I was in the car listening to Elon Musk’s lethargic answers to investor questions yesterday and a long-simmering theory felt like it was being confirmed: Elon Musk doesn’t want to be CEO of a car company. He’s bored! I’m saying this not as a critique of Musk, because if I’m right and he’s right then he’s creating a company many times more valuable than it is right now.
Is he right? I’m less sure. Musk’s whole life has been a constant doubling-down on every bet and, thus far, it’s worked out for him. There are signs it’s not working out as well and that’s important.
If you can get through a Musk-heavy Morning Dump I shall reward you with a discussion of Volvo’s financials, an update on Stellantis and its idiotic quest to alienate all of its suppliers, and a video of me trying to convince GM to build a PHEV Aztek.
Because Elon Musk Doesn’t See Tesla As A Car Company
Reuters had a story that Tesla was abandoning its $25,000 car, which seemed like a wild assertion and one that Elon Musk said was wrong. Yesterday, Tesla released its Q1 financials and they were bad. Whereas GM saw improving financials and more revenue, Tesla experienced exactly the opposite. The most interesting part of the day, though, was the investor call where CEO Elon Musk answered a bunch of questions.
Musk didn’t confirm the Reuters story, but he clarified it, and it makes a lot of sense. Here’s the full transcript, by the way, that I’m quoting from. Here’s the key bit:
We’ve updated our future vehicle lineup to accelerate the launch of new models ahead, previously mentioned start of production in the second half of 2025. So, we expect it to be more like the early 2025, if not late this year. These new vehicles, including more affordable models, will use aspects of the next-generation platform as well as aspects of our current platforms, and we’ll be able to produce on the same manufacturing lines as our current vehicle lineup.
If you’re not a close watcher of Tesla this doesn’t mean that much to you, but I’ll try to do a quick version of explaining it. Basically, Tesla has been working on an “unboxed” platform that will allow the automaker to build cars cheaper than anyone else can build cars, including Tesla itself. What I think happened is Tesla moved a lot of people off that team, which is what tipped off Reuters.Â
What does that mean? Tesla has decided (the timing is unclear and it could have been decided after a negative response to the story) that it is going to build the newer models on a more traditional Tesla platform, which will allow the company to introduce much-needed models much faster by using more of its existing manufacturing footprint.
The big question about this is… can Tesla make a $25k car without the new platform? Fred Lambert, who pays more attention to this than anyone, doesn’t think so:
Without the unboxed system, it’s likely that we can kiss goodbye to the previously mentioned $25,000 price point.
I will have to defer to his judgment on that, though one would think that saving money on re-tooling would help.
This becomes extremely important when considering the company’s financial results. Which were bad.
Tesla reported a 9% drop in Q1 revenue, which is the biggest drop in more than a decade and below Wall Street’s already lowered expectations. And, yet, shares jumped after the call.
The stock jumped in extended trading after CEO Elon Musk told investors that production of new affordable EV models could begin sooner than expected.
Here’s the thing, Tesla spent a lot of time working on robots, self-driving, AI, and Cybertrucks instead of focusing on expanding its model line, which is what a normal CEO of a car company likely would have done. This meant that when the EV market slowed down Tesla was forced to heavily discount its inventory because instead of a mix of models it mostly had the same old cars build on the same old platforms to offer.
Ok, back to my premise. When the death of the $25,000 car was reported, I wrote this as my theory for why:
What if Tesla’s business isn’t really cars? I know this is a wild statement since that’s a big chunk of the company’s value, but Musk is out there working on AI and robots and flamethrowers and tunnels. There are fundamental limitations to the amount of money to be made in the car business and it’s possible that Musk would rather pivot to the next thing rather than focus on the arduous, slow, and kind of boring work of making cars now that he’s got to compete with BYD, and. Xiaomi and a bunch of other companies.
