Time for Professional Management at Tesla?

Eventually, institutional investors will be heard. Is there a Jack Welch-trained MBA in Tesla’s future?

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HaHa

These days Elon is #1 replacing Zuckerberg as the person-non-grata.

Well the model of ‘safe’ hands is not that encouraging. Boeing or GE or others…
Manufacturing is very different then spreadsheet jockey in finance and the entire EV market is under stress not just Tesla

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At the risk of venturing down the “this time is different” pathway, I’m not sure Tesla Inc. needs to worry about professional managers for the time being.

My big picture view of Musk is that he is working toward his personal goal of colonizing Mars, and making himself the leader of that colony. Everything he does relates to that in some way.

Tesla’s purpose in that is mainly to make money. Not strictly by making cars, but more broadly by building up the value of the stock. Yes, making cars (and whatever else Tesla is doing these days) is making money. But the big bucks are in the stock ownership. He currently owns something like 20% of the company. And he is famously seeking to increase that ownership by getting paid in stock for being CEO.

(Side note - that 20% is probably enough to effectively control the company. He’d need about 63% of the rest of the outstanding shares to be voted against him to overrule whatever he wants. That’s a pretty high bar.)

SpaceX is clearly the vehicle to get there. It’s also making money, but I suspect most of the profits are being plowed back into that company to make bigger and better rockets. The next step there would be to start doing some exploration on Mars to determine a suitable site, and after that to design and construct the necessary habitats.

When you see those habitats starting up, then start watching for “professional” management to take over at Tesla.

–Peter

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Quiet time at the showrooms…

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It is under stress in the sense the EV market isn’t growing as fast as many manufacturers planned for, but it is still growing very rapidly by any standard.

Tesla’s sales are dropping, which is especially troubling in an expanding market. It is a little ironic because as long as I can remember Musk has stated that Tesla’s ultimate goal was to produce an affordable EV for the mass market.

The first challenge was proving there was a viable market at all, which Tesla did. Then Tesla had to make progressively more affordable EVs, which Tesla also did, dominating the global EV market. But instead of going for the knock-out punch of introducing the affordable mass market vehicle, Musk got side tracked by the Cybertruck.

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IMO, he may have said those words but he had something far different in mind–if it came to be.

He really wants FSD Level 5. Why? Then Tesla no longer sells cars to individuals. They lease them out to nationwide robotaxi fleets. There is FAR more profit in building a car that provides a steady cash flow year after year vs a one-time sale.

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Hertz profit (GAAP net income) 2023: $616 million
Avis Group (net income) 2023: $1.6 billion

GM group (net income): $12.4 billion
Toyota group profit 2023: $46.7 billion

I’m not sure, but I think the “sell cars” is larger than the “rent cars” number.

Yeah, it’s not exactly the same, but I’ll bet if you took all the profit of every taxicab company in every city in the US from the beginning of time it wouldn’t be $50 billion, so .,.

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I don’t think Elon is going to be “renting cars”. He’s said that once FSD is perfected and robotaxis approved, the sales price of the FSD software will be $40,000 per vehicle.And Tesla owners will be able to make their cars “cost-free”, or turn them into a side hustle, by making their vehicles available for robotaxi service.

The business model looks more like Uber, but without the cost of the human driver.

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Yeah, I’ve heard this. So for the low low price of $40,000 I can let strangers take my car and bring it back, perhaps in decent shape, perhaps not. (There’s a reason Hertz cleans the car after every client, and why AirBnB hosts do the same. The short version is: people are pigs. So good luck putting your car, which now costs more than the average car, in the hands of perfect strangers for a 10 minute, 2 hour, or longer ride. Color me, as you might expect, skeptical.)

Of course Uber doesn’t have the cost of the human driver either, but they do have one present to keep the riff raff from riff raffing in their car.

Side note: Uber made almost $2B last year, after losing $9B in 2022. Pretty sure that Toyota number is still bigger.

