Disclosure: I am long Tesla stock.
I think Tesla over the next several months is going to offer an absolute masterclass in how badly optics can become disassociated with reality.
I’m not talking about the usual questions and debates people in the investing world have over valuation. What I’m talking about is the increasing mainstream attention to the company itself as a result of Elon being Elon.
When I first started investing in Tesla (late 2019) nobody in my life or on my normal social media ever talked about it outside the context of a political push for EVs. Now, every single day I come across leftists on all my social medias who are not part of the investing world pushing very poorly thought out talking points about why they’re doomed.
The major new talking point is how Elon is alienating his consumer base by criticizing the Democratic Party. Republicans hate EVs, and now democrats won’t buy them, so who is going to buy his cars now?
This is a crazy oversimplification of the issue. There is no unified Republican opposition to EVs. Republicans tend to not believe in man-made climate change and therefore do not support government mandates to electrify the auto industry based on the rationale that we have to save the world by doing so. But that doesn’t mean they won’t buy EVs. If EVs can beat ICE vehicles in the market, that’s totally fine. It doesn’t take a genius to see that EVs are superior value propositions at comparable price points for most consumers. The idea that Republican consumers are going to make irrational value judgements and refuse to adopt EVs because they don’t believe in climate change is just absurd. Yes, there is a small subset of the population that will resist the transition to EVs, but these are usually the motor head “car guy” types whose rationale is “I like to feel the engine” which is a niche market in the first place and will in no way be a drag on the overall trend of mainstream adoption.
The second thing to point out is that the supposed alienation of Tesla’s consumer base is likely to be greatly exaggerated. Most democratic voters are not going to base their consumer purchase decisions on what the CEO thinks of their preferred political party. The extremely loud group who swear they will never buy a Tesla because Elon is a fascist is a very small slice even of Democratic voters. It reminds me a lot of how people on the right swore that the NFL was done for because of boycotts by middle aged white people over the national anthem stuff, or when every leftist I knew was adamant that they’d never eat at chick fil a again.
And then there’s the issue that most of America doesn’t even identify strongly with either party. This talking point assumes that America is roughly 90% either Republican or Democrat but in reality most don’t even vote in the first place and most who do consider themselves moderates.
Further still, it’s worth noting that Tesla’s international market which will care even less about US politics is as big if not bigger than their US market.
But this idea is going to be given face-value credibility when Tesla’s Q2 numbers show a decrease in deliveries quarter over quarter and every angry leftist and every Tesla bear latches onto the headlines and says “SEE! Elon starts getting political and Tesla’s sales drop.” But they’ll fail to point out (and casual observers will fail to realize) that Q2 weakness will be entirely explained by the Shanghai shutdown. So for an entire quarter the people saying that Elon is sinking the ship will appear correct. And then Q3 will come around and Tesla will resume its crazy growth trajectory as Shanghai gets back to (relative) normal and Berlin and Austin continue to ramp. Then at the end of next year when Tesla delivers like 2 million vehicles we’ll look back at this and laugh at all the failed doomsday predictions.
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