Tesla Is Not the Next Ford. It’s the Next Con Ed

Matteo Wong

The Atlantic

Abbreviated take at Angry Bear on what is happening at Tesla.

Presently, the media has not been to kind to Tesla and its founder Elon Musk. The latest in The Atlantic gives a run down on the past and where Musk may take Tesla in the future. It sounds and looks better than what Tesla has been experiencing.

Of late, Tesla’s cars have come to seem a bit hazardous. The self-driving features have been linked to hundreds of accidents and more than a dozen deaths. Then, earlier this month, the company recalled its entire fleet of Cybertrucks. A mechanical problem that trapped its gas pedal, as InsideEVs put it, “could potentially turn the stainless steel trapezoid into a 6,800-pound land missile.”

Along the way, Tesla—which did not respond to multiple requests for comment—has defended its cars and autopilot software. As of last week, the company told federal regulators the Cybertruck malfunction  has not been the cause of any accidents or injuries. But even resolving every safety concern may not stop Tesla’s entire EV business from becoming a hazard.

Yesterday afternoon, the world’s most valuable car company released its earnings report for the first quarter of 2024, announcing that its net income had dropped 55 percent from a year ago. On an investor call shortly after, Elon Musk could offer only a vague euphemism to describe what has become an especially disastrous month: His car juggernaut “navigated several unforeseen challenges.” In April, Tesla announced its first drop in sales since 2020. It recalled one line of vehicles and reportedly canceled plans for another, and begun mass layoffs. There are still six days left for the month to get worse.

Whether Musk can sustain his EV empire is in doubt. He told investors that Tesla’s primary focus is now on AI and self-driving cars. If that pivot fails, the company has positioned itself to be on the edge of another, perhaps more crucial part of the green transition . . . delivering and storing America’s power.

Tesla’s EV chargers are ascendant, if not dominant, as are its huge batteries that store renewable energy for homes and even entire neighborhoods. Profits from Tesla’s energy business were up 140 percent compared with the same period last year, and Musk asserted yesterday that the division will continue to grow “significantly faster than the car business.” The company’s future may not lie in following the footsteps of Ford, then, so much as those of Duke Energy and Con Edison. Tesla, in other words, is transforming into a utility.

Tesla’s core problem has been that its cars are falling behind the curve. Even with sagging sales, the company remains America’s biggest EV manufacturer, and its car sales still far outweigh the revenue it gets from energy storage. But Tesla’s models, once undeniably high-tech and cool, are aging.

The Cybertruck debuted in November, but Tesla has sold only about 4,000 of them, fewer than the number of F-Series trucks that Ford sells on average in two days. Otherwise, Tesla hasn’t released an entirely new passenger model in more than four years. Its competitors have used the time to catch up. If that is not bad enough, it worsens.

The Chinese brand BYD is pumping out dirt-cheap, stylish cars. Recently it surpassed Tesla as the world’s leading seller of EVs. BYD’s cars aren’t available in the U.S., but automakers such as Rivian, Hyundai, and Ford are selling high-tech electric cars. Americans now want affordable EV models, not just high-tech ones. Even Tesla’s push to incrementally cut sticker prices hasn’t achieved the affordable goal.

In yet another April debacle, Reuters reported the company scrapped a long-anticipated, more affordable model that would have sold for just $25,000. Musk did tell investors yesterday that the company is speeding up the timeline for more affordable vehicles built “on the same manufacturing lines as our current vehicle lineup.” But he did not specify prices and declined to answer a direct question about whether the cheaper cars will be entirely new models or tweaks to existing ones.

The future, of course, is far from preordained. Tesla’s auto business remains one of the few profitable EV operations in the country. Ford and GM are losing billions of dollars on EVs as they retool their companies away from the internal-combustion engine. And, to say the least, Musk is hardly a predictable executive.

Yesterday’s earnings call suggests he is more infatuated with self-driving robotaxis than electrifying the grid: He’s doubled Tesla’s AI-training resources in three months. But self-driving cars are the opposite of a safe bet. Tesla’s semiautonomous vehicles have become the industry standard but will no longer set Tesla apart. Clean energy is a highly competitive, capital-intensive, and rapidly changing industry. Just like its massive head start in the EV field, Tesla’s battery and charging advantages will not be self-sustaining.

The outlook? Tesla appears to be successfully jumping from one wave of the clean-energy revolution to another. Going from providing cars to providing the electricity powering not just cars, but also homes, offices, and more. A decade from now, even as Tesla vehicles slide in popularity, the company’s influence may prove stronger than ever.

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