Anyone who reads these pages regularly knows that I’ve been an outspoken critic of Tesla Inc. (NASDAQ: TSLA) and its enigmatic CEO Elon Musk. My censure has centered mostly around the company’s valuation and what I’ve argued to be misleading statements and potentially fraudulent activity.
From the acquisition/bailout of Solar City to the branding of Tesla’s “Full Self-Driving” technology, there’s been plenty of room for condemnation of the company and its CEO. That said, I actually found myself cheering on Elon this week, during Tesla’s controversial, headline-generating earnings call.
Tesla posted some surprisingly good-looking numbers for Q1 2020, in light of broad economic disruptions due to the ongoing coronavirus outbreak. Some standout numbers included a gross margin of 20.6% and an automotive margin of 25.5%. Tesla also said it may still hit its 500,000 vehicle delivery target in 2020.
The surprise results were enough to send Tesla’s shares up as much as 8% after hours, but all these numbers were ultimately overshadowed by some off-script comments from Musk during the call:
Yeah. I should say we are a bit worried about not being able to resume production in the Bay Area, and that should be identified as a serious risk. We only have two car factories right now, one in Shanghai and one in the Bay Area, and the Bay Area produces the vast majority of our cars, all of S and X, and most of the three and all of the Y.
So the extension of the shelter in place or, frankly, I would call it, forcibly imprisoning people in their homes against all their constitutional rights, that in my opinion, and breaking people’s freedoms in ways that are horrible and wrong is not why people came to America or built this country, what the fuck? Excuse me. But outrage –– it’s an outrage. So –– but it will cause great harm, not just to Tesla, but to many companies. And while Tesla will weather the storm, there are many small companies that will not. And all peoples — everything people have worked for their whole life is going to get –– is being destroyed in real time. And we’re going to have many suppliers –– or have many suppliers that are having super hard times, especially the small ones, and it’s causing a lot of strife to a lot of people…
…I think the people are going to be very angry about this and are very angry, because somebody should really –– if somebody wants to stay in their house, that’s great. They should be allowed to stay in the house, and they should not be compelled to leave. But to say that they cannot leave their house, and they will be arrested if they do, this is fascist. This is not democratic. This is not freedom. Give people back their goddamn freedom.
Clearly, Musk is worked up over the current situation and I have to say it was refreshing to see a prominent U.S. business leader speak out against authoritarian lockdowns that are actively destroying a lot of lives, and arguably doing more harm than good. From a public relations standpoint, this was a bold move from Elon, but it is a move that someone needed to make.
Elon, of course, has garnered his share of condemnation for his statements. The natural accusation being levied is that Elon doesn’t care about saving lives; he just cares about Tesla and his wealth.
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Mark Cuban spoke on Fox News on Wednesday, reflecting this sentiment about the Tesla CEO:
Anything that negatively impacts Tesla, Elon hates, period, end of story… I don’t think he has other people’s interests at heart. I mean, I don’t really know him at all, but that’s just my take.
To Cuban’s credit, I think it’s a fair assumption that Elon is primarily looking out for Tesla’s best interest here, but Elon’s distress is indicative of more than just what’s happening at Tesla. It highlights the pain that a lot of companies are facing right now, as well as the pain of the workers and suppliers who rely on those companies for a paycheck.
There are a few companies that have the luxury of being able to weather the storm of lockdown. Technology giants like Alphabet (NASDAQ: GOOG), Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), and Netflix (NASDAQ: NFLX) are all enjoying a boom in demand for their products/services in the current stay-at-home economy, but these companies are not representative of most businesses in the U.S.
Tesla’s current market cap may not show this, but the company is still effectively a startup in growth mode. If you tap the breaks for long enough on the company, then everything will fall apart. This makes Tesla a much better representation of many U.S. businesses and workers than folks like Cuban would care to admit.
As of this week, over 30 million Americans have filed for unemployment amidst the coronavirus lockdowns. That works out to roughly one in every five people who had a job in February currently out of work.
Needless to say, we’re facing a truly devastating economic crisis right now, the pain of which is just beginning to be felt. Elon Musk’s earnings call rant should be viewed as a kind of canary in the coal mine for a swath of U.S. businesses.
As far as Tesla is concerned, the company has the liquidity to weather the storm, but it is certainly losing valuable time with its Bay Area Gigafactory on pause.
All the while, Tesla has competing for technology startups on its heels, including one emerging technology firm out of Canada my colleague Alex Koyfman of Microcap Insider has recently been touting.
While Tesla is stuck in limbo and Elon Musk is pulling out his hair, this firm is apparently rolling out a new kind of electric motor that rivals anything we’ve seen before. I’ll let him give you the full details in this newly released presentation here.
Until next time,
Jason Stutman
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