As discussed previously, one of the ten largest corporations in the world by valuation is a failing car company with small and rapidly declining sales, which the CEO and largest shareholder himself has suggested may never release another new model.
Despite this and other damaging revelations, the price of the stock has recently shot up almost 20%. As I'm writing this, its price to earnings ratio is 155.82. (Toyota's is 7.25.) Other than the possibility of graft (and it would have to be truly unprecedented to justify this market cap), the bull case for holding—let alone buying—the stock rests entirely on two products still in the prototype stage and already facing intense competition from companies with a bigger foothold in the market and what are arguably superior technologies.
We've talked about Optimus, the humanoid robot, earlier, and we will come back to it. For now, let's look at Tesla's proposed robotaxi business.
For starters, there are the findings that the company's own analysts reached even when they included Musk's absurdly optimistic assumptions. [Joe Wilkins writing for Futurism.]
Tesla's robotaxi will also have to contend with Musk's ever-irrational ego trips. In new reporting, The Information found that when an internal Tesla analysis suggested that the Cybercab would was unlikely to sell well or become profitable, Musk buried the report instead of facing reality.
"We had lots of modeling that showed the payback around [Full Self Driving] and Robotaxi was going to be slow," Rohan Patel, Tesla's former head of business development and policy who left the company last year, told the outlet. "It was going to be choppy. It was going to be very, very hard outside of the US [Keep in mind, this was before Musk and Tesla saw their popularity plummet across Europe -- MP], given the regulatory environment or lack of regulatory environment."
Per The Information, the internal analysis was based on Musk's own hare-brained assumptions that "individuals would buy the cars, but a large portion of the sales would go to fleet operators, and the vehicles would mostly be used for ride-sharing." In addition, "many people would give up car ownership and use Robotaxis" and "Tesla would get a cut of each Robotaxi ride."
Along with some other executives, Patel used this analysis to highlight how much more reasonable it was to focus on the $25,000 vehicle, but Musk shrugged it off. Instead, he axed the $25,000 Tesla program altogether, and went all-in on the Cybercab.
Musk is promising a 90% plus share of the robotaxi market. He has also promised to have a million robotaxis on the road "next year" since 2019. In that time, Waymo has gotten a pretty good head start.
[For a good rebuttal of Musk's dismissive comments about Waymo, check out these comments from John Krafcik, Waymo founder and former CEO.]
Ironically, the one part of the earnings call that arguably got investors most excited—the June launch in Austin—was the most damaging to the robotaxi narrative when you dug into the details.
Supposedly, Tesla has self-driving solved and the Cybercab ready to roll into mass production next year. So what will the upcoming rollout of robotaxis look like (assuming it happens at all)? Ten to twenty Model Ys, geo-fenced and teleoperation-assisted—in other words, what Waymo has been doing for years, only without LIDAR.
There's no way to reconcile what Musk has been claiming with what he's proposing. The rollout doesn't prove anything. It can't add significantly to the data they already have on Full Self-Driving using their current array of sensors. All this does is reiterate the fact that they have absolutely no technological advantage over their well-established competitor.
We've been down this road before with Elon. Remember when he promised a futuristic underground system that would take your car at blinding speeds to any point under Los Angeles, thanks to his fantastic new tunneling machines? Instead, what we got was a car driven through a completely conventional tunnel, stabilized with wheels bolted to its sides. All these years later, The Boring Company has produced no technological innovations whatsoever. It is a Theranos-level failure to deliver on promised technology.
As of this writing, Tesla has a market cap of $892.88B. Almost all of that is based on the potential profits from robotaxis and robots. It's difficult to see how the first of those two justifies hundreds of millions in market cap. We'll talk more about robots next time.
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