Tesla Again
I am sure you have heard about it from your various news sources by now, but Elon Musk did not have a great Q3 call. Here is why that is a major problem.
First, the call got off to some technical issues. These issues are something you would expect at your school’s PTA meeting, not at the Q3 earnings call from the largest car company by market cap. Elon Musk was muted for the first half of his opening statement. That is such amateur garbage. None of his people told him either, and I have seen online that many are pointing to this as an example of Elon having too many yes-men around him. People who are too scared of him to tell him that he is muted. His employees being too scared of him to tell him that he was muted on his earnings call is objectively not good. That may be too much of a reach, and it is possible they just did not care, thought it was hilarious, or thought that he did not need to repeat his remarks, but I do not think so. The most likely possibility to me is still that his people are scared of him, and not in a good way: Leadership, leadership, leadership. It is always the most important trait in a company.
The actual content of the call was not great either. Elon Musk sounded depressed and a little defeated. He blamed macroeconomics for Tesla’s recent problems. Blaming interest rates in particular for Tesla’s Q3 failings. Then someone asked him whether Tesla was planning on accepting full legal responsibility for their self-driving cars he fumbled the question and gave a non-answer. He just seemed off.
Elon went on to tell shareholders to temper their expectations for the Cybertruck which is also not great. The Cybertruck was supposed to be one of the best new additions to the Tesla inventory, and so far it does not seem like Tesla or more importantly Elon Musk still believes that to be true. Elon said, “We dug our own grave with Cybertruck.” That statement is about as morbid as you can get when it comes to a product line, espescially a product line that was supposed to be a little bit of a savior.
Elon then told shareholders that they were planning on cooling it a little on their Gigafactory Mexico. A factory that was supposed to be one of the best additions to the Tesla lineup of factories has been delayed indefinitely, apparently because of interest rates.
The actual data was not good either. Operating margins were down to 7% from 17%, and profits were down 22% y/y. There was very little good news at all from this earnings call.
In general, Musk was seemingly self-critical of what Tesla is and can be. There was little optimism in what he was saying, and if I was a shareholder in Tesla, I would be worried. I do not know if Tesla no longer excites him or if he has run into a wall of some kind, but he was pessimistic, telling investors that the 50% CAGR that had been predicted (by him) was unattainable, as were the self-driving taxis that he had said would be on the road by next year.
Tesla is down 20%, and when companies who have experienced wild growth like Tesla take hits like this, many people ask themselves, is now the time to buy? The answer in this case is no.
The worst-case scenario is that Musk stays on as CEO and drags this out. He slowly loses interest in Tesla but refuses to abandon the company or pass it off to another. In this scenario, I see Tesla being dug into a hole
A little bit better worst-case scenario is that Elon Musk completely reinvests himself in Tesla. I do not know if this is necessarily good for Tesla, because I do not know if Elon Musk is good at leading a company, but either way, Tesla would be fascinating.
The best-case scenario is that Elon passes over the reigns. He will never pass over the reigns, but it is the best option. We still get to see Elon tweet wild things about Tesla, but the company would be much healthier under a different leader. A leader who is more mature, and less capricious.
The best, best-case scenario is that Tesla is bought out. This is the least likely possibility because Elon would likely never sell, and because of regulators. However, it would easily be the most fun, and everyone would win.
Out of all of these, I see Musk dragging this out as the most likely possibility. Frankly, he is completely spread too thin. He is running 7 companies, and to all of them, he has attached a savior persona. But he will never turn his back on Tesla completely, because he is Tesla, and Tesla is him. However, I do not think his heart is in Tesla anymore. You listen to that earnings call and tell me he is not a man ready to be done with this.
Either way, Tesla will be fun to watch. I do not think they will completely implode, but I think a meltdown is possible. Expectations were too high for too long, and I think Elon is finally realizing that. What he does with that information, nobody could tell, but it will be hilarious.
