As a car enthusiast listening in on Tesla’s (TSLA) earnings call on Tuesday, Apr. 23, something seemed off.
An hour before the call, Tesla announced the release of the updated Model 3 performance; a very fast and very promising car that boasted impressive figures.
With that in mind, I came into the call “car-focused,” expecting some bragging about the performance numbers of the new car, as well as additional updates about the "$25,000 car" that Tesla CEO Elon Musk has denied axing.
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Tesla
However, that was not the case. Instead, we got a little tease that sounded like he was talking about something he detested talking about; as if a single mention of a so-called affordable car was going to shut us all up.
“We’ve updated our future vehicle lineup to accelerate the launch of new models,” Musk said.
“These new vehicles, including more affordable models, will use aspects of the next-generation platform as well as aspects of our current platforms, and we'll be able to produce on the same manufacturing lines as our current vehicle lineup.”
What that sounded like to me, and analysts listening in on the call, was that the whole “$25,000 car” is not happening.
"We read 'more affordable' as potentially de-contented Model Y/Model 3 versions with improvements in software and AI/hardware capability, but at lower prices," Morgan Stanley analyst Adam Jonas told Reuters.
Despite all this, the weirdest aspect of the call was that the way Musk spoke about Tesla differed from a few months ago. It seemed as if he was not running a car company, but some sort of confused robotics and AI firm that was dead set on building the next generation of Robotaxis.
Later on in the call, I heard a jarring answer to my provocation from none other than Musk himself.
“We should be thought of as an AI robotics company. If you value Tesla as just an auto company — it’s just the wrong framework. If you ask the wrong question, then the right answer is impossible.”
"If somebody doesn't believe that Tesla is going to solve autonomy, I think they should not be an investor in the company. And we will. And we are."
Although many other enthusiasts, and “Tesla believers“ have seen signs indicating this in the past, at that moment, I knew that the Elon Musk I was listening to on that call was not the Elon Musk that I knew from before.
The Elon I (used to) know
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In 2006, Musk wrote a blog post titled “The Secret Tesla Motors Master Plan (just between you and me).” In it, he describes in detail how the electric sports car that they were working on at the time would be the catalyst for more affordable vehicles down the line.
“Almost any new technology initially has high unit cost before it can be optimized and this is no less true for electric cars,” he said. “The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”
If I had enough time on my hands, enough sanity in my head, and enough energy in my fingers, we could talk endlessly about Elon‘s bad behaviors, many failures, and shortcomings. However, one issue stands clear, which can be addressed using a quote from Bruce Lee in "Enter The Dragon."
“Never take your eyes off your opponent, even when you bow.”
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Every minute Tesla leadership spends asleep at the wheel going off and doing its own thing with robotaxis, AI, and robots, is an extra minute for every other EV-producing automaker to catch up.
Although I quoted Bruce Lee, the threat against Tesla is not just the Chinese juggernauts such as BYD (BYDDY) , NIO (NIO) , Xpeng, or Chery.
The real threat comes from every other automaker. They have the money, the capacity, and the 胆量 to make EVs that are equal, or better quality than Tesla.
Rivian
In a time where Etsy shops are selling new Tesla owners detailed delivery inspection guides for defects, Rivian (RIVN) and Lucid (LCID) are formidable opponents, but the ones Tesla should be really worried about are Ford (F) , General Motors (GM) , and Honda (HMC) .
At the current moment, establishment automakers are focusing on plug-in hybrids due to a slowdown in EV sales. Elon Musk knows that this situation can be a great opportunity for Tesla.
Opportunities abound for Tesla
“As we all have seen, the EV adoption rate globally is under pressure and a lot of other manufacturers are pulling back on EVs and pursuing plug-in hybrids instead,” Musk said.
“We believe this is not the right strategy and electric vehicles will ultimately dominate the market.”
The problem I have with this statement is that while Musk's assumption is correct about plug-in hybrids, he doesn't follow it up with anything material.
Automakers taking one step back — even just a tiny step, doesn’t explicitly mean that automakers are entirely giving up and quitting on EVs. They will catch up.
Take one of those “other manufacturers” that Musk might have had in mind: Ford.
Ford versus Tesla
Although Ford has said that it is shifting its EV projects, it admits that it is losing money from its electric cars. During its earnings call on Wednesday, Apr. 24, Ford CEO Jim Farley said that it is still betting on "a new small, affordable" car because they know people will buy it.
“Well, when we look at the connected car data from our EV customers, we notice that people live in the suburbs, urban customers, they tend to drive shorter distances, and those more affordable vehicles, more approachable, and we believe that's where the adoption of EV will go the fastest,” said Farley. “We believe we can compete in segments of small cars and vehicles, more affordable vehicles in a unique way that's Ford.”
“We learned a lot when we -- in our more expensive vehicles, Mach-E, when in February we dropped the price 17%, our volume went up 141%. That's telling us that the more affordable we can make a great product, the more attractive it is to these mainstream EV adopters.”
More Business of EVs:
- A full list of EVs and hybrids that qualify for federal tax credits
- Here’s why EV experts are flaming Joe Biden’s car policy
- The EV industry is facing an unusual new problem
Whether the car is made by Ford or Tesla, a cheaper EV made by a trusted name will sell. Better yet, industry insiders know that a cheaper car would not only have a major fiscal impact on companies like Ford or Tesla but would put said companies at the forefront of major cultural and social change.
Sandy Munro, the CEO of auto engineering firm Munro & Associates and face of the YouTube channel Munro Live told Forbes that "[Tesla is] going to sell them all day long. And woe to those who are trying to compete with them."
“It will be a people’s car that everyone can afford. Like a Volkswagen.”
Epilogue: Tesla can come back to reality
Tesla is capable of making a cheaper car, whether it would be a stripped-down Model 3 or Model Y without some, if not most of the bells, whistles, or premium materials. Better yet, we could get a curveball in the form of a brand new “Model 2.”
Elon Musk said that Tesla will talk about a more affordable car, as well as all the robotaxi stuff on Aug. 8, 2024. Knowing Elon’s track record of promises kept and promises lost, no one knows what shape the “affordable car” will be, or even if it exists.
It could be the ugliest car in the world, but for the right price, people will gobble them up. We will have to see.
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