This call confirmed this theory. There was way more talk of everything that wasn’t cars than actual cars. And Musk explicitly said the following on the call:
If you value Tesla as just like an auto company, you just have to — fundamentally, it’s just the wrong framework and if you ask the wrong question, then the right answer is impossible. So, I mean, if somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company. Like that is, but we will and we are and then you have a car that goes from 10 hours of use a week, like an hour and a half a day to probably 50%, but it costs the same.
That’s it. If you think Tesla can make humanoid robots, autonomy, AI, et cetera work then it is so much more valuable than the company is today and the share cost is way low and you should buy shares in Tesla. If you think that’s all a shell game you should run like hell.
I’ve got my sense of what reality is, but that sense has to contend with a universe in which betting against Elon Musk has almost never worked out for anyone.
Volvo Is Doing Just Fine
Volvo definitely is a car company, and its Q1 financials reflect that. Sales were up in Q1 2024 by about 12% compared to Q1 2023 and EBIT margins hit 7.2%, compared to the same period in 2023 when margins were 6.6%.
The company is actually well-positioned in the marketplace with a strong mix of EVs and PHEVs. Total revenue for the company did fall, and the company blamed contract manufacturing (ahem, Polestar):
That and foreign exchange rates have been a bit of a drag. Volvo has a solution to the Polestar issue, though, and that’s giving back Polestar to its investors (and Geely).
Judge Smacks Down Stellantis Parts Dispute
Stellantis, under CEO Carlos Tavares (pictured above), is playing a dangerous game with its suppliers, which is what the company does when it’s not antagonizing governments.
As previously reported, Stellantis is trying to keep parts costs low and has told suppliers they can no longer submit claims related to price increases.
On the Stellantis side, the company is essentially saying that it has contracts and it’s tried to help out as much as possible to offset inflation/supply chain-related pressures on its suppliers but it also has to worry about its own margins.
On the supplier side, these companies are pointing out that during the pandemic Stellantis made humongous profits while they got the squeeze and haven’t been made whole yet.
Suppliers have threatened to stop delivering parts and Stellantis has decided to stop paying certain suppliers. This has led to a flurry of court cases, and the most recent has come down against Stellantis. Here’s the key bit from Automotive News:
Two of the cases are being handled by Judge Victoria Valentine, who granted court orders this year forcing Yanfeng and Kamax to continue supplying parts while the cases work through the court.
But Judge Michael Warren, the circuit court’s other business judge, departed from those decisions by denying a preliminary injunction against MacLean-Fogg Component Solutions LLC. “Despite FCA’s oral argument that such circumstances will cause other suppliers to similarly threaten to stop shipping parts when they want a price increase, causing disruption of the entire United States auto industry, FCA’s argument is speculation and conjecture,” Warren said in the order.
Hold on, it gets better:
In the April 9 lawsuit filed against the supplier, lawyers for Stellantis argued “the financial impact on FCA will be catastrophic and will cause tens, if not hundreds, of millions of dollars in shutdown damages, in addition to the incalculable losses from being shut out of future supply work with its suppliers and losing various employees due to forced layoffs.”
In Tuesday’s order, Judge Warren shot down the automaker’s claim of a risk of irreparable harm. “This cascade will only occur if FCA refused to pay under protest,” the judge said in the opinion. “Akin to a civil contemnor, who holds the key to her own jail cell, FCA can avoid this impending economic disaster by paying under protest.”
Looooooool. It’s not fun to pay under protest, but them’s the breaks (unless, of course, Stellantis tries to short its brakes supplier).
GM Should Build A Hybrid GMC Aztek
I had a great chat yesterday, above, with ABC 12 and a familiar voice around here (spartanjohn113). Mostly we talked about GM’s Q1 results, and it did give me an opening to float my pet theory of what GM should do next.
Specifically, I challenged GM, Mark Reuss, and Mary Barra to build a cool, affordable crossover PHEV with a tent and call it Aztek. I also said, specifically “it’ll sell.” However, I did add: “You have my word… which is not trustworthy at all in this case.”
It’s not! Never build a car an automotive journalist asks for, it only ends in heartache.
