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Tesla short-seller Andrew Left has reversed course.
The Citron Research investor, who had been short Tesla, announced that he’s going long. Justification? Tesla is crushing the competition.
Of the many, many bad ideas about Tesla in circulation — from bulls and bears alike — perhaps the worst is that the company is going to dominate the future of automobiles. That’s one you often hear from the bulls; the bears, chiefly short-seller Jim Chanos, like to flip it and maintain that established, well-capitalized competition is coming for Tesla and that will lead to the game-over scenario.
Left’s newfound enthusiasm relies on the all-caps version of the domination thesis.
“Rumors of the Tesla killers have been as constant and unfounded as Bob Lutz’s call for Tesla’s bankruptcy,” Left wrote in a note on Tuesday. (Lutz is a former auto-industry executive who has been critical of Tesla for years.)
“While the media has been focused on [CEO] Elon Musk’s eccentric, outlandish and at times offensive behavior, it has failed to notice the legitimate disruption of the auto industry that is currently being DOMINATED by Tesla.”
For starters, Tesla isn’t disrupting anything; rather, it’s replacing gas-powered propulsion with electric motivation, a technology available for over a century.
Secondly, while Tesla is DOMINATING the all-electric luxury vehicle business and forging a new market for people who absolutely, positively do not desire a gas-burning vehicle, the market under domination is … well, tiny. Globally, electric cars make up about 1% of sales. In the US, Tesla could establish market share of about 2% — of 17 million in annual deliveries.
“Tesla is destroying the competition,” Left exclaims. Then he trots out a bunch of charts and summarizes Tesla’s stake in the aforementioned rinky-dink market, as well as its performance in the also small luxury vehicle space.
The problem here is that the world’s automakers aren’t so much competing for electric-market share so much as trying to avoid over-committing to a technological temptation. They don’t want to produce cars for demand that’s too new to be called stable, especially since they operating on five- to seven-year cycles. They also don’t want to bother with a “Tesla-killer” because Tesla isn’t worth killing. In fact, Tesla has been useful as a risk-taking front-running.
Tesla could be on the verge of posting an impressive and maybe even profitable third quarter — we’ll find out on Wednesday — but its destiny isn’t based on DOMINATING nonexistent competition. Instead, for Tesla to prosper it will need to serve the market for all-electric vehicles that it’s validated. Not for nothing, Musk doesn’t want to dominate: With a billion internal-combustion cars to replace worldwide with electric vehicles, Tesla needs lots of help.
It would be nice if somebody on Wall Street could figure out this middle ground and support Tesla for doing right by its customers, rather than concocting false narratives of conquest and disruption. Sadly, that’s being left to media that’s noticing what Tesla is truly all about.
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