But I’ll say if Tesla can manage to convince people to turn their cars over to strangers and get paid both for the car and a license for the software it will be a terrific business. I see a great future for self-driving if/when it gets here in significant numbers, but I’m not convinced “taxi service with someone else’s vehicle” is how it’s going to wind up. I’m putting this one on the shelf right next to “We’ll all going to be driving in underground tubes soon because it’ll bypass all the traffic.”

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Who would have guessed that a sizable number of people would be willing to drive for Uber for less than minimum wage when you account for all the costs involved? A large percentage of the population is bad at arithmetic.

Look at how many people paid up to $12,000 for the not-ready-for-prime time FSD option. Musk is a business genius. I bet he gets lots of takers for a one-way trip to Mars. {{ LOL }}

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I would. Taxicab drivers, with only the rarest of exceptions, have been doing it for decades. What I would not have predicted is how easily local governments would roll over and allow it with virtually no regulation - after highly regulating the livery business since the 1920s. Uber and Lyft were brilliant in just doing it, even as they got pushback for doing it.

I suppose I should have expected it given the anti-regulation ethos floating around since 1980 or so.

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This is actually really good life advice

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I don’t think that’s the main reason it happened. It happened for 2 main reasons:

  1. Because the taxi companies were quite fragmented and none were willing to invest in a digital dispatch system. That’s really the only thing uberlyft brought to the party at the time. You open the app, click on “SEND CAR” and a car comes shortly thereafter, and they even show you a map of where the car is on the way to you. The taxi companies, even the bigger ones, remained stuck on the “phone call to dispatcher” model, and the people were into apps and texting instead.
  2. Because the investors into uberlyft were willing to subsidize the rides to a great extent. People got all sorts of discount codes, and could earn free trips in various ways. Some people earned lots and lots of free trips and used them for years after those programs ended. I am still shocked at how long they were willing to subsidize the rides. Even today, savvy shoppers can find ways to get a discount on rides/deliveries.

There’s also a third thing, but it wasn’t quite measurable. “Car services”, legal and not so legal, existed in every large city for decades. They were mostly regular cars, mostly driven by regular people, that were dispatched more via “word of mouth” or phone calls to “someone you know”, and not via a dispatch center. It was very informal, and often community based (for example, the Chinese community in NYC had a very wide availability of car services, day, night, local, airport, etc). There cars had no medallions, and no radio, and generally weren’t obviously marked as car service cars (except for the legal ones). We used them because they were far less expensive than medallion taxis, were cleaner and more comfortable (in those years, for some reason, every taxicab had slippery plasticky seats that were very uncomfortable). And the taxicabs had those nasty plastic dividers from front seat to back seat, that the made the whole ride annoying and even somewhat claustrophobic. Meanwhile, the car service cars were mostly regular family cars, pretty much the same as your own car (if you owned one). So because the car services already existed, the jump to an informal digital dispatch system wasn’t a huge leap at all. Remember, in the beginning, uberlyft was posed as a simple system to match willing drivers with willing riders where the price would vary as needed to match up the numbers in each area as closely as possible. It kind of still does that, but in a much more corporate way.

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Doesn’t have to be strangers. Musk said that the Tesla ridesharing app would allow owners to limit use of their personal car-now-acting-as-a-robotaxi to specified individuals or those with 5-star customer ratings, etc.

This has interesting possibilities. One can make one’s car available for whatever fee you want to charge only to friends and family who are likely to be respectful of your property.

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I assumed as much, and factored in a rating system for riders much like AirBnB uses. And even with that, there are still big service fees for cleanup, cleaning services, etc. after every guest. No, I am not saying that “car rental” will be the same, but it will somehow be similar. Even a well rated driver can spill a coffee, drip a Dairy Queen, or wear dirty jeans.

And of course I’m not saying “this is 100% doomed”, I just believe that it’s not going to be nearly the phenomenon that the cheerleaders think it is. I have little doubt that some people will try to side-hustle this way, at least until they discover vomit in the back seat. Most people are kind of picky about their cars, as they are with their homes.