Mark (who, in addition to being a car dude is also President of GM) found it funny, at least:
Matt a very informed and thoughtful conversation. Not surprised coming from you. I saved a lapel pin for you all…hint it is a Pontiac.. cheers mlr
— mreuss 🇺🇸 (@GMdudeinNA) April 24, 2024
Maybe not confirmation of a GMC Aztek, but at least I’m getting a sweet lapel pin! That’s a consolation.
What I’m Listening To While Writing TMD
I love Chromeo. I got to see them perform in Houston at a Basquiat exhibit (the most Millennial sentence ever written) and met Dave 1 and P-Thugg and they were delightful. Not only is their music smooth and funky as hell, all their videos seem to feature great cars, including the white Camaro in this video.
Fast forward a few years and I’m living in Brooklyn and I’m in search of a parking garage to ditch press cars. There are a few to choose from, but the best choice seems to be the one run by a guy with an Infiniti M30 convertible. He gets me.
One day while I’m down there I go exploring the cars in the garage and there’s a white Camaro convertible. I blurt out “very Chromeo” and he goes “Oh yeah, that’s P-Thugg’s cars, he keeps some of his rides here.” So, for a few years, I shared a parking garage with Chromeo. I will never get cooler.
The Big Question
Is Elon Musk running a shell game or is Tesla the future of everything? Or some other answer?
Top photo: NBC Universal/SNL Screenshot
So far.
His successes have been built on the back of many complex factors that no way imply everything he ever does in the future is guaranteed to succeed.
I’ll take that bet. The world is a very different place now than it was when he started running Tesla.
“Because Elon Musk Doesn’t See Tesla As A Car Company”
That’s actually nothing new. I recall him saying around 5-10 years ago that he saw Tesla as more of an energy company than a car company in the long run.
“Is Elon Musk running a shell game or is Tesla the future of everything?”
The second one!
Okay… I’m kidding. But in reality, what Tesla does is a decent indicator of where the industry might be/should be heading.
Mind you, there are some things they tried and discarded… such as battery swap stations instead of fast charging. Or the robot arm thing for BEV charging instead of a regular cable.
But over the years, Tesla has had more right calls than wrong calls.
So it would be a mistake for any vehicle or energy company to ignore what Tesla was doing and coming out with.
Pretty sure Elon bought into the EV game not because he believed in reducing carbon emissions, but because he saw an article about child slavery in lithium mines and thought, “this sounds awesome.”
Customers who don’t pay their suppliers can DIAF. Customers who have the audacity to bandy about the threat of a systemic catastrophe and blame it on those suppliers who are trying to get paid are scum. Fuck Tavares with a factory-second Challenger cylinder head.
I’m here for this passion.
I may or may not have been chasing a customer for unpaid invoices for 6 months.
Beyond cars, Tesla will expand into even more of an energy generation, storage and distribution business than they already are (mega packs, solar roofs, charger network). That nay turn them into a utility and Elon won’t want to go there because the capex are high, margins are meh, and the industry is strictly regulated. So my guess is he’ll stick to retail and industrial batteries and charger networks for vehicles, not for homes.
Autonomous cars you can partially own, or own and pimp out to others while you’re not using them, aren’t going to happen in the next 20 years because 1) the tech is hard 2) if people were interested in monetizing their cars, Turo would be a huge business, which it isn’t, and also, ew 3) the insurance industry will need to figure out how to handle that, and it’ll take a while.
Energy is the only market available to today’s Tesla that literally has unlimited growth, and an unlimited supply of solar energy. Batteries are another story, because of material supply constraints. But generating and transmitting that energy may be the long-term future of Tesla long after Adolf Jr croaks off into space.
If GM could sell the Bolt for $25k and Hyundai can now do the same with the Kona, there’s no reason why Tesla couldn’t do it by leveraging LFP batteries and their casting tech
GM lost a LOT of money on each car sold and only made a (relative) few. The 25k cost was after the tax credit as well. I’m not sure that’s a good business model.
