13 Fords for 1 Tesla

So it’s time to talk about Tesla. Again. I did so addressing its shaky finances in 2019, and I wrote about a first glance of the Model 3 in Q4 2018. As in 2019, the reason this time is mainly financial. This is obviously a car blog, not a financial one, but then again, under all the bells and whistles, Tesla is a car company. And in that sense, when its stock price values it at $300bn or 13 times Ford as it did earlier in July at a stock price of around $1750 per share, you should notice (it’s come back to $1417 at the time of writing, so we’re probably down to something like 11-12 times Ford now). The first reflex is of course to think something major has happened, but that’s not the case. Tesla’s more than tripled stock price since it dip under $400 earlier this year could be called the definition of momentum for future financial text books. Congratulations to all that were part of the ride. I wasn’t.

I’ll happily spare you all the explanations of why the stock has rallied and in any case, the stock price is a poor reflection of a company’s quality. You could probably argue that it’s especially poor in the case of Tesla. Not that things haven’t improved for the California-based car maker. They just turned in their fourth quarterly profit in a row, including $104m in the very lacklustre second quarter 2020. That said, on one hand profits are rather modest and on the other they’re always a bit clouded, including various subsidies and tax breaks. But the trend looks positive, better than in the poor scale of the diagram below.

Courtesy of theverge.com

Tesla is also delivering more cars. Elon Musk has set his target at 500.000 cars in 2020 which doesn’t seem fully unrealistic as Tesla has delivered more than 100.000 cars per quarter in the last quarters. It’s not all rosy though, as the Model 3 now makes up over 80% of all deliveries. Total deliveries of Models S and X have fallen from 28.000 in Q4 -17 to 12.000 in Q1 -20, i.e. less than 10% of all deliveries. This basically means that going forward (and until the cyber truck, that however looks to be a few years away), Tesla profits are riding on the Model 3 and the new Model Y.

There are however problems as well. Quite a lot of them. One is the EV market in total which both in Europe and the US is growing but is still very small. In Europe’s leading car market Germany, EV’s now make up around 3.7% of new car sales. In the US where EV’s is basically synonymous with Tesla, the share is below 3% in all states but California and Washington DC. In most of them, it’s below 1%.

Source: https://evadoption.com/

Another problem for Tesla is that the big car brands have woken up and as the EV market grows, competition will only intensify. Were the big guys late to the game, as is so often claimed? Not sure if you look at the above stats of the total EV market. They’re anyway here now and you can already see the effects in Germany where Tesla’s trend is negative since a while back. 4367 Model 3’s were sold in the first six months of 2020, but VW and Renault sold more than 7.000 each of the E-Golf and the Zoe, and the Model 3 will probably also be overtaken by the VW E-Up and the Audi E-tron still this year. An E-Golf or a Zoe are not comparable to the Model 3, but neither is an E-tron – in the other direction. The EV mass market will no doubt be in Zoe land, but the premium market will increasingly move from Tesla towards Audi, Mercedes and other large brands. This is not a big surprise. Tesla was never a premium product in quality – only in pricing.

The Model Y – the latest interpretation of basically the same concept.

This brings us back to the stock price, because of course, Tesla doesn’t need to dominate the world. It’s already turning a small profit on the current production of around 400.000 cars per year, and if it can increase that by a few ‘000s, it would look pretty good. That would however also be necessary for coming necessary capital expenditure. In any case, it’s not enough to put a value on the company at 13 times Ford, who by the way sold 1.13 million cars worldwide in Q1 -20, a 20% drop on the previous quarter.

I have no clue where Tesla’s stock price is going next, but personally I stay away from emotionally driven companies, and this is a prime one in that regard. It may be useful to remember that in the dot.com boom and bust 20 years ago, a young online retailer called Amazon lost 94% of its share value before it turned things around and moved to dominate the world. That’s not something Tesla will ever repeat, but irrespective of the stock price, I wish Tesla all the best and think it’s amazing what they’ve managed to achieve. My guess is however that when we look back at this in five years, if Tesla is still around, it will be selling almost all its cars in the US where the EV market share will still be in single-digit territory.

