That's encouraging innovation, but it's innovation specifically related to the regulation. It's a bit like saying, the best way to help people climb to higher ground is to first drop them into a pit.
Trying working at a startup in a heavily regulated industry, such as finance or telecommunications. It becomes obvious very quickly why those industries converge around large players, and that reason is a huge regulatory hurdle to even get started.
Given Elon Musk's track record of spelling out exactly what he wants to do, receiving a bunch of naysaying, and then doing exactly what he said, I think betting against him is a bad bet.
The shorters, and there is a lot of them, don't think so, but I agree with you. We need a sustainable future and this is a really good effort to get parts of our society there. Waiting for the auto companies to get their act together, then we'll burn.
> We need a sustainable future and this is a really good effort to get parts of our society there.
Even if we accept this as truth (I'm not saying it is or isn't), the fact remains that Tesla is very overvalued compared to any other carmaker, especially when we know they are losing money on each car and will keep doing so for at least three more years. Tesla has almost as high market cap as Ford, despite selling less than 1℅ as many cars per year. Tesla had a P/E of -60 last year, projected to have -100 this year. The financial fundamentals compared to current valuation doesn't look good. Will Tesla go up or down? There is more potential downside than upside, that's for sure.
Also, it's not like none of the other car companies have EVs coming out. In fact, most of them do.
They are losing money on each car, even when you remove the Gigafactory from the picture. They lose around $20 000 per car [1], all in all, on ~ 50 000 cars sold last year. Investments in expansion including Gigafactory last year were ~ $250 million, but they lost $1000 million.
They're gambling on suddenly selling much more cars in the future, but they're constantly adjusting their sales estimates down. Mid-2014 they said they would sell 100 000 cars in 2015. The number was half of that. This year, they are on track to sell about 70 000, and they are revising guidance downwards.
Also, a lot of their current sales are fully dependent on government subsidies, which we know for a fact are going to stop. In Denmark, Tesla sold 3000 cars in 2015. Then Denmark restructured the electric car subsidy to benefit smaller cars more and bigger cars less; now the price of a Tesla literally tripled, and sales in 2016 have been exactly zero. There are similar noises coming out of politicians in other key markets (like Norway, their second biggest market due to subsidies): "we didn't introduce electric car subsidies so people could go out and buy big luxury cars for cheap".
"selling, general and administrative expenses (SGA) are predominantly fixed figures in regards to units sold."
but four paragraphs later it explains away Tesla's losses by saying
"The increase in SG&A is to be expected considering Tesla's ramp up of the Gigafactory and its massive growth in general."
Look, either it's independent of sales, or it's dependent. You can't have it both ways.
Also, saying "we don't lose money for each car because I want to deduct the cost of administration, marketing, sales and other general expenses, since those don't really count as expenses" is just disingenious.
What that article might have a point in saying is that Tesla won't lose an additional $20 000 if they sell one more car. I.e. their marginal loss is not $20k. But marginal loss is a completely different quantity from the actual loss per car; it's actually related to the derivative. If we say the loss/profit function has a given value at some point in time, the derivative can of course be completely arbitrary (positive or negative).
Edit: marginal loss equals loss per car only if your loss is linear in sales with a proportionality constant of one. No-one argues this is the case, in fact, everyone agrees (and Tesla is betting heavily) that the second derivative of this function is greater than zero over a large interval (thus it can't be linear). That article is a textbook example of a strawman argument.
When you say "they lose $20k per car", why would anyone interpret that any differently than "if they sell another car, they'll lose another $20k"? You're completely changing your argument with this comment into something radically different, and then pretending that's what you were trying to say all along.
No, I'm not changing my argument. "Spending $X per Y" inescapably means "you get Y of something and you have to spend $X". It is division, it's not taking a derivative.
Analogy: say going to the zoo costs $50 for your family of 4. But it's a family rebate, so anywhere from 3 to 5 family members costs $50 total. The cost per person for you is $12.50. But the cost of one more ticket if you were to have another child, the marginal cost, is $0. That is, however, irrelevant to you today, because you can't have another child today.
