled with mobs and memes and the whole world seems connected online via this alternative-alternate universe of tribal warfare. It kind of reminds me of a video game sometimes.”
In a previous video, Dave debunked some FUD regarding Tesla but realized that people are just so caught up in the misinformation that little can help — it’s programmed into their minds. Some of the comments he read helped him how deeply ingrained some of these misunderstandings are.
Regulatory Credits Are Not Government Handouts To Tesla Or Elon
The first example of deeply believed misunderstanding is that of regulatory credits and subsidies. Many who do not like Elon Musk or Tesla often criticize Elon Musk and Tesla for receiving regulatory credits, while looking the other way when other large corporations do so. Dave explained the difference between subsidies and regulatory credits while noting that these are not handouts, as some of the marketed FUD would have you believe.
“Tesla makes some regulatory credits every quarter. However, most people — or a lot of people out there — think that these regulatory credits are somehow government subsidies given right directly to Tesla by the government. The reality is each government or different countries around the world — some of them have some strict standards against, you know, carbon emissions from cars.
“And if certain automakers don’t meet those strict standards, then they have to pay some fines. But in order to avoid those fines, these governments have set up a system where they could buy these certain emission credits from other auto companies that that don’t give much emissions out of their cars.
“And that’s what’s happening here. Tesla is getting the vast majority of their regulatory credit sales from other OEM manufacturers; not directly from the government.”
Dave explained that governments do give tax credits or rebates for EVs, but this is always or almost always to the customer directly. Tesla’s not getting that money into its bank account. The customer buys the vehicle and the rebate or credit is applied — putting the extra cash into the customer’s pocket — not Tesla’s.
Myth: Tesla Doesn’t Make Money On Its Cars
The above FUD, centered around regulatory credits, is often linked with the idea that Tesla isn’t making money on its vehicles. The two combined are something that many think is a real thing. Tesla is getting free money from the government and not making any profit from selling its cars — this thought is pure FUD and I love how Dave debunked it.
“A lot of people think that Tesla doesn’t make any money on their cars, and that’s kind of crazy because Tesla has been profitable for many, many quarters.”
Another thing Dave brought up is that Tesla is bringing in billions of dollars every year. Those billions of dollars are mostly coming from its car sales.
“Over the past four quarters, Tesla brought in over $36 billion in revenue and they’re making a healthy gross profit.”
That gross profit, between 20% and 25%, is leaving Tesla with billions of dollars of gross profit even after covering its operating expenses. Tesla still makes a profit in the end, along with positive free cash flow.
This past week, Jerome Guillen parted ways with Tesla, which led to a slew of negative headlines and heightened FUD. Honestly, we don’t know the specifics, and I feel that it’s really none of our business. Guillen’s reasons for leaving weren’t publicized, and I personally think that he shouldn’t be hounded and neither should Tesla. The way some of the headlines gushed over him leaving, you would think he was dating Elon or something — the FUD was that wild.
Dave shared his thoughts on Guillen’s decision to leave and noted that the FUD is leading people to think that Tesla is really in trouble. Dave tackled the FUD in a different way by starting with Guillen’s work history at Tesla.
“Jerome Guillen was the former president of Auto for Tesla, which is a huge role, and I think Jerome will go down in Tesla history as a super important person who played some crucial roles. For example, early in the day back in the day in 2014 or 2015 or so, Jerome Guillen was head of Tesla Sales and Service, a hugely important role. Next, he came back after a hiatus and he really helped Tesla ramp the Model 3.
“He was working on the Tesla Semi but Elon brought him over and he really was the person responsible for building an assembly tent that really turned the corner for Tesla in their ramp of Model 3 in 2018. Afterward, Jerome was promoted to president of Tesla Auto, largely because Elon needed somebody to take care of the entire supply chain and the hundreds and hundreds of suppliers all around the world.”
Dave pointed out that for Tesla to have someone with the title of President of Automotive would help that cause. He noted that, recently, Guillen stepped down from that position to switch to being President of Heavy Trucking — and now, according to a company filing, he has left the company. Dave shared that he was saddened and somewhat disappointed that Guillen is leaving.
Dave’s met Guillen several times and noted that Guillen knew how to work with Elon. Dave also shared that when he asked Guillen if the Shanghai factory was going to be on time back during Autonomy Day, Guillen replied that it was because it was under his watch.
“All in all, I think we’re going to miss Jerome and I believe he will do well wherever he goes. And I wouldn’t be surprised if he ends up head of a large auto company in the future and he does a great job. Because I think he’s learned a lot of great examples that have been set at Tesla.”
Tesla’s Business Structure Ensures It Will Weather The Storms
Dave noted that he believes that Tesla will do fine and touched upon what he thought most people aren’t understanding about Tesla.
“I think Tesla as a company isn’t structured like a typical large company. Tesla has 80,000 employees. However, they are an extremely engineering-focused company, which is actually quite unique. And they’re driven by ambitious projects and goals that all bring things together that set Tesla apart, I think, from the rest.
“Many other companies are planning focused. They’re management focused, right? You bring in your MBAs, you bring in your accountants, CFOs. Other companies are very marketing focused. However, for Tesla, they are very uniquely engineering focused where they’re pushing big improvements. They’re looking to release new and better products constantly and a lot of the departments actually report to Elon directly.
“Now, this is another kind of unique thing about Tesla. Usually, a CEO just delegates everything to his VPs or exec senior VPs and they take care of all the things and the CEO just takes care of the vision. However, with Elon, he’s directly involved with so many different areas of engineering because he wants to combine the minute details of the power of engineering together with the bigger context of giving audacious goals and ambitious goals to drive forward progress, innovation.”
Elon is hands-on and gets direct reports from various teams, and meets regularly with his teams. Elon is also in a lot of different engineering meetings where he gives feedback and tries to help solve engineering problems so the teams can push those forward, so that those audacious and ambitious goals can become reality.
Since Tesla is so engineering-driven, having a key executive such as Jerome Guillen leaving will not affect the engineering. Had Tesla been a marketing-focused company or management-focused company, perhaps having a key executive leaving would have been a major challenge. Dave pointed out that Elon is still there to guide the whole process and noted that it’s actually easier for another competent person to step into these key roles as long as they are engineering-focused and they know how to lead engineering while being open to shooting for the stars. Do you agree?
You can watch Dave’s full video here.
Don't want to miss a cleantech story? Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!
Have a tip for CleanTechnica, want to advertise, or want to suggest a guest for our CleanTech Talk podcast? Contact us here.