The drip, drip, drip of bother and potential scandal has yet to do real damage to Tesla Motors, but can disaster be far off?
U.S. regulators are circling like buzzards over a rotting carcass and the safety of Tesla’s technology is coming into question in the wake of at least one death and multiple crashes – three documented smash-ups which happened while Tesla’s Autopilot was engaged.
The Securities Exchange Commission (SEC) is investigating Tesla. The National Highway Traffic Safety Administration (NHTSA) is investigating Tesla. Tesla yet again has missed its most recent sales target. To juice flagging demand, Tesla has begun de-contenting and cutting prices, just like any other car company.
So much bad news in such a short span. Will any of it stick? So far, no. Tesla’s appeal has been rooted in the perception that it is anything but a traditional car company. Many are loathe to let go of the dream.
Tesla CEO Elon Musk.
Not Consumer Reports. CR is calling on Tesla to cease making misleading statements about Autopilot. Claims by Tesla’s CEO, Elon Musk, have apparently led at least some owners to “a potentially dangerous assumption that the Model S is capable of driving on its own.” Wrong assumption.
Some will be shocked to learn that Musk has made misleading statements. But as recently as 2013, Musk said Autopilot would be capable of handling “90 percent of miles driven” by 2016. No so here in 2016.
The Daily Beast summed things up: How Tesla and Elon Musk Exaggerated Safety Claims about Autopilot and Cars. The story was tagged “lemon.” Can real trouble be far off?
For the decade since Musk blogged about his “Top Secret Tesla Master Plan,” a certain group of acolytes and dreamers have been captivated by Musk’s vision of a new kind of car company. The true believers have invested great faith in Musk, dismissing Tesla’s missed sales targets and endlessly delayed product launches as minor stumbles on the road to greatness. Critics and realists are called “haters.”
Meantime, large institutional investors have pumped up Tesla, keeping its share price at stratospheric levels on nothing more than hope and promise – even though some of those big investors have been profiting by supplying shares to short sellers. The biggest boosters of all? Certain analysts who work for the same investment banks who own millions of Tesla shares.
Take Morgan Stanley’s Adam Jonas, whose firm owns 3.76 million Tesla shares, valued at more than $1 billion. Last year Morgan Stanley boosted Tesla’s stock price target to an absurd $465 (US) from $280 (US), citing Tesla’s expertise in autonomous technology and an expected but unproven ability to work out manufacturing inefficiencies.
Last month, Jonas backtracked a little, downgrading Tesla. But this week he had the pom-poms out again, telling CNBC that Tesla is morphing into a new kind of public transport company.
“We believe that Tesla’s unique advantages in machine learning and lack of exposure to legacy systems (internal combustion tech, unconnected cars) provide it with an opportunity to tap into larger and faster growing markets ahead of its competitors,” he wrote in a research note.
This was in response to another Trump-like Tweet from Musk. On July 10, Musk boldly proclaimed without a shred of evidence that he’s “Working on Top Secret Tesla Masterplan, Part 2. Hoping to publish later this week.”
Whatever Musk spins out next, the reality is that Tesla is not profitable, has never been profitable, and cannot be profitable for many years to come. One key reason Tesla endures is that Deutsche Bank, Fidelity and the rest have soaked up millions and millions of Tesla shares, driving its market cap to a ridiculous $32 billion (US).
The big money is betting that Tesla will one day become a very special technology company, one that as Musk has said, will be worth more than Apple. Perhaps. At the same time, these institutional investors are hedging, helping short sellers. This is called playing both ends of the investment casino game.
If you are a Tesla fan or shareholder, there are real worries, regardless of what investment banks are doing. It’s possible the SEC and NHTSA will find something troubling at Tesla. Perhaps customers who feel misled will take legal action. Perhaps the weight of Tesla and Musk’s failed promises and outsized projections will become a crushing burden.
What then?
The drip, drip, drip of bother and potential scandal has yet to do real damage to Tesla Motors, but can disaster be far off?
U.S. regulators are circling like buzzards over a rotting carcass and the safety of Tesla’s technology is coming into question in the wake of at least one death and multiple crashes – three documented smash-ups which happened while Tesla’s Autopilot was engaged.
The Securities Exchange Commission (SEC) is investigating Tesla. The National Highway Traffic Safety Administration (NHTSA) is investigating Tesla. Tesla yet again has missed its most recent sales target. To juice flagging demand, Tesla has begun de-contenting and cutting prices, just like any other car company.
So much bad news in such a short span. Will any of it stick? So far, no. Tesla’s appeal has been rooted in the perception that it is anything but a traditional car company. Many are loathe to let go of the dream.
Tesla CEO Elon Musk.
Not Consumer Reports. CR is calling on Tesla to cease making misleading statements about Autopilot. Claims by Tesla’s CEO, Elon Musk, have apparently led at least some owners to “a potentially dangerous assumption that the Model S is capable of driving on its own.” Wrong assumption.
Some will be shocked to learn that Musk has made misleading statements. But as recently as 2013, Musk said Autopilot would be capable of handling “90 percent of miles driven” by 2016. No so here in 2016.
The Daily Beast summed things up: How Tesla and Elon Musk Exaggerated Safety Claims about Autopilot and Cars. The story was tagged “lemon.” Can real trouble be far off?
For the decade since Musk blogged about his “Top Secret Tesla Master Plan,” a certain group of acolytes and dreamers have been captivated by Musk’s vision of a new kind of car company. The true believers have invested great faith in Musk, dismissing Tesla’s missed sales targets and endlessly delayed product launches as minor stumbles on the road to greatness. Critics and realists are called “haters.”
Meantime, large institutional investors have pumped up Tesla, keeping its share price at stratospheric levels on nothing more than hope and promise – even though some of those big investors have been profiting by supplying shares to short sellers. The biggest boosters of all? Certain analysts who work for the same investment banks who own millions of Tesla shares.
Take Morgan Stanley’s Adam Jonas, whose firm owns 3.76 million Tesla shares, valued at more than $1 billion. Last year Morgan Stanley boosted Tesla’s stock price target to an absurd $465 (US) from $280 (US), citing Tesla’s expertise in autonomous technology and an expected but unproven ability to work out manufacturing inefficiencies.
Last month, Jonas backtracked a little, downgrading Tesla. But this week he had the pom-poms out again, telling CNBC that Tesla is morphing into a new kind of public transport company.
“We believe that Tesla’s unique advantages in machine learning and lack of exposure to legacy systems (internal combustion tech, unconnected cars) provide it with an opportunity to tap into larger and faster growing markets ahead of its competitors,” he wrote in a research note.
This was in response to another Trump-like Tweet from Musk. On July 10, Musk boldly proclaimed without a shred of evidence that he’s “Working on Top Secret Tesla Masterplan, Part 2. Hoping to publish later this week.”
Whatever Musk spins out next, the reality is that Tesla is not profitable, has never been profitable, and cannot be profitable for many years to come. One key reason Tesla endures is that Deutsche Bank, Fidelity and the rest have soaked up millions and millions of Tesla shares, driving its market cap to a ridiculous $32 billion (US).
The big money is betting that Tesla will one day become a very special technology company, one that as Musk has said, will be worth more than Apple. Perhaps. At the same time, these institutional investors are hedging, helping short sellers. This is called playing both ends of the investment casino game.
If you are a Tesla fan or shareholder, there are real worries, regardless of what investment banks are doing. It’s possible the SEC and NHTSA will find something troubling at Tesla. Perhaps customers who feel misled will take legal action. Perhaps the weight of Tesla and Musk’s failed promises and outsized projections will become a crushing burden.
What then?
About the Author / Jeremy Cato
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