Tesla’s recent surge in stock price is puzzling to those of us who know the auto industry well. We know, empirically, that Tesla does not make cars that are as well built and reliable as those from traditional automakers. We’ve read through Tesla’s financial reports, and we know how close they have skated to the edge of bankruptcy. We watch Tesla’s stock price soar, feeling just as puzzled as we were in the ’90s when people spent ridiculous amounts of money on Beanie Babies and called it an investment.
We wonder: Are we missing something? Or are all those people just high on the Tesla cult?
Even Wall Street seems a bit puzzled by Tesla’s increasing share price. Tesla stock has gone from $230 a share at the end of September to trading at over $900 a share on Tuesday. It’s a meteoric rise, baffling considering that the company produced just 367,500 cars in 2019 and posted a net loss of $775 million for the year. Compare that to Toyota, the world’s largest automaker, which sold 10.7 million vehicles across all of its brands in 2019. Toyota’s shares on the New York Stock Exchange hovered around $140 a share Tuesday.
Tesla True Believers are not investing in Tesla solely because they have blinders on and can’t see the flaws in Tesla’s current product lineup. Many of them believe that an investment in Tesla is an investment in making the world a better place. They believe that an investment in Tesla is a vote against Big Oil. They believe that climate change is happening, and happening fast, and that Tesla is one of the few companies that can handle the rocky transition to a post–Big Oil future.
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And they may have a point. Some bankers are beginning to sound the alarm over the financial risks associated with climate change. Last April, a group of 34 central banks from around the globe put out a research paper called A Call for Action: Climate Change as a Source of Financial Risk, which warns that climate change is poised to have a massive impact on traditional industries and affect the financial health of economies worldwide.
There is almost nothing the traditional automakers can do to compete with the storyline that Tesla is better for the world than any other carmaker. They can’t make a better, faster, higher-quality electric car. Or SUV, or pickup truck, or an entire brand dedicated to electric vehicles. None of that matters to the die-hard fans, because those efforts are still part of companies that make a lot of money off traditional gas-powered vehicles. And so that makes those brands tainted by Big Oil.
The only way to change the narrative would be for another automaker to go 100 percent fully electric. That’s not a recommendation, incidentally. There’s little evidence that enough consumers want to buy electric cars to make a leap like that. The traditional automakers have plants and buildings full of workers they are trying to support, and so they have to be less risk-averse than smaller startups that have fewer obligations to meet.
All stock-market investments are a bet on the future. And it’s clear that investors see Tesla as the future. What that means for the other automakers remains to be seen.
Source: Motor - aranddriver.com