Two great visionaries, but at least with Tesla, Elon won’t overtake Jeff.

The E-tron – impressive or not?

The E-tron is becoming an increasingly frequent sight on the streets of Zurich and elsewhere. I had the opportunity to study the car in detail at the recent Geneva Salon (check out my video here) and found it a bit difficult to get my mind around: sure, impressive in build quality and good-looking, but that has nothing to do with it being electric and everything to do with it being an Audi. But for the rest?

If you’re a bit cynical, but only a bit, you could say it’s taken Germany’s leading car manufacturers (Mercedes will join the electric SUV party in the coming months with the EQC, a car very similar to the E-tron) seven years since Tesla’s first Model S, and four years since the Model X, to bring out alternatives in the form of cars with less range, less room and, especially critical, far less charging points at present.

Starting with the range, Audi claim an optimal value (also called WLTP range) of 417 km, but are honest with the fact that it’s a distance you’ll only achieve with the AC turned off and ideally neither passengers, nor speed. A more realistic range – in optimal conditions, meaning neither too hot, nor too cold – is, according to multiple tests, somewhere around 300-350 km, and in winter, you can deduct around 30%, bringing you down to as little as 200-250 km per charge. This still supposes driving very legally. The Model X in its latest configuration has an unrealistic WLTP range of 505 km, probably meaning around 400 km in reality, and thus 300 km in winter. Not great, but around 1/3 better.

A short range means you will be charging quite often. Audi will tell you that the E-tron has the mechanical ability to charge up to 350 Kwh, which is more than twice as fast as a Tesla Supercharger (150 Kwh). That’s however in the future, as such chargers are not around yet. Audi is a member of Ionity, a collaboration of leading European car manufacturers currently building charging stations with charging power of up to 150 Kwh across Europe, power-wise on par with Tesla’s supercharger. But in all of Europe, there’s currently not more than 20 such stations. That leaves you with the other 90.000 or so charging stations which are part of the European electric car “roaming” network and that E-tron owners can use (against payment by an E-tron credit card), but the vast majority of those have a charging power of 22 Kwh at most, in many cases even less. Charging an E-tron to 80% at a rate of 22 Kwh means three hours charging time. Taking as example a 600 km holiday drive from Zurich to the French Riviera, there are seven Tesla supercharging stations along the way. With an E-tron, it would mean at least one three-hour stop, and thus more than 2 hours longer travel time – for a six-hour drive.

In terms of interior space, the advantage of Tesla’s swollen egg form is that it offers lots of room, and that its luggage compartments back and front are both roomier, as is the passenger space. An Audi Q7 is much roomier than an E-tron, which more resembles a Q5 space-wise.

So where does this leave us? If space, range and charging times are all irrelevant, then the E-tron is probably the better car – as it should be, given Audi is an established, leading manufacturer and not a Californian startup. But all else is not equal, meaning it’s taken Germany’s leading car brands more than five years to bring out a car that is only almost on par with Tesla, but with a charging network that is comparable to what Tesla offered more than five years ago. That is not very impressive, to say the least.

Keep your hands on the wheel!

The below video made the rounds on Twitter yesterday, so you may already have seen it. If not, it’s quite scary. Five attempts at the same piece of road, but the Tesla autopilot gets it wrong every time, illustrating not only a lack of reliability, but also a lack of self-learning…

Now before you tell me that Tesla recommends drivers only to use the autopilot on motorways, the problem is obviously that you CAN use it on other roads, and as long as you can, someone will – hopefully with better results than this.

There is however – unfortunately – more to the story. The below video was filmed by my co-blogger Magnus, this time on a motorway, a few months ago. The driver talks to Magnus about how long you can hold your hands off the wheel before the car reacts, and after that, what happens speaks for itself. So whatever Elon says, please keep your hands on the wheel!