Howes: Tesla's troubles threaten to deepen as rivals accelerate
Demand is dropping, the stock is trading near 52-week lows and now Tesla Inc. CEO Elon Musk is conceding that the Silicon Valley electric-car maker may have to raise capital from investors — again.
That's assuming they can find enough brokerage accounts whose owners aren't wise to Tesla's tricks and broken promises, Musk's antics and his flailing style of doing business. Sooner or later, to paraphrase Margaret Thatcher's riff on socialism, the grand industry-changing experiment that is Tesla is fine until you run out of other people's money.
Daniel Ives of Wedbush Securities told Bloomberg that Tesla's first-quarter financial results are "one of the top debacles" he's seen in some 20 years of covering tech stocks: “Musk & Co., in an episode out of the 'The Twilight Zone,' act as if demand and profitability will magically return to the Tesla story.” He predicts the automaker will be forced to raise another $3 billion to sustain its capital spending and debt service.
Deutsche Bank's Emmanuel Rosner cut his price target for Tesla by $10 to $270 per share, based on Tesla's dismal first-quarter loss of $702 million, and in a note voiced skepticism about the automaker's decision to hold its first-ever "Autonomy Investor Day" just a few days before its earnings release:
"We believe the company tried to refocus investor attention on the company's potential technological disruptive ability in autonomous driving and new mobility and away from near-term financials which are clearly experiencing a patch of weakness. This is proving difficult, and 1Q results will do little to convince bears that an inflection in demand or margins is approaching."
Translation: Don't expect Tesla's performance to get much better anytime soon. Investors seemed to agree Thursday, trading Tesla shares down more than $11, or nearly 4.3 percent, to close at $247.56 — just north of the stock's 52-week low.
And Jim Collins, a longtime auto analyst and principal of Portfolio Guru LLC, called Tesla a company "in trouble," adding in a post on The Street.com: "We're not going to let 'P.T Musk' ... pull the wool over the eyes of individual investors."
Here's something else: Choices are coming to dealerships near you. As much as Tesla has earned a place, for whatever reason, as an aspirational auto brand that says something about its owner, the simple truth is that competition is bearing down on it with a slew of products that promises to dilute its commanding position in the EV market, luxury and not-so luxury.
General Motors Co. and Nissan Motor Co., Audi and Porsche, BMW and Mercedes, Jaguar and upstarts from China — all of them are closing on Tesla's patch of the comparatively small EV markets in the North America, the European Union and China. They boast manufacturing systems, global logistics capability and dealer networks (save the Chinese operating outside China) that are superior to Tesla's.
And Ford Motor Co. is readying an onslaught of EVs spanning from a Mustang-inspired crossover to an electric version of its iconic F-Series pickup — and that's before the Blue Oval executes its vision to develop a separate electric truck or SUV with Rivian Automotive LLC, the Plymouth-based maker of electric trucks and SUVs poised to receive a $500 million investment from Ford.
Can you say, "competition"? Or, better yet, "nightmare" — because a marriage of Rivian's electric-truck innovation with Ford's manufacturing prowess and understanding of the truck market could give new meaning to the term "killer app," especially for the likes of Tesla.
That's why the softening of demand for Tesla products is so troubling to analysts and investors. It signals market weariness with Tesla's offerings, the idiosyncrasies of ownership, the widening availability of EVs from competing (and established) brands, or all three.
As traditional automakers intuit the best of Tesla's innovations, seek out startups like Rivian that can make them smarter faster, and accelerate development of their own EV range, pressure will intensify on the likes of Tesla and Musk to reckon with the inherent strengths of the auto establishment.
It's not the vision that's the problem, or the engineering. It's the execution and Musk's positively Trumpian ability to undercut the credibility of the company, its financial story, even its products with swaggering embellishment and derision for industry convention.
That's an option, of course, but it's delivering diminishing returns.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 p.m. and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.