Kelly Evans: The lure of Tesla

Kelly Evans Tesla

As you’ve probably noticed, I’ve been a bit obsessed with the energy and EV transition lately since it suddenly seems to be happening at an accelerating pace. “Time to write about something different,” I told myself over the weekend.

Then we took a little field trip to the local farmer’s market yesterday morning, like we often do. (It’s somehow gotten the boys to eat apples. Whatever works!) As we were pulling in, we noticed a new, handwritten sign. “EV show,” it read, with an arrow. My husband and I exchanged bemused looks; wouldn’t it be funny if they were actually having an electric vehicle display, we thought in sync, assuming it must actually stand for “extra vegetables,” or something.

As you’ve probably noticed, I’ve been a bit obsessed with the energy and EV transition lately since it suddenly seems to be happening at an accelerating pace. “Time to write about something different,” I told myself over the weekend.



Then we took a little field trip to the local farmer’s market yesterday morning, like we often do. (It’s somehow gotten the boys to eat apples. Whatever works!) As we were pulling in, we noticed a new, handwritten sign. “EV show,” it read, with an arrow. My husband and I exchanged bemused looks; wouldn’t it be funny if they were actually having an electric vehicle display, we thought in sync, assuming it must actually stand for “extra vegetables,” or something.

So there are two ways to think about Tesla from here. One, as a traditional automaker whose valuation will eventually reset to something much more boring. As Bernstein’s Toni Sacconaghi notes, “operating margins for the largest [automakers] have not changed meaningfully in the past 20-30 years…on average, rangebound between 4-8%.” Elon Musk himself, when asked at the annual shareholder meeting recently what he thought would be Tesla’s long-term competitive advantage in a world where  most cars are electric, and most might even be operating off of Tesla’s autopilot technology, answered simply–“Manufacturing.”



But the other way to think about this is that Tesla is the new Apple–a $2.4 trillion juggernaut whose operating profit is more like 30%. That might sound crazy, but if Tesla’s got the brand name, the fanbase, the subscription software that could become the platform for mobility, and hardware that’s basically leading edge (because, as the mobile phone wars have shown, it doesn’t actually have to be the very best), then maybe it’s not out of the question.

And if you’re buying the shares here, at over an $800 billion valuation, then this is clearly the argument you’re already making.

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