'Detached From Reality': Welcome To The Tesla vs. $TSLA Showdown
CM Optimus
Also on tap for today’s roundup: a look at Toyota’s challenges despite massive profits, and a prediction for Lucid’s Q1 report.
There are now two ways to think about the only publicly traded company in Elon Musk’s vast portfolio. On one hand, there’s Tesla, the pioneer of modern electric vehicles, which won over millions of loyal fans and built a charging network so good that the rest of the car industry wants in on it. On the other hand, there’s $TSLA—the stock price, which more than ever feels powered by hopes, dreams, social media posts and bets on Musk’s own track record.
The two things have always been linked, of course. And at their most cynical baseline, corporations exist solely to drive value for their shareholders.
But as Musk seemingly loses interest in new models that can compete in a tough global EV market, sheds top executives and even slashes its charging network in order to apparently focus on AI and robotaxis, the original aims of Tesla and the future goals of $TSLA seem further apart than ever.
As many supporters rally behind Tesla’s layoffs and doubling down on unproven technologies where it doesn’t even have a lead, it is worth asking them: do they actually believe this stuff, or do they just want $TSLA to go up?
A read on Tesla’s current situations kicks off this Monday edition of Critical Materials. Also on tap today: a look at some of Toyota’s challenges even after a gangbusters year, and what to expect from Lucid’s Q1 earnings call tonight.
30%: The Tesla vs. $TSLA Dilemma
Tesla AI
Tesla won over scores of fans (and investors) for its stated mission of accelerating the world’s transition to sustainable energy, particularly with electric cars. And Tesla wrote the playbook most of the industry is now running, from battery plants to over-the-air software updates.
That’s why it’s natural for some of those fans to feel left behind now that Tesla is, in Musk’s words, “not quite betting the company, but going balls to the wall for autonomy.” All of the latest bets are on future promises, not tangible products; hence, the latest Optimus videos on social media this weekend.
The conundrum comes down to this: the world needs more affordable EVs, as does Tesla. But the $TSLA price needs to go up, so the emphasis now seems to be on robots, AI and autonomous driving.
A good reality check comes from Bloomberg, which points out that $TSLA is valued significantly higher than other mega-cap Big Tech peers that have more established credentials and investments in AI, such as Nvidia and Microsoft:
“Musk has always wanted Tesla to be viewed as more than an EV maker, but that works when there is growth in the core business,” said David Mazza, chief executive officer at Roundhill Investments. “When your core business is declining, that narrative is a lot harder, which is why I think the multiple right now is detached from reality, and the stock is not cheap despite coming down a lot this year.”
[…] But Musk’s focus toward this lofty future goal has come at a confusing time for investors. Fully self-driving cars are a technology that most analysts and experts say is likely years, if not decades, away from full-scale commercial adoption. Tesla is struggling with weak demand for EVs and just reported its first quarterly sales decline since 2020. On top of that, it seems to be stepping away from projects once seen as a key strategic advantage for the company — such as its charging network.
More importantly, Tesla has offered investors very little, apart from Musk’s own track record, to show that its efforts to create a truly autonomous car will be more successful than say General Motors Co.’s Cruise, which grounded its fleet last year, or Ford Motor Co. and Volkswagen AG’s Argo AI, that shut down in 2022. Tesla intends to unveil its so-called Robotaxi in August.
“Full self-driving may not be a winner-take-all market, and if it is, it is not clear that Tesla will win,” said Toni Sacconaghi, analyst at Sanford C Bernstein. The analyst’s own use of the driver assistance software — that Tesla has started to offer for free trials — also revealed everyday shortfalls. Overall, reviews of the software have been mixed.
Another analyst quoted by Bloomberg called $TSLA “a faith-based stock:” “It is really about investors’ faith in Elon Musk’s ability to deliver visionary ideas. And for most of this company’s history, that faith has been richly rewarded,” he said.
And yet, it’s working. Investors are already rallying to Musk’s latest cause. “The EV industry in our view is entering a commoditized dark age, while the AI and robotics industry is entering a renaissance,” Adam Jonas, long bullish on Tesla, was quoted as telling investors Thursday. “Tesla’s decision-making around what it does less of and what it does more of should be seen through this lens.”
But is that sincere, or just an injection of hope that $TSLA will go up?
