This Invention Could Sink Tesla
Last week's surprise announcement from Tesla shook the investment world, the tech world, and certainly Elon Musk's ego, all at once...
A $2.90 per share profit, when analysts were unanimously predicting yet another quarter of loss for the world's most famous electrical vehicle maker.
So, the big question now: What should Musk's next move be?
Should he release a new product? Maybe the pickup truck he teased earlier this year?
Should he diversify into yet another sector, the way he did back in 2015 with the Powerwall?
Should he initiate the construction of another “Gigafactory,” to build even more batteries to satisfy the growing demand for his company's products?
Well, here's a novel idea: Maybe he should retire.
Yes, I'm serious. Because there's no better time to go out than now, when he's on top.
He could leave while the getting's good and focus on something else — SpaceX, perhaps, or his mass transit project.
I'm not saying this to be a smartass or a cynic, but because the reality at Tesla is actually not quite as cheery as people might assume after last week's earnings report.
Tesla's Problem Is Bigger Than Profit Margins or Production Capacity
You see, Tesla's main line of products, its cars, is on the verge of obsolescence, and no self-driving feature or radical new styling cues are going to change that.
The cars are, at their heart, critically behind the times, and the only way to remedy that situation is to extensively retool their production lines and drastically modify the core mechanism within every one of the cars rolling off the production line.
The problem is with the electric motors that power every Tesla Model S, Model 3, and Model X.
You see, these motors, pretty and powerful as they might be, are defective by design — a problem Tesla engineers knew existed even when they were still in the concept stage.
It's not their fault, really. This issue with the electric motors isn't isolated to Tesla. It's a problem that plagues all existing electric motors, and it has since the very advent of the device more than 150 years ago.
The issue began with the very first electric motor ever built, by Michael Faraday, back in the first half of the 19th century.
Amazingly, it's an issue that's stayed with the electric motor despite many decades of evolution.
Today, electric motors, in their multitude of forms and applications, consume more than half of the energy mankind produces.
And electric generators, which are nothing more than electric motors working in reverse and which produce nearly all of that energy (close to 99%), suffer from the same defect.
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It Only Took 10 Generations, But It's Here
So if the entire electric motor/generator universe suffers from this issue, why should Tesla worry now?
Simple. Because a small tech startup has finally solved the problem.
It's perfected a new generation of motor that fixes this age-old defect, it's patented it, and now, it's already partnering with some major North American manufacturers to install it in things like wind turbines and high-speed trains.
For Tesla, the only solution might be to buy this company outright, because otherwise it will end up paying billions in royalties to this tiny startup over the course of the next few years alone.
But even if Tesla does buy the firm, it will still need to go through the extremely costly, time-consuming process of retrofitting its production lines to build this new, revolutionary motor.
Which is why it might be time for Elon to pack up and call it a day, because compared to all the other hurdles he's had to face over the course of his career with the company, this may well be the biggest.
For the founders, managers, and shareholders of the company that created this solution, however, things have never looked better.
Their story is still unknown to most of the financial community, but it's making the rounds within the tech community, and before long, mainstream investors will find out.
Their stock is already showing signs that people are starting to get the point.
Want to learn more? I can fill you in on what this defect is, how it's been solved, and, most importantly, by whom.
All you have to do is click here.
Fortune favors the bold,
Coming to us from an already impressive career as an independent trader and private investor, Alex's specialty is in the often misunderstood but highly profitable development-stage microcap sector. Focusing on young, aggressive, innovative biotech and technology firms from the U.S. and Canada, Alex has built a track record most Wall Street hedge funders would envy. Alex contributes his thoughts and insights regularly to Wealth Daily. To learn more about Alex, click here.
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