1. Because the taxi companies were quite fragmented and none were willing to invest in a digital dispatch system. That’s really the only thing uberlyft brought to the party at the time. You open the app, click on “SEND CAR” and a car comes shortly thereafter, and they even show you a map of where the car is on the way to you. The taxi companies, even the bigger ones, remained stuck on the “phone call to dispatcher” model, and the people were into apps and texting instead. 2. Because the investors into uberlyft were willing to subsidize the rides to a great extent. People got all sorts of discount codes, and could…

Taxis were trapped by hidebound regulation, the whole “medallions” thing which cities used to try to limit the numbers scurrying around. Uber/Lyft simply sidestepped all that and created their digital jitney service with help from the VCs of Silicon Valley. I’m not sure there would ever have been a way to transition from “taxi” to “jitney” except to destroy the old model.

Think about it. See if you can come up with the reason why. Right, because “people are pigs.” And jumping in and out of taxicabs can make for a messy experience, so back when upholstery wasn’t as forgiving as today, “plastic seats” was the solution. Yes, they were terrible. My MIL had them in her living room too, even though no one was allowed to sit in there. Weird.

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Don’t UberLyft also send a photo of the car, license plate # and the driver?

This gives the rider a sense of security as opposed to an anonymous taxi.

The driver has the “security” that the rider has an account with UberLyft?

:face_with_monocle:
ralph has only been in an Uberlyft 2x. As an additional passenger.

In the last earning call, he mentioned that the Robotaxi fleet is going to be owned by Tesla. It’s possible that he might also let individual owners “lend” their cars into that program - though he didn’t actually say that, and the company hasn’t mentioned a “Tesla Network” in a while. Though it’s hard to see how that would actually work - existing Teslas lack the hardware you would want/need in an AV taxicab (the ability to close doors, cameras that can see 100% of the interior cabin and trunk), and presumably would be at a competitive disadvantage to the new vehicle that’s optimized to be a taxi. Once Tesla’s made a few 10K or so of the bespoke Cybercab, there’s probably not going to really be room in the fleet for private cars.

We’ll see once they unveil the Cybercab vehicle in August, because I don’t really understand the business plan that they’ve outlined in the last few weeks. It sounds like the next new model is the Cybercab, and that they’re going to build it on existing lines (rather than wait for “unboxed” production lines to be built) so they can get it into production late this year or early next year.

But here’s the thing - cars that are purpose-built for driverless use (ie. they don’t have steering wheels or brake/gas pedals and the like) aren’t street legal. State governments can authorize cars to be operated without a driver, but the federal government sets the minimum requirements for the physical design of cars (the Federal motor vehicle safety standards, or “FMVSS”), and they don’t allow cars to be built for street use without these controls. There is a process for asking for a waiver of the FMVSS, but it can take years to get it. GM/Cruise applied for one for their Origin model back in mid-2022, and the NHTSA still hasn’t finished their review. And even then, the exemption is only temporary (two years for a large company like Tesla) and limited to 2,500 vehicles.

I don’t think a “robotaxi” will have steering wheel or pedals - Musk apparently rejected the idea of a “franken-car” that has rudimentary controls that can be removed when FSD is ready - but I don’t think a regulatory solution exists that can be implemented in time if the robotaxi is the next model they start building.

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That would add overhead.

Oh…
Well I bought a bit near the current bottom and let us see.

my reaction was more Time for Professional Management in the heading. Reminded me of Steve Jobs being shunted out of Apple with John Scully the professional manager in 1985.

So be careful what you wish

Competing on a global scale with Chinese like BYD ( a Charlie Munger /Warren Buffet invested company) is not easy as scale they have in China alone exceeds entire US for Tesla.
The customer incentives in China apply to any EV sale and BYD won the most. Not TESLA the previous most popular

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Then you failed to understand how the industry works. Being able to sell the same vehicle’s time-use (i.e. lease/rental income) is far more profitable (and thus more valuable) than making a one-time sale of that same vehicle. Which is why rental agencies work today. And it goes far beyond renting cars. U-Haul does quite well. So do tool rental and many other rental-related businesses. Mini-storage is booming. Why would that be different than vehicle or tool rental?