TSLA – Bull Case (Qualitative Opinion)

A lot of posts about folks dumping Tesla. Here are some counter points. I welcome feedback! Please be civil.

1. I sincerely doubt people are shying away from Tesla because of Elon. Even if they are, it is a short term phenomenon because of his involvement in Twitter. Like all stupid forays, this foray will come to an end as well and money will rush back in again.

2. Tesla makes great cars. Buyers remorse is almost non existent. People love their cars, flaws and all! There isn’t a car that is anywhere close to it from a technology perspective. (you may debate this – but find me a car that has a greater range + capabilities)

3. Tesla does not spend a dime on advertising! Just think of the brand awareness and consideration this company has without spending a dime on advertising. Others are spending billions! Even Porsche who I think is the closest competition has billboards all over the place!

4. They are profitable! This is not a smoke and mirror show. Maybe you say that the autopilot is a joke and not a fully featured solution. The retort would be, how many people are paying for FSD via subscription and what is the cancellation rate? It is near 5%. If Tesla is able to retain 95% of its customer base in something “frivolous” like FSD, surely there is something that FSD is doing correctly.

5. Tesla cars are priced where they are because of demand and supply. They are able to presell every car they produce. Obviously, the recession may cause some havoc and reduce demand in the short term. How will Tesla weather this? Based on the moves they are making, it feels like they are taking an active approach to managing staff, expenses and ultimately production. The drop in stock price is because of this! This is the uncertainty that is causing the institutional investors to reduce their positions.

6. Tesla has experienced meteoric growth and with the growth comes “fat” (ask any body builder). The “recession” is the perfect back drop for Tesla to become lean and hungry again. Think about the GE in its hey day and the 10% rule!

7. Tesla is more than a car company”. This is a polarizing statement! But let’s look at the evidence to see where on the spectrum they lie. A) Do they have technology that goes above and beyond transportation (Yes, Solar, Commercial Energy, Insurance, SaaS). So, objectively, I would say more true than not. Given this, valueing it as such is the right thing to do.

8. They are vertically integrated, their reliance on partners decreases day by day! This is the Apple model and why Apple’s consumer experience is head and shoulders above everyone else. Tesla controls almost all aspects of its production. Tesla does not even use dealerships to sell their cars! The full control allows them to be nimble and take decisions that are consumer centric!

9. Important point: For the last 10 years they have navigated the business extremely well! I have to give them an A for execution. Every challenge has been met with bold strategy and then executed to critical success. The team is the same, so why should the results be any different 10 years from now? Elon is one man and sure he may have brain fart from now and then, but the team and culture (results oriented) he has developed for the last 10 years will be the difference maker!

10. Just like how Steve Jobs was succeeded by Tim Cook, innovative companies like Tesla will always attract the best and brightest. I’m confident that even in the absence of Elon, there will be a competent leader who take the reins and extract greatness.

11. I’m not going to call Elon a genius yet. But he is operating at much higher scale when compared to everyone else. Setting aside his success with PayPal. To gestate Tesla and at the same time expand into solar & rockets and compete successfully should show you that the man is not normal. And with this, you should expect some level of eccentricity. If not for this eccentricity (his downfall) he would likely rule the world. Be glad that Twitter is the channel for his eccentricities vs Tesla.

Again, these are all the musings of a random fool that is me. I have an investment in Tesla and am adding to my position slowly but surely. The thesis behind my investment has not changed and there is nothing yet that gives me worry (yet).