The Tesla Magic — Part Enchantment, Part Wizardry

Forget the dismal 2022. The Tesla magic is back.

Shares jumped 7% to a new high for 2023 after the all-electric carmaker said its deliveries in the most recent quarter rose 83% compared with the same period last year. Tesla reduced prices several times on all of its 4 EVs — S, E, X, and Y — and buyers rushed to take advantage of the pricing opportunities in conjunction with available US government tax credits.

Tesla Magic Grounded in Q2 Growth — Thank You, China

Major US indexes inched up a tiny bit on Monday to begin July and the second half of the year. If history is any indicator, July should be blazing.

Significantly, data released this week by the China Passenger Car Association indicates that Tesla reached 247,217 vehicles delivered in the April to June months, up 120% from a year ago. That means deliveries from its Shanghai factory more than doubled in the second quarter, accounting for over half of its record global sales.

Not to be lost in the media frenzy, China is the world’s biggest EV market, and Tesla had announced in April it would build a second massive factory in Shanghai.

Musk spoke on Thursday via video link at the opening ceremony of the World Artificial Intelligence Conference in Shanghai. “In terms of where Tesla is at this stage, I think we are very close to achieving full self-driving without human supervision.” His appearance marks another recent effort to maintain close links to China.

Even though it drives many of us crazy, perhaps it is Musk’s intransigence about topics like the company’s future autonomy that keeps Tesla vibrant — yes, the Tesla allure continues to hold a kernel of illusion.

Emma Meng, an auto influencer on Weibo, was recently quoted as saying, “There are only two types of EV companies in the world: Tesla, or Chinese EV makers.”

The Slow Ride to Tesla Ascendance

Admittedly, it has taken over a decade for Tesla to capture the imaginations and wallets of so many drivers. Why has the Tesla magic finally kicked in?

Bloomberg reported this week that Musk was chauffeured up to the Elysée Palace in a Model X for a meeting with President Emmanuel Macron. Later in the day, Musk’s magnetism attracted 200 business leaders at the Palace of Versailles to discuss new investments. In that moment, the company’s CEO was regaled as a before-the-cameras visionary rather than a behind-the-scenes ideologue.

France, you see, wants a Tesla gigafactory. In fact, Finance Minister Bruno Le Maire snapped a selfie with Musk and posted it on LinkedIn with the hashtag #ChooseFrance.

Contrast that with Stellantis, which is assessing its massive stake in 14 brands and dozens of factories around the world — all of which are facing looming and expensive modernization to serve an audience quickly expecting an electrified catalog.

What’s the Science behind the Tesla Magic?

The May announcement of NBC Universal advertising executive Linda Yaccarino assuming the CEO role at Twitter has infused a breath of fresh air into formerly disgruntled Tesla shareholders. Nearly forgotten is their ennui when Musk acquired Twitter in a $44 billion deal that seemed a business school graduate’s bungle.

Add to the equation changes within the Tesla organization — new scrutiny of labor practices in its supply chain, the decision to acquiesce to “try out a little advertising,” the elevation of Tom Zhu as head of Tesla’s assembly plants and sales operations in North America and Europe — and Tesla seems back on top.

It’s also important not to overlook that Tesla is a large corporation that invests in expensive big data and analytics capacity to enhance its innovation and competitive advantages. Tesla released its compute capacity forecast last month, drawing a clear line to a trajectory in which it will be not only one of the top EV manufacturers but also one of the most important AI companies in the world.

With each innovation like this that Tesla unveils, the science of EVs becomes another element of daily living.

“It was a jaw dropper,” Wedbush Securities’ Dan Ives said, referring to Tesla’s imposing report on its Q2 deliveries. “Those price cuts, that was the poker move that they needed to make to put an iron fence around their install base.”

If the Tesla magic is to be enduring, it must be more than a momentary illusion or a technological sleight of hand. “Magic,” sci-fi writer Arthur C. Clark revealed, “is just science that we don’t understand yet.” There are always naysayers. Bernstein’s Toni Sacconaghi Jr., a longtime bear on the stock, is one such Tesla pessimist. “The key question for investors is what might margins be?” Sacconaghi mused. “We worry that Tesla will have to further lower prices in 2023 and/or 2024 to meet unit expectations.”

Perhaps the recent Consumer Reports finding that a Tesla or other EV will save the typical driver $6,000 to $12,000 over the life of the vehicle, compared to owning a comparable gas-powered vehicle, will continue to make an impact. Plus, with new federal tax credits from the Inflation Reduction Act, consumers can save as much as $1,100 in the first year of ownership.

When we compare an ICE vehicle with an electric vehicle (EV), the winner is clear.

It took a decade for Tesla to become mainstream, and, along the way, the company secured the understanding that EVs are cool. They have breathtaking acceleration, are fun, and are clean. Sure, we’ve lost the “Vroom” engine sound. But your grandkids won’t know anything except electric transportation. For the next generation, the “Whirrr” and the “Wooooosh” of a Tesla is the brand that will spark their smiles.

Final Thoughts

Senator Thomas R. Carper (D-Delaware), who chairs the Environment and Public Works panel, told the Washington Post recently that he required the EPA to “waste no time” in implementing the Greenhouse Gas Reduction Fund program because “the science is clear — we are running out of time to avoid the worst impacts of the climate crisis, and we can’t afford any delays.”

We’ve known for a while that we all need to replace our internal combustion engine (ICE) vehicles. They’re inefficient in their use of energy, since only a marginal amount of the energy they consume is actually used to provide momentum — around 15–20%, depending on the type of vehicle. ICE vehicles emit carbon dioxide, the most common human-caused greenhouse gas (GHG). In fact, emissions from transportation account for about 29% of total US GHG emissions, making it the largest US contributor. Between 1990 and 2021, GHG emissions in the transportation sector increased more in absolute terms than any other sector.

It’s not lost on the legacy automakers that Tesla has led the way to a zero-emissions transportation tomorrow.