Monday, June 4, 2018

Elon Musk -- Then you will know the pravda, and the pravda will set you free.

You probably heard about Elon Musk's recent plan to push back against all of those journalists on the automotive beat with a crowd sourced (read fan boy-based) website called "pravda" that promises to rank the credibility of reporters and editors. Assuming you already know all of the gory details (if not, we'll wait here till you catch up), here are a few quick thoughts from someone who has spent more time than is healthy following this story.

1. As Kai Ryssdal noted on Marketplace, even Tesla admits that its business plan, particularly its lack of traditional marketing, relies heavily on the company's ability to generate tons of press coverage. Inaccuracy was not a concern as long as the stories were positive.

2. He likes to focus on the coverage of recent safety issues with Tesla's autopilot, an area where you can make an argument about autonomous vehicles being safer than traditional cars. It is still an open question as to whether or not the argument is true, but it is at least convincing enough for a sympathetic audience.

In many ways, the more damaging thread has been the coverage of Tesla's business woes. You can take pretty much every number the company would like to see and double it or cut it in half, whichever is worse. Production targets continue to fall far behind. The reasonably priced versions that are supposed to be necessary for the company's future are nowhere to be seen, and the latest reports on quality have been horrible. There too, Musk prefers to focus on one aspect, namely software problems that can be updated from a distance. He spends remarkably little time talking about complaints that the cars are falling apart.

3. Worse yet for Musk, investors are starting to worry about all of this and also about things like financing.

4. It's possible to make too much of the echoes of other current attacks on the credibility of the press but it's possible to make too little of them as well 

5. Pravda?

As usual, with all matters Tesla, Hiltzik is the go-to guy

As my colleague Russ Mitchell reported last month, "Musk originally planned to be building 500,000 cars a year in 2018 at its Fremont, Calif., assembly plant, the vast majority of them Model 3s. Even if Tesla hits all its current targets, no more than 150,000 Model 3s will be produced this year."


On May 2, the company disclosed that Model 3 production had hit 2,270 cars a week in April "for the 3rd straight week over 2,000," obviously missing its first-quarter target. It's proper to note that the $35,000 Model 3 remains largely a dream; the company is focusing on higher-priced versions, including a $78,000 Model 3 that it says will become available this summer; buyers who put down $1,000 deposits hoping to have basic transportation from Tesla this year are likely to be disappointed.


Among other missed targets listed by UBS in a recent report were a coast-to-coast drive using the company's autonomous drive system by the end of last year (Musk said in February that it was then set to happen within three to six months); a doubling of North American supercharger capacity in 2017 (only 120 superchargers were added, UBS calculates, an increase of 35%); and storage battery sales of $2 billion to $5 billion by the end of last year. UBS estimated sales of only $140 million last year.


The most important unfulfilled promise by Tesla may be an implicit one: to deliver a quality product. Recent reports on Model 3s purchased at retail by professional reviewers have been brutal. Consumer Reports this month declined to recommend the car, citing inordinately long braking distances, distracting controls and poor riding comfort. The most gruesome review came from the respected auto shopping site Edmunds, which has been subjecting a $56,000 Model 3 to routine usage for four months.

"We put down a $1,000 deposit to get on a two-year waiting list for this car," Edmunds reported this month, "and it's falling apart." Parts are broken and falling off, the all-important internal control screen is full of bugs, and the smartphone app that locks and unlocks the vehicle is unreliable, among other problems.

Signs are emerging that the investment community is getting wise to Musk's habits. When he claimed in April that Tesla would not need to raise money in the capital markets this year, analysts were quick to point out that in February 2012 Musk asserted that the company would "not need to ever raise another funding round." Since then, Tesla has raised nearly $9 billion in financing. Tesla's high-flying stock price, meanwhile, may be coming down to earth. It's lost more than 25% of its value since peaking in June 2017. At midday Thursday it was trading at about $278.50.

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