We gotta talk about Tesla

I wrote the bulk of this from California over the holidays. America gets a bad rap for being slower on the EV uptake than Europe and China, and the numbers certainly bear that out. Here are Global EV sales from H1 2022 by region:

(Source: Bloomberg NEF Special Report for COP 27)

California, however, might as well be the Norway of America. Not due to its climate - I wrote this under a palm tree with a gin fizz in my hand - but because its EV adoption rate is so far ahead of other states. The Norwegians are now up to 79% of all new car sales being a fully electric vehicle. That is incredible. California is not quite at that level, but its 20% plug-in sales share is impressive in an American context.

Similar to Norway, much of California’s success can be attributed to smart policy incentives. But another big reason is that Tesla was founded in California. Its first plant was there and it has been churning out cars in Fremont for more than a decade now. It is the hometown company. California is also quite a liberal state; much of Tesla’s early growth was driven by left-leaning adopters who cared enough about the environment to purchase an electric vehicle.

The situation is now changing. Unless you live under a rock, you have probably heard that Elon Musk, Tesla’s Technoking, acquired Twitter in November. He made an offer to acquire Twitter for $44 billion back in the spring. He then quickly realized it was a dumb offer that significantly overvalued the world’s 14th largest social media company. So, he spent the year trying to worm his way out of it, before Twitter’s board - with shareholder value front of mind -?was able to force the deal through in the fall.

Now, Musk appears to be spending a lot of time running the social media company and far less time running Tesla. He pledged to sleep at Twitter headquarters until it is fixed. Headlines?like “The Vibes are off at Tesla” and “Elon Musk's Twitter obsession takes further toll on Tesla” are showing up all over the place. Twitter is burning cash. They aren’t paying rent at their HQ in San Francisco. Advertisers are fleeing the platform (a positive side effect is that paid ads on Twitter are a lot cheaper for Monta now! ??) While not being privy to the internal affairs at the company, it does not seem to be going very well at Twitter.

Okay enough about social media websites. We care about EVs at Monta. How is Tesla doing? Well, the stock dropped 65% in 2022. Granted, most every stock dropped in 2022 (unless you’re in the defense industry ??). But 65% is quite a bit steeper drop than the rest of the market, and definitely more than comparable car companies.

The thing with Tesla is that there is no other car company as entwined with its CEO. Quick, who is the CEO of Volkswagen? Or Stellantis? Or Ford? Toyota? (Okay that last one is maybe doable since I am pretty sure it is always someone from the Toyoda family). But with Tesla, everyone knows Musk. Tesla embodies Musk. He has been the one sleeping on the floor of their factories. A mythological founder’s aura surrounds him and the company. Granted, he is also quite a bit more outspoken and visible than Volkswagen’s CEO (whoever they are). But there is no questioning the fact that he has been a visionary and propelled the EV industry forward.

So why not keep doing that? It is a great question. Tesla investors are certainly not happy, due to the aforementioned 65% stock decline in 2022. Lawsuits abound. The company is?now producing more vehicles than they are delivering, a sign of cooling demand. They are uncharacteristically dangling incentives in front of drivers to clear out their inventory.

For a variety of reasons, the vibes do appear to be off at Tesla. And the Twitter stuff seems to be contributing to at least some of those bad vibes.

The flip side of Musk/Twitter sentiment is that Europeans and Chinese probably don’t care all?that much that Musk is tweeting things like “My pronouns are Prosecute/Fauci” or is making sure @catturd2 and @BakedAlasaka get reinstated to twitter (DM me if you want the background behind these American internet microdramas). So if Tesla can keep pumping out cars and finding buyers in those markets, things should be fine. But in America,?people do care. And Tesla’s brand is going down the toilet. Its net favorability from U.S. consumers is negative for the first time since it started being tracked in 2016.

Okay, so Tesla did not have a banner year in 2022. The crucial question is: what does this mean for the adoption rate of EVs? The short answer is probably not much. Tesla has essentially been synonymous with EVs for the past 5-10 years. But 2023 brings with it a very different EV scene than 5 years ago. Major carmakers are finally getting their act together and bringing many new models to market. For EV buyers, it is not a case of “Which Tesla model should I buy?” Consumers are flush with options that will only continue to proliferate.

Maybe Tesla has served its purpose of midwifing the EV revolution. The world needed someone a little bit irrational to try to take on the Toyotas, Volkswagens, and GMs of the world. Musk was that guy. Now, the experts in building cars from the last century are finally turning their expertise to this space and will carry the industry forward. Obviously Tesla will continue to be a viable car company with many passionate followers. And it would probably be unwise to bet against Musk. He didn’t become the world’s richest man by chance. But the Twitter thing is truly bewildering. Thankfully, with other car companies ramping up production, the EV revolution can continue unabated, regardless of what happens with a certain bird app or at a certain car company named after a Serbian inventor. We can just continue to watch it all unfold for the pure entertainment value ??