60%: Toyota’s ‘Slow And Steady’ Approach Pays Off, But Not Without Future Challenges Too
Toyota BZ3c and BZ3x
On the other side of the spectrum, you have Toyota, the world’s biggest carmaker by volume, and one that is capping off an utterly fantastic year of record sales—especially driven by the success of its hybrids. Which, if you care about reducing gasoline use and carbon emissions, is a good thing. New CEO Koji Sato just wrapped up his first year at the helm and will announce the company’s annual results in Tokyo later this week.
As ever, Toyota faces challenges tied to its slower approach to fully electric vehicles. That’s less an immediate problem in North America and Europe, where the rate of adoption is slowing down, but a fairly big headache in China, still the world’s largest car market and now one utterly dominated by more advanced locally made EVs.
Here’s an excerpt from Automotive News:
Its China sales inched ahead 2.1 percent to 1.5 million vehicles in the first three quarters of the current fiscal year and regional operating profit shrank. North American sales, by contrast, grew 17 percent to 2.2 million in that period as operating profit there surged elevenfold.
To shore up its China business, Toyota introduced two EVs at last month’s Beijing auto show. The bZ3C compact crossover was developed with Chinese EV producer BYD. The bZ3X midsize crossover was developed with Guangzhou Automobile Group Co.
Toyota said it is rushing to sell both models in China within a year. But Toyota may continue to experience weakness in that market. Or the automaker could show invigorated confidence that its focus on new EV offerings and hybrids is gaining traction.
At the moment, Toyota can paper over any EV red ink thanks to its booming business in hybrids. It sold more than 3.7 million hybrids in the just-ended fiscal year — powering the company’s projection for a record operating profit of ¥4.9 trillion ($34.76 billion).
A healthy haul of hybrid sales in the fiscal fourth quarter may turn out to have pushed Toyota above that forecast. Eyes will be on Sato to see how he tweaks his EV ambitions for the year ahead.
Toyota made a big show of its future EV plans at the Japan Mobility Show last year, including models due to hit the market as soon as 2026. I’m eager to hear what, if anything, has changed since then.
90%: Lucid’s Q1 Report Drops Tonight
Lucid Motors factory expansion ribbon cutting ceremony
We’re also keeping an eye on Lucid Motors’ Q1 report and investor call, which happens tonight at 5:30 p.m. EST. As we’ve reported before, the ambitious, Saudi-backed EV startup recently broke ground on a new factory in Arizona meant to expand its currently one-car lineup to the Gravity SUV and eventually, more models. But as with many startups, cash burn continues to be a problem, and the Air sedan must carry the company on its roof until more vehicles arrive.
Here’s a dispatch from Seeking Alpha on what to expect:
Last month, the luxury EV start-up said it produced 1,728 vehicles and delivered 1,967 vehicles during the first quarter. This compares with 2,391 vehicles produced and 1,734 delivered during the fourth quarter.
Towards the end of the reporting quarter, Lucid announced a $1B investment from majority stockholder Ayar Third Investment Company, an affiliate of the Saudi PIF wealth fund, its majority shareholder, sending its shares higher.
Wall Street, on average, expects the California-based company to post a quarterly EPS of -$0.25 along with a revenue of $182.48M (+22.1% Y/Y).
Expect more this evening as we get it.
100%: How Do You Explain What’s Happening At Tesla Right Now?
We’re veering very heavily into what I call the $TSLA Fanfiction Era of the company.
Explanations I have seen about Tesla’s Supercharger team layoffs on social media posts, emails and DMs include guesses that the team was lazy and ineffective, and simply had to be replaced; that the industry doesn’t need any more EV chargers; that Musk realized he was “helping” his competition too much by opening up the network and decided to kneecap it instead; and that Musk has been informed by “his Chinese Communist Party overlords” that an economic crisis and/or massive cyberattack on America are coming soon, and thus it’s wise not to build out a fueling network “when nobody will be traveling for a long time.”
No, I am not making up that last one. I wish my imagination were that good.
Instead of reading fanfiction, I would advise you to trust news outlets that are actually speaking with people currently or formerly inside the company, and are taking great care to vet what they publish. Even so, what’s your theory about what’s going on inside Tesla lately? Your guess is as good as anyone’s.
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