The Bolt was $25k before tax credit. They ran out of tax credit under the old system. Also, we don’t really know if they were losing money per unit sold. Once they paid off the factory and tooling, their accounting allowed them to drop the price quite a bit. Ford is going through the same process right now with their EVs where they show massive losses on paper because they’re accounting for the cost to build the factory and tooling. Once they pay that off then you’ll see the Mach E and F150 come down in price and suddenly appear profitable.
Mark Reuss said it only cost about $25k to build the Bolt. So it was likely cash flow neutral and the upper trims were likely profitable. They wouldn’t have ramped it to 80k sales a year if it wasn’t.
The Ultium Bolt will cost 40% less to produce, so a $25k Bolt is very possible.
If GM can do it, so can Tesla
Tesla’s corporation mission is “to accelerate the World’s transition to sustainable energy”. Everything they do is based on that mission. Hence transportation (cars, pickups, semis, vans, etc.) and solar panels and grid-scale energy storage (Powerwalls, Powerpacks, Megapacks). Since Tesla EVs are robots on wheels, robots on legs with arms and hands are a logical extension since they use the exact same FSD neural net computer “brain”. They provide labor from sunshine and wind (eventually, as the grid transitions to renewable energy) instead of food or fossil fuels.
This is a damned good thing since all the different fossil fuels (petroleum, natural gas, coal, uranium) are either beyond peak and into terminal decline, or about to be in the near future. None of the fossil fuels are sustainable because they are never again the same thing once burned or fissioned.
Please show us on the doll where the spaceman touched you.
That already wasn’t funny the first 2 times you made the same comment.
Every time there is an announcement of some tax break or subsidy to bring a manufacturer to a region, part of the talk is about all of the downstream jobs at the parts suppliers and the supply chain that will be created or boosted. I hope this bites Stellantis in the ass the next time they go cap in hand looking for a handout. Many suppliers are not big corporations, but just cottage industries. They really don’t deserve this bullshit.
I can bottom line this with ease. Autonomy is something he believes in, not something based on any reality.
Consider that. He thinks some computers and associated software can in a few years replicate the human brain which has evolved over billions of years. That is fucking insane. Yeah, buy some stock in a pure fantasy.
I vote shell game. I get the same vibe as when the publicly traded printing company I worked for started saying they were a ‘technology’ company and played down that 98% of our company either made rolls of paper or printed from rolls of paper or mailed out reams of paper, then we went bankrupt and were bought out by a private company and they don’t have to make stupid public statements.
The ‘unboxing’ thing sounds like they realized it wasn’t working out so are trying to spin it. Out of all the car companies, if they thought they were leaving money on the table with their moving assembly line process they wouldn’t at least test out other options? Not even talking about Toyota with it’s “we’re gonna build a city cause why not” money they got, but the smaller scrappier ones like the dozens of Chinese upstarts.
Uh. . . did your “technology company” try to market a triangular iPad?
I so often feel like I work at Dunder Mifflin, I should totally get the t-shirt.
“I got to see them perform in Houston at a Basquiat exhibit”
I’m an east coast Millenial. Whats Basquiat? Is that a GenX thing?
Seriously don’t know who Jean-Michel Basquiat was? He died when I was like 3 and I know who he was
Basquiat was a modern art painter who died young but left behind interesting art legacy that people pay stupid money for. Look him up, there’s some good stuff.
Also kind of a breakout role for Jeffrey Wright in the biopic.
Sooo, Musks $25,000 car is really just to sell you one for $50,000 but then they will use the same Elon math of “fuel savings” like they do still on the website to try and make it seem like it is a bargain. The extra $25k will be explained as more use on the car than you would have if you just drove it yourself vs it being used as a robo taxi in the off hours.
Yeah, what I wrote doesn’t make sense at all but wouldn’t be surprised to see this happen and Tesla try and siphon off money while the owner gets a small fee per rental usage.
I can’ real close to buying a Model Y recently, mostly for how inexpensive they have become. The company had built up the hype that it was a luxury brand but in the end we all see it as a bare-bones car (although very good at what it is supposed to do) with just enough features but now will be associated with being a taxi or rental car.