The IT Nerd

For the last few weeks, Tesla stock has been in free fall closing at $108.045 USD a share as of yesterday. The company that effectively invented the electric vehicle market has lost over 70% of its value over the last year and faces severe headwinds. Plus there’s a significant amount of people who are cheering for the stock to go lower. To be honest, I’m in that camp because of Elon Musk and everything that he’s done in the last few months. But I’m here to say that Tesla isn’t on it’s deathbed. At least not yet. There is a path for them to recover if the company chooses to take that path. But before I explain what that path looks like, let me explain what headwinds they face so that you can understand the gravity of their situation:

• Competition: When Tesla were the only EV in town, they could do pretty much anything. Including having customers wait for months or years for vehicles. Not to mention build vehicles that have questionable build quality. Simply put, they could do that because there were no other options out there in terms of EVs. But those days are over for Tesla. Companies like Mercedes Benz, General Motors, Hyundai, Volkswagen Group, and BMW to name a few have gotten really serious about electric vehicles. And Tesla isn’t equipped to take those companies on. I say that because Tesla just announced that they shipped 1.31 million cars. Volkswagen Group is estimated to have shipped 65 million cars in 2022. If even 5% of them are EV’s then they will crush Tesla. The thing is any of the established car brands aren’t going into the EV market to just ship 3 or 4 million cars. They’re in it to ship orders of magnitude above that. And when you add other car companies to the mix, then this becomes a problem for Tesla. Things like brand loyalty come into play as well as the ability to compare the quality of a Tesla vehicle against another brand. And these are the things that Tesla will have problems dealing with.
• China: Tesla just had to shut down its plant in China because of rising COVID cases in the country. But that isn’t the main problem that Tesla has in China. Domestic competition is their main problem. Numerous home grown EV companies are taking market share from Tesla in China which has led the company to cut prices. And when you cut prices, it’s hard to bring those prices back up. The reason why this matters is that Tesla has bet big on China. And it seems that at this point that bet is not paying off. Which means that this will hurt Tesla.
• Elon: This one is pretty obvious. Elon Musk is not only a major distraction for Tesla, but he’s a drag on the brands perception. Stories surfaced of people cancelling orders for Tesla vehicles in the dying days of 2022 because of Elon. That’s not a good place to be when you’re trying to make Tesla a competitor to established car brands. And him selling stock to fund his obsession with Twitter isn’t helping matters.
• Lawsuits and other legal trouble: Whether it is a lawsuit over not delivering full self driving on time, or issues with their self driving software that have led to investigations, it’s stuff like this that send consumers as well as investors running to the exits. The more of these investigations that are floating around the company, the worse it is for the company.
• Lack of “new” product: Tesla is a company that is iterative. Meaning that they continuously evolve the models that it has out there. The problem is that in the car space, consumers are used to a new car coming out ever few years. For example, a new model appears. Then a refresh of said model appears about three years after that. Followed by a brand new version about two years after that. While it is true that a Model S produced today is a substantially different product versus the one that Tesla started shipping in 2012, consumers don’t see it that way. And products like the Cybertruck or Roadster are MIA. That means that there’s less incentive for people to enter a Tesla dealership because they’re conditioned to always want “the new hotness.” And Tesla currently has no “new hotness.”

Those are significant headwinds. But there is a reason why Tesla is still around. And that’s the Supercharger Network. Nobody else in the EV game has the charging network. And that is enough to drive sales until an established brand matches them on that front. And that could take years for a General Motors or Hyundai to do that. Meaning that Tesla has some time. But not much of it. Which is why Tesla needs to take this path to put them back on top in the EV game. On top of addressing all of the above issues, I’m going to highlight four things that they need to do immediately:

• The quality has to improve ASAP: If you read reviews of Tesla online, or watch video review of Tesla on YouTube, quality in the forms of excessive squeaks and rattles along with the fit and finish of their vehicles keep coming up as issues. They need to deal with that in order to be a player against established car companies.
• Tesla needs a PR department: When Elon Musk is your chief spokesman, that’s something that will work until it doesn’t. And right now it’s not working. Tesla needs a real PR department. They need to interact with automotive journalists which will allow them to get their message out about the cars and steer the message away from Elon. They also need a press fleet because most reviews that I’ve ever read or seen rely on the journalist borrowing a Tesla from a friend. Consumers look at that and see that as a bit suspect. As in Tesla has something to hide.
• They need to bring in automotive types to run manufacturing: The only way to compete against established car brands is to get people who have been there, done that and got the t-shirt. Because Tesla needs to scale to making millions of cars quickly. Otherwise they’ll be only producing a couple of million cars a year or less against competition that makes cars in orders of magnitude above what Tesla can do.
• Elon needs to go: Tesla needs to dump Elon immediately. The longer he hangs around, the more damage he does to the company. And he’s unlikely to leave Twitter and have the discipline to focus on running Tesla. Now it’s safe to say that he won’t leave willingly, so the board of directors have no choice but to fire him. I question if they have the will to do so, but I am free to be surprised.

If Tesla does the above, then I believe will put them back into the game. If they have the courage to take that path. But what do you think? Do you think Tesla has a path back from the brink or should everyone start giving the company its last rites? Please leave a comment below and share your thoughts.

This entry was posted on January 4, 2023 at 8:18 am and is filed under Commentary with tags Tesla. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.