Last April, I wrote about a whimsical Tesla analyst call. I had briefly mentioned three issues:
(A) personality of the founder vs. personality of the firm
(B) over-exuberance about Tesla before they could start making cars in scale.
(C) cautious optimism about Tesla eventually fixing things for better.
It seems like those were much simpler times, but who knew?
That April call was a Donnie Darko style foreboding of many bizarre things to happen later.
Since then Elon Musk’s twitter feed and other interactions only got stranger, beginning with an undergraduate-level banter on Karl Marx and capitalism, dissing people, creating tent-city and night outs at the factory, relaxing at a podcast, eventually leading to the costly “420” tweet that was fined by the SEC.
After months have passed, three things are still true.
A. Theory of Cult
A significant cult exists in the startup world that tends to evaluate (venerate or abhor) personalities over fundamentals. I do think that such fan following (or detracting) may work wonders when promoting new ideas that are very much integrally tied to the founders. However, a clear degree of separation between founder and firm is needed when evaluating “regular” things like firm operations.
No one writes better about this issue than Matt Levine.
[…] It is very hard to replace the visionary who built Tesla up from nothing into a much-admired $50 billion car company, and it is very hard to take a money-losing company private for $70 billion without any cash. Those are also the two problems that Musk is addressing, trying to find investors for his weird going-private plan while also asking the Times if they know anyone who could take his job.But the other problem — the one he is ignoring — is relatively easy. Lots of people are perfectly adequate public-company CEOs, and many of them are far less impressive than Musk. It is not — sorry — rocket science.
B. Making Things in Scale
Tesla has significantly deviated from Toyota Production System, and also ended up with “over-automation”. These are problems that can only be fixed by repetitive process learning.
The manufacturing process has gotten better, but it is hard to look at the process efficiency without some inventory numbers.
C. Slowness in Getting Better
Tesla Production Throughput is likely getting better but happening at a slower than ideal pace. Today, even with some justified grumbling about the mid-range battery and disappearing tax incentives, it seems that Tesla 3 production rate is edging closer to their goal. Sustaining long-term requires both investor patience and observable output. There is definitely some frustration created by shorting, as the production problems by definition, even with best-directed efforts, will take time to solve.
Tesla’s speedy cash burn is definitely creating more chatter among shorting classes diluting investor patience. There is not enough demand for the top-line models to “learn” production over time. So, we are now at the point where production is not yet scaled to meet the (potential) demand for Tesla 3.
However, the ideal point of the scale is still reachable.
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Finally, I also want to highlight an issue that is a bread-and-butter issue in the auto industry that worries me.
Not all Teslas are going to be “new” in a few years.
The whole issue of the oncoming after-parts supply chain on warranties and repairs that needs to be configured. This is like a slow-motion oncoming collision. I am not sure Tesla is yet ready for that.
Notes:
1. Musk loves and admires Foundation series and his favorite SF author seems to be Iain Banks and his Culture Books. These are good books that I very much love — but they are not in my top 12 SF list.
2. I am not sympathetic to the arguments that treat Tesla solely as a Tech company. Tesla makes cars, and they have to perform comparatively on metrics to other auto companies that make electric cars.