Years ago, this unsupportable argument came largely from the more emotional regions of the pro-Tesla camp. Those who made it were justifiably disgusted with the traditional auto industry for its many sins of the past, hated the idea that they had to buy a car from it, and saw Tesla as a sort of savior company.
As Tesla has grown and experienced all the pain that car companies deal with all the time, this view has retreated. People still love Teslas. But because a lot more of them own an actual vehicle, they understand that Tesla is making something that has four wheels and windows.
Impractical expectation have migrated out of the early adopter space and into the finance realms, where it’s always been important to promote investment stories about Tesla that are mega-bullish.
Loup Ventures’ Gene Munster, for example, argued last year that Tesla’s addressable US market could be 11-million vehicles annually (Munster offered this prior to Tesla’s summer of discontent in 2018, and even before the carmaker’s Model 3 sedan hit serious production delays, since resolved).
As I noted at the time, Munster’s number is borderline nonsense. If Tesla were to sell 11 million vehicles annually in the US, it would control 65% of the 2018-level market, which should come in at over 17 million. And bear in mind that at its peak in the 1950s — when it had only two major domestic competitors in Ford and Chrysler — General Motors captured just over 50% of the market; it now leads all US sales with less than 20%.
Equally egregious is Ark Invest, whose CEO, Cathie Wood, thinks Tesla will in five years will transform itself from being primarily a carmaker to being a mobility service-provider, minting a share price of as much as $ 4,000. Tesla has nothing that even vaguely resembles even an incipient mobility business. Waymo, which has been testing self-driving vehicles for close to a decade, has just started to roll one out.
It doesn’t strain credibility to propose this as an investment thesis — it insults it. (Ark was among Tesla investors who argued against Musk’s failed effort to take the company private, and to Wood and her team’s credit, seems to have delivered admirable returns to investors through its stakes in “disruptive” technologies.)
It gets worse. Ark also thinks that 17 million EVs will be selling annually by 2022. Forgetting for a moment that there’s something of an unrealized contradiction between Tesla plugging EVs into a service, rather than the ownership model, the math here is challenged by reality.
We would be much, much better off as residents of planet Earth if the EV were to grow rapidly over the next three years. Five-to-seven million in annual sales would be wonderful. If you go to 17 million, however, you have to figure out how the globe’s automakers are going to either convert existing factories now assembling gas-powered cars to build EVs; or locate the capacity expansion worldwide that would support manufacturing EVs at a level equal to the entire yearly US market for passenger vehicles, in a boom state.
Disagreeing with these Tesla ultra-bulls doesn’t mean that you’re anti-Tesla, by the way. It just means that you’d prefer for Tesla to be part of a reality-based scenario — one in which Tesla doesn’t dominate, but participates, in a robust market for EVs.