No. of Recommendations: 6
So, there's no knife falling quite so fast these days as Tesla. Elon Musk is irradiating his personal brand (and that of Tesla) among a big swath of the country, China's got some issues both as an EV market and manufacturing center, and the EV segment of the market is maturing. That's let a lot of the air out of the stock, which has dropped nearly a quarter of its value this week.
But several of those things might be short-term. Musk eventually will have to step away from Twitter - he can't keep running both Twitter and Tesla, and I can't see him picking the former over the latter. Eventually Covid will do what it will do to largely unvaccinated China, and the factories will fully open again. And there's still lots of growth to come in the EV market.
An interesting quandary.
I would say that, while there are legitimate worries about China, I am not too concerned about the other 2 factors you mentioned, i.e. Musk and non-Tesla EV competition.
China: I agree that COVID is likely to blow over pretty quickly there, probably taking a large toll on seniors, but then the economy will roar back, all the stronger for having lost a large number of people past their productive years. And what is lacking in vaccine immunity will very soon be replaced by the more dangerous but more effective sort, natural immunity from an infection. On the other hand, war in Taiwan is a distinct possibility, and the war and the blowbacks from Western countries would wreak havoc on Tesla production and sales in China. Apart from the fact that being so dependent on the whim's of the Chinese government is definitely a significant risk.
Musk: Maybe I am underestimating how negative the reaction to Musk is among part of Tesla's clientele, i.e. virtue signalers, but I think Tesla's cars sell themselves on their technical merits, and people who want an electric vehicle, for whatever reason, will very often end up buying the most technologically advanced ones (i.e. Tesla's), despite their irritation with some of Musk's provocative recent actions. And as far as Musk's abilities go, I think Musk on numerous different occasions has demonstrated his ability to grow a big important business. He will figure out what to do with Twitter and Tesla's woes, either by ceding active control of Twitter or by finding a less controversial CEO for Tesla, while keeping the Engineer in Chief role of course.
Non-Tesla EV competition: I don't think anyone has the ability, currently, to profitably sell cars with an adequate range for a fully electric vehicle. Tesla's cars are still miles ahead, in terms of kilometres of autonomy per battery kWh, and having less efficient batteries and battery management and engines not only means you need more costly batteries to get the same range, you also need heavy vehicles, meaning higher material costs and even less efficient performance. I think one of the reasons that companies like Ford and Toyota and VW have been slow to ramp their electric vehicle production is that they are not actually making any money on them. They will catch up eventually, but I think that may be many years hence. And in the meantime, Tesla has the opportunity to soon come out with a cheaper replacement of the Model 3, a pickup truck (probably not just the Cybertruck), the Tesla Semi, etc. etc., which might well reignite sales growth.
With a 3rd and 4th factory only coming on line this year, I think production will keep increasing rapidly for the foreseeable future, along with battery capacity to sell more home batteries and more utility-scale batteries.
Full self-driving is still some time off, but it seems likely that Tesla will get there first, there too, and if and when they do, that will have a huge impact on their sales.
I have been a Tesla bear at prices 3-4 times higher, but I think if I had to pull either a long or a short lever, it would be the long one.
DTB
