Elon Musk’s Tesla pulling ahead – bulls stampeding, short sellers burning – all the way
Tesla had a blistering stock rally this week with shares climbing by 19.9% on Monday, surging another 15% in premarket trading to $900 today with analysts describing the rise as" insane". Short sellers, the bane of Tesla founder Elon Musk, who made a fair bit of money when they were betting on falling demand for electric vehicles, Tesla's ability to manufacture them, the amount of cash Tesla has and Musk's midnight tweets, have been in retreat. Musk gleefully published a couple of burning flames yesterday after he expressed the wish in 2018 on Twitter that it would be the "short burn of the century coming soon". MarketWatch has speculated whether Tesla is like Amazon 20 years ago. When Musk tweeted that he was thinking of taking his company private there was one investment firm, ARK Invest that advised him to reconsider and said, "Tesla should be valued somewhere between $700 and $4,000 in five years." Over the weekend, ARK published an update and now expects the stock to be worth a whopping $7,000 by 2024. Its optimism stems from "Tesla's ability to cut costs and increase margins, assigning an 80% probability that the company will achieve 40% margins." One of the Tesla bulls, billionaire Ron Baron told CNBC that he thought Tesla could reach $1trn in revenue in 10 years. For now, the markets are supporting the bulls and are betting that Musk will continue to zoom ahead of his competition. – Linda van Tilburg
The market is betting that competitors won't catch up to Tesla
By Gabrielle Coppola and Ed Ludlow
(Bloomberg) – For a few tumultuous years, Tesla gave the bulls reason to believe and bears reason to doubt. Sure, Elon Musk was pulling off what legacy automakers tried and failed to do – make electric cars cool – but he was presiding over an inexperienced enterprise, and the old guard would catch up.
As Tesla observers try to understand how and why the stock has tripled in a little more than three months, analysts and Musk's own rivals are second-guessing the notion that the Model 3 maker will be caught anytime soon.
"There's a recognition that Tesla is in a preeminent position in terms of EV technology," Peter Rawlinson, the chief executive officer of upstart Lucid Motors, said in an interview on Monday at the BloombergNEF Summit in San Francisco. "They're even further ahead than has been reported, and I think the gap is widening, not closing."
The praise echoes comments made recently by the CEO of Volkswagen, the world's largest automaker. Tesla usurped the German manufacturing giant by market capitalisation on January 22. Not even two weeks later, its $140.6bn value exceeded VW's by about $50bn at Monday's close – and was poised to move higher, up 3.5% on Tuesday in premarket New York trading.
Cars will "become the most important mobile device," VW's Herbert Diess told top executives at an internal meeting last month. "If we see that, then we also understand why Tesla is so valuable from the view of analysts," he added, lamenting that VW isn't also looked at as tech-like.
Mud slinging
Rawlinson, who was chief engineer of the Model S before joining Lucid in 2013, wasn't always this positive, even going so far as to talk down his former employer's product.
"I contend that Tesla is not truly luxury," he told Bloomberg News in September 2018, when Lucid had just secured a $1bn investment and Musk was less than a month removed from trying and failing to take Tesla private. Rawlinson said then that Teslas were "premium and high-tech, but not luxury". On Monday, he reiterated his view that the interiors of Tesla's cars fall short.
But since that earlier interview, Musk has built a commanding lead in the still-fledgling US EV market, and the Model 3 has risen to become one of the top-selling cars in Europe – electric or otherwise. Tesla needed only a year to construct its first overseas assembly plant in China and last month started deliveries of locally built sedans. By March, it plans to begin handing over Model Ys to customers, months ahead of schedule.
"We think they are pretty far ahead in battery and EV technology," Adam Jonas, an analyst at Morgan Stanley, said in an interview. "Tesla has moved from being seen as an auto stock to be seeing as a tech stock" that is "mentioned in the same breath as Amazon, Apple and Google."
'Technological gulf'
Global carmakers from VW to General Motors are pouring billions into electric vehicles, trying to capture some of Tesla's stock-market mojo while also meeting tighter emissions standards around the world. But the inferior battery range of recent EV entrants including Audi's e-tron crossover and Porsche's Taycan sports car show how far legacy automakers are lagging behind, Rawlinson said.
"I'm not being critical of the Germans – it's wonderful they're creating these cars and coming in," he said. "But it just shows much of this technological gulf remains."
Lucid's debut model, the all-electric Air sedan, is scheduled to start production in December, and the company hopes to deliver 15,000 units in the first year. Pre-production versions are exceeding 400 miles of range in testing, Rawlinson said.
Musk said during an earnings call last week that the Model Y crossover will have 315 miles of range, which would handily beat the Audi e-tron and Porsche Taycan's US Environmental Protection Agency-estimated ranges of just over 200 miles.
Traditional automakers are at a disadvantage when it comes to building battery-electric vehicles because they have to keep spending money and resources on combustion-engine cars, which influences how they think about vehicle design and battery-pack efficiency, Rawlinson said.
Head start
Even automakers such as VW and GM, whose pockets are deep enough to invest in dedicated EV platforms, are behind because they don't put a high enough priority on developing EV technology in-house, he said. Traditional manufacturers and even some EV startups "are saying the electric powertrain is already commodified, that it's not a differentiator."
Lucid will announce a contract with a major cell maker soon, but battery chemistry is only part of the battle. Pack architecture, software and thermal management are just some of the elements necessary to achieve superior range, Rawlinson said. The company is beginning to seek funding for a new electric SUV based off the same platform as the Air.