Be interesting to see how they do it...if they do it.
The more I think about this, the more I see why Musk dreads the idea of a $25k EV. It would be too damaging to the luxury / elite Tesla brand. They've been making performance luxury cars - not practical commuters - since the old circa 2003 Lotus conversions. The selling point was always out-accelerating Corvettes, not saving the planet or saving money.
Just imagine what happens to the brand name when Car And Driver evaluates a Kia as being a better EV than a Tesla. That's what would likely happen if Tesla decided to compete in what is now their market. From there it is a race to the bottom for margins.
Yet the downside of having no truly affordable cars in the lineup is sort of like what General Motors and Chrysler experienced in the 2008-2009 recession. Sales of their expensive luxury SUVs dried up as remaining demand shifted to lower-end cars. Revenue collapsed, and the companies were forced to bankrupty or bailouts.
Tesla has yet to endure a real recession like that as a mass producer of cars. Tesla's relatively low debt-to-equity ratio makes them less vulnerable than GM was, but the company could still face cash flow issues if the luxury market collapsed, as it sometimes does.
This is the paradox of car manufacturing. The margins are all at the high end, but the high end typically collapses in recessions. Thus they are constantly being lured into riskier and riskier markets, only to be burned. Product pivots take years.
Tesla's outrageous valuation isn't based on them being a boring, normal car company. It's based on them being a tech company that's going to create answers for needs we didn't even know we had. It's been pretty clear for quite awhile that Elon really doesn't care about building a normal business. He wants to do new, exciting things that he can hype up and sell to investors as the next best thing. Iterating new models to fill in market voids is better left to Toyota et al. He's got robots, flamethrowers, tunnels, robotaxis, AI, etc, etc, etc to invest in that will totally change the course of human history.
These are solid points. Management's decision making has to be somewhat affected by their PE ratio of 69, compared to, for example, 6.5 for Honda and 5.6 for GM. Under no circumstances can Tesla's directors make choices that result in shares losing 90% of their value. Yet there is also risk in coasting the bleeding edge of innovation. A series of dud new tech investments could vaporize cash while nonetheless leaving the company with a manufacturer's valuation.
Hence Musk's
latest comments that a $25k Tesla that a human can drive doesn't make sense - presumably from Tesla's perspective. Such a car would not offer exponential scaling like the robotaxi idea. Yet the robotaxi idea depends completely on FSD tech that Tesla has not yet been able to perfect for a decade, and which lacks regulatory approval almost everywhere.
“Basically, I think having a regular $25K model is pointless. It would be silly.” - Elon Musk
At some point the stock is the company's product.
