Aug 1, 2023 - Economy

How Tesla’s yarn unspooled

Photo illustration of a Tesla car driving off of a giant fake Pinnochio style nose in an upward trajectory.

Photo illustration: Aïda Amer/Axios. Photo: Spencer Platt/Getty Images

Whatever you think of Elon Musk personally, you have to give him credit for, more than anybody else, moving the world from the internal combustion past to the EV future. Or do you?

Why it matters: A narrative is now emerging that Musk might have actually done more harm than good for the EV industry as a whole. That narrative, however, largely ignores the crucial role played by the stock market.

The case against Tesla, as laid out in a now-deleted post on Threads by Facebook and Asana co-founder Dustin Moskovitz, is that two big lies propelled Tesla to its dominance in EVs.

  1. Tesla lied about the range of its vehicles, at a time when range anxiety was the top concern that car buyers had with EVs, as a Reuters investigation found.
  2. Tesla persuaded buyers into shelling out thousands of extra dollars for software with names like "enhanced autopilot," "full self-driving," and the like — all on the false promise that cars with that software would soon get an update making them fully autonomous vehicles that could earn money on their own by acting as driverless taxis.

What they're saying: "I call this the biggest Kickstarter rugpull in history," wrote Moskovitz.

Between the lines: Moskovitz's thesis is that Tesla's lies created a "gravitational effect" whereby customers, talented employees and funding ended up flowing to Tesla rather than anybody else.

Be smart: Stocks like Tesla are bought by people who believe in the company, so believers are generally the marginal price-setters. Skeptics generally just stayed away from the company; those who tried to short the stock ended up getting badly burned and ultimately drove up the share price when they had to cover their positions.

The big picture: Absent Tesla's lies, asserts Moskovitz, other companies — most notably BYD, in China, but also Toyota, Nikola, and others — would have had more demand for their own EVs, more access to talented engineers, and more cashflow with which to develop new models.

  • "At a high level, I believe Elon accelerated the development of EVs by at most 1-2 years," wrote Moskovitz. "It's plausible to me he actually delayed it."

The other side: Even now, EVs comprise only a minority of new vehicles sold in the U.S. and in most other markets. Ford has been surprised by demand for its hybrid vehicles and is ramping up their production, even as it continues to lose billions on its EV operations.

  • There's one reason above all others why a storied and profitable business like Ford would invest so much money in EVs — and that's Tesla's market valuation.
  • Tesla's market cap (it's worth $850 billion, versus just $50 billion for Ford) is very real, even if its claims and promises are fake. And the only way for legacy car makers to lay claim to some of that perceived future value is for them to move aggressively into EVs themselves.

The bottom line: The world should be happy that Elon Musk failed to take Tesla private in 2018. Its astonishing success as a public company — more than its success as a carmaker — is what has really driven the rest of the world to switch to an electric-first strategy.

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