- Even by Tesla’s standards of news generation, 2018 has been something to behold.
- Much of the news has been a distraction from Tesla’s business.
- A key driver of that business is Tesla’s Model 3 sedan, now tracking to a be huge success after a difficult birth.
People have always been interested in Tesla, and the media has always avidly chronicled the exploits of Tesla CEO’s Elon Musk.
But 2018 set a wild new standard for Tesla-ology.
It was actually hard to keep up. Musk alone got into a fight with Wall Street analysts on an earnings call (then apologized), continually attacked short-sellers, tweeted like the Commander in Tweet himself, accused a Thailand rescue diver of pedophilia (then apologized), puffed a blunt with Joe Rogan, dated Grimes, hatched an ill-fated scheme to take Tesla private, and was investigated and charged by the SEC as a result (later settled).
Musk also didn’t sleep much in 2018, and neither did his proponents, critics, nor the battalion of journalists who covered every twitch of his itchy Twitter finger.
Through it all, you might have thought Tesla was in the verge of bankruptcy, and although that risk isn’t trivial, the company’s market capitalization remains larger than Ford’s or Fiat Chrysler Automobiles, and at around $55 billion is technically higher than General Motors (Tesla’s cap jumps around a lot, so it depends on the day). This despite selling fewer cars in a year than GM sells in just the US.
If one steps back from all this, however, it’s possible to separate a salient signal from a wall of noise. (As well as from valid investigations of Tesla’s practices, which should be questioned as if the company were any other automaking enterprise employing tens of thousands of workers.)
Tesla sold 100,000 vehicles worldwide in 2017. Buy the time 2018 is in the books, the company should more than double that figure, largely thanks to one car: the Model 3 sedan.
The Model 3, mind, you, has endured a difficult birth. Production targets were almost comically missed until the middle of 2018 — serious manufacturing kicked off in late 2017 — and along the way, Tesla had to build an entire ad-hoc assembly line in a tent at its Fremont, CA factory to pick up the pace.
Negging on the Model 3
There was a relentless thrum of negative news about the vehicle, echoing for the entire year. But the truth is that the Model 3 is afantastic machine. The product of possibly needless crisis and struggle, yes. Yet brilliant in spite of its rude initial path into the world.
Focus on that, because if Tesla can sustain its current levels of production and demand for the Model 3 doesn’t fade, then Tesla could surpass Volkswagen’s market share in the US. And if Tesla can add to its lineup of vehicles, mid-market manufacturers, such as Hyundai-Kia, could see their US share challenged.
This dynamic relies on consumers deciding to buy an electric vehicle over a gas one. At the moment, despite what Tesla boosters are saying, anyone buying a Tesla is doing so … because it’s a Tesla! They want in on the brand, at a cheaper level than the $100,000 average the company has been charging for its more luxurious vehicles.
An onslaught of Model 3s
But more Teslas on the roads, and the eventual arrival of cheaper Teslas, could establish a virtuous sales cycle. (Caution for the optimists: If the US market enters a sales downturn after years of records, Tesla’s progress could stall.)
Tesla’s financials remain sort of precarious, as the company’s balance sheet is laden with debt and cash is short. But revenues have been surging in recent quarters, and if the Model 3 keeps selling, that trend could blast higher, solving Tesla’s cash needs. Given this, the Model 3 has become impossible to argue with. It’s a fact. People seem to love it. It might not be perfect, but few cars are, and in any case, Tesla has a ten-year plan for the vehicle and a long road of improvements ahead.
If you simplify Tesla’s business and concentrate on its most important aspect, the Model 3 can’t be avoided. The worst is likely over, and the best it yet to come. And Tesla could ride the Model 3 to becoming not just the dominant electric carmaker, but a force to be reckoned with in the global auto industry.