Last weekend Herbert Diess, CEO of Volkswagen Group (VAG) and Volkswagen, shocked his managers. At a leadership summit, he proposed to alter the company-car rules. The 20,000 employees who have a company car like the bigger, thirstier, and more expensive models, but shouldn’t they all be driving electric?
I did something quite irresponsible lately. I made a prediction 6½ years in the future about Tesla’s finances. The normal financial analyst horizon is a single quarter, and that is often too difficult.
Tesla has a long history of in-sourcing production. It started with the idea of following the Apple model. That meant doing the design itself, finding factories which could make it, having no production itself — only design, marketing, and sales. That didn’t work — nobody did know how to make an electric car.
While this letter was being prepared for publication, Elon Musk released the news that he decided not to follow through on his idea of taking Tesla private. That news made the goal of this letter obsolete. But the arguments in it are as valid today as they were yesterday, making it still worthy of publication.
Before people start placing Linette Lopez on a pedestal, note that she is a “champion of Tesla FUD” only outside the realms of Seeking Alpha. It appears the Tesla writers on Seeking Alpha are in a competition about who can create the most outlandish theory about Tesla’s finances, preferably completely devoid of reality, whereas Linette Lopez is more your run-of-the-mill yellow press reporter.
Since Tesla CEO & Chairman Elon Musk tweeted out a note that he was “considering” taking Tesla private, my mind has been racing through the pros and cons of such a change. Add me to the thousands or millions of others in this same boat. While we’ve hosted many an interesting discussion about the pros and cons, however, we haven’t actually published an attempt at a comprehensive summary of these pros and cons.
Today’s blog post from Tesla CEO & Chairman Elon Musk confirmed my WAG about the cost of going private. It is somewhere between $0 and $24 billion. For both amounts, Elon can get the funding secured. But for the amount of $???, it is a bit harder. Investors want to know how much they are going to invest, and how much influence they are going to get for that amount.
For 15 years, Tesla has been prisoner of The Secret Tesla Master Plan. It called for the development of a number of products and the acceleration of the world’s transition to renewable energy. To achieve those goals, Tesla was forced to travel from milestone to milestone, with a pause to recuperate and then get back to the maximum speed its financial resources would allow.
While this article waited for the editor to come along and publish it, the world changed. Elon published on August 13, 2018, a new blog post explaining his actions on and before the 7th of August, when he tweeted about taking Tesla private at $420 and sent a letter to Tesla’s employees.
I leave the original article as written, and add an addendum with the consequences of these new revelations.
First, the hottest question about Musk’s idea to take Tesla private: Does he have the funding?