But what you did was the equivalent of telling a friend "Oh yeah, going to the zoo costs $12.50 per person". It's disingenuous at best. Your friend will quite rightly believe that if they go there with their family of 5 it will cost them $62.50 instead of costing $50.
"There is more potential downside than upside, that's for sure."
This may be true over very short time horizons. But if Tesla survives 50-100 years, is it not realistic to think it could be valued at 5x - 10x current? That would be a 400% upside, versus 100% downside. I say this as a habitual short seller.(haven't traded TSLA)
Tesla is currently valued higher than Subaru, Fiat Chrysler and Mazda; all successful car companies selling much more cars. With the exception of Volvo and Toyota, whose value includes much more than just the car companies (like heavy industry manufacturing, commercial vehicles, Toyote even owns 0.27% of Tesla), only a ~2x increase in valuation is realistic. If they become one of the biggest car companies in the world.
I'm a Musk fan, but not a fan of his desire to accelerate sustainability on the backs of the taxpayer. Malthus also predicted doom and gloom and we saw plenty of market forces handle that. Government regulation has increased tremendously, so perhaps the days of leaving it up to the market are over, but from a public policy standpoint, it's incredibly risky leaving a "sustainable future" up to one company.
> Malthus also predicted doom and gloom and we saw plenty of market forces handle that.
So far all I've seen is market forces switching from renewable food production (soil and in-situ biological generated fertility) to nonrenewable (fossil fertilizers trucked in from "somewhere else"), rampant soil loss, unsustainable acquifer pumping and salination, water eutrophication, wealth consolidation in food production, and soil erosion on a scale never seen before.
Ironic that you should bring up subsidies, because globally industrial agriculture is almost entirely a subsidized (yet economically futile) endeavor.
I know it's heresy to question Borlag et. al and the "green" revolution, but far from "handling i," market forces have merely enlarged and externalized the scale of the destruction.
Most of those problems stem from the lack of property rights. If a company cannot sustain its business with what it owns, then it should go out of business. However, non-market forces prop up these unsustainable businesses or turn a blind eye to the destruction of the commons. They "steal" from the rest of us via subsidies or abuse of public resources. Those are not market failures, contrary to popular opinion.
Things like the atmosphere, food web, water cycle etc. are fundamentally different than ownership of physical objects or even land. They are not confined to a particular place, and being fundamentally diffuse transactions and interactions with them are not obviously subject to singular control. Even if you break them down into components the bookkeeping and transaction cost is far too high.
Saying that they're not market failures says more about the narrow definition of "market" than about the workings and evolution of capitalist systems (including both visible systems like farms and factories and invisible systems like laws and power structures).
With the amount of momentum behind him it would take a lot of upsets to derail the company. There's always going to be some wealthy philanthropist willing to bail them out so they can be included in the Musk biographies of the future.
Regulation has done a great job in several industries of concentrating the industries into a few major players, because it is incredibly difficult to comply for new/small companies. Banking and finance is one, telecom is another.
Telecoms got itself monopolised just fine before regulations came along. AT&T sealed in the concept of operating as a regulated monopoly. But that goes back to 1913.
There are industries which tend naturally toward monopolies, with transport, communications, broadcast, and software among them. There are also industries which tend naturally away from monopolies, such as sandwich shops, cement providers, and laundromats.
(Not that there cannot be some concentration, or even national chains among these. But they're rarely dominant.)
Transport, comms, banking, and information technology, tend toward monopolies.
Consulting is a mixed bag -- if you're relying on creativity, not so much, but if you're relying on marketing and business contacts, both of which are far more a network effect (with strong lock-in elements), yes. Contrast your typical small-gig design shop vs. the Big Declining n Accounting Firms, or IBM and Oracle (consulting / business services).
Retail can be local (small effects) or global: large grocery stores, WalMart, Amazon.
There are other effects as well. I've been curious about Maersk's adoption of ultra-large cargo ships, even as shipping volumes have been falling. While there's a financing-design-build lag, there's also the possiblity that having and operating a large ship puts pressures on other operators -- if you're operating and loading, you're taking cargo which would go onto smaller vessels.
Lobbying from these industries players for bad regulation might have helped but regulation is usally nothing bad. I'm happy in EU knowing that most stuff I can buy is at least to some degree vetted for killing me.
