LONDON — Tesla had a rocky start to the year with vehicle deliveries down by 31% from 2018’s fourth quarter. But there may be a lifeline for electric vehicle makers including Tesla from American lawmakers. A bi-partisan group plan to introduce a bill to expand federal tax credits for buyers of electric cars. This after an existing $7,500 tax credit which phases out over 15 months was halved for Tesla buyers in the beginning of the year. The bill dubbed the Driving America Forward Act would grant automakers a $7,000 tax credit for an additional 400,000 vehicles. Tesla shares rose by 1.6% on the news. In the meantime, Tesla CEO, Elon Musk is in a legal dispute with the US Security and Exchange Commission after the SEC said Musk violated their 2018 agreement when he tweeted in February that Tesla will make half a million cars in 2019. On the 4th of April 2019, a federal judge gave him and the SEC two weeks to come to a settlement urging Musk “to put his reasonable pants on.” In a Bloomberg debate on Tesla’s future, the CEO of Gerber Kawasaki Wealth Management, Ross Gerber dismissed the controversy around Musk saying he was becoming a folk hero in America, while David Kudla, the CEO of Mainstay Capital said that Tesla was past its peak. – Linda van Tilburg
We’ve had a very disappointing number here on deliveries for first quarter. Certainly, if we look at the overall number – from almost 91,000 during the last quarter, we’re down to 63,000 vehicles this quarter – 31% decline and that’s before the wave of competition coming domestically and globally. We’re just seeing the initial part of that coming for Tesla, so that’s why we think we’ve seen peak Tesla is behind us.
___STEADY_PAYWALL___
Ross, you clearly maybe don’t agree that we’ve seen peak Tesla – you’re long this about $10m worth of shares, so what’s the case going forward?
Yeah, that was incorrect. I own $10m worth of shares.
Sorry. Did I freak you out? Sorry. I read too fast – $10m worth.
Saying ‘it’s peak Tesla’ is kind of like saying this is peak society. You know what I mean? This is the beginning of Tesla and this is what Tesla is struggling with – rolling out their product internationally and all the by-products of releasing such a compelling car. That’s why we saw kind of a drop in Model S sales. It was the performance Model 3 is a very compelling alternative to a Model S and I think I saw a little bit of cannibalisation because of that but I don’t think that that’s a big problem for Tesla longer-term because it’s not their goal to be a high-end car-maker. It’s their goal to mass-produce EV cars, so this is the transition they’re making from a high-end car-maker to a mass production global scale car company here. It’s a very exciting time for Tesla as well as a challenging time as they continue to deal with disrupting an industry. The only competition that’s coming for Tesla is really from China and when you look at the rest of the car companies, they’re in desperation mode now, just trying to wiggle their way into some strategy to counter Tesla. We’re seeing that in Germany, in particular. The rest of the world is going green, so Tesla’s in the right spot.
Well, David, come in on that. Respond to Ross.
Well, if that’s the case, Ross, that they are driving towards that car for mass appeal for the mass audience, customer, then they need to be able to make the car profitably at $35,000 – maybe they need to be able to produce and sell a car below $44,000 and it’s not able to get there. The car-makers that are going to eat their lunch in that regard are the Chinese automakers. They’re coming online. They’re coming online in a big way. By 2020, they’ll have enough capacity in China alone, to fulfil all the EV demand globally and more. They have so many EV automakers in China that are coming online, that the Chinese government last year, had to curtail – actually restricted the licenses of Chinese start-ups allowed to manufacture EV vehicles. That’s how many automakers are getting into the EV market. It’s not about traditional OEM automakers that are wondering about a strategy and wondering ‘how do we get into this market’. The market in 2019 is 2.6-million EV’S expected to be bought in 2019. It goes on from there. We are on an S-curve of EV demand. There is going to be an EV glut on the market in 2020.
See, I agree with a lot of what you’re saying in that China is definitely the biggest competitor to Tesla. I completely agree with that, but I don’t think their ability to scale is as good as they claim and I think a lot of the car companies and the reason they’re cutting back was a lot of it was just a bad investment for them. China, especially Volvo, Gili, and BYD I think are the other leaders in this industry. But Tesla has a brand value in China that’s unbelievable. It’s better than the iPhone. The Chinese people love Tesla. It’s about being an American brand and what it stands for, so I think EV demand and supply will increase dramatically, but I think demand’s going to increase much quicker than supply and Tesla’s going to be the top of the charts there, as well as other successful companies.
I’ll start with you, David. How much do you worry about the fact that I’m sitting here in front of my Bloomberg terminal and Elon Musk is in front of the SEC. Musk’s in front of the SEC over his Twitter habits? I mean, that doesn’t feel normal for a CEO. How much does that play into the thesis here?
Well, it plays in a great deal. We’re focusing a lot on Q1 deliveries and looking down the road at what the potential is globally for Tesla in talking a lot about the brand (and I agree with Ross Gerber). It is a strong brand and a lot of that Brand is because of Elon Musk and if Elon Musk were gone tomorrow or gone at some point, a lot of that brand equity is in Elon. In Elon, we trust. I think he has devout followers. There have been some missteps that have tarnished Elon and the brand and there is a real risk; investigations by the SEC, by the DOJ, and now we have the ongoing concerns about the tweets on production levels and restrictions. For him as a CEO, he continues to find ways to get into trouble. He is not your typical CEO. Some of the followers like that but some of the regulators and others – whether it’s NASA, SpaceX and others – they find it problematic, so that’s a double-edged sword.
Well, just one last question to you, Ross. Let’s follow up on that. If there isn’t an Elon Musk as CEO of Tesla, will this be a problem? [Inaudible 0:06:34.5] Hall is following what’s going on with Mr Musk in downtown New York and she says one of the questions has always been, “Could the SEC seek or Judge Nathan rule that Musk should not be CEO”? So far, it doesn’t seem to be that way.
Yeah, that’s not going to happen. The SEC’s job is not to take out CEO’s over a tweet. I think what people don’t understand… if you look at all the pictures, Elon’s smiling on his way into court because while the conservative people of the world look at as ‘oh, he’s tweeted a bad Tweet’ and ‘oh, he’s always in trouble’… People hate the government. They love that Elon’s standing up to the government. He’s gotten one million new followers since this all went down. Controversy is part of Elon Musk’s brand and it’s made him a folk hero. He has almost as many fans as the Kardashians. It’s part of the strategy. Keep that in mind.
