Well, he did it. He went onstage and wowed the crowd with a new battery-electric vehicle and the world's transition to carbon-free transportation was advanced.
Of course, I am referring to Scott Keogh, President and CEO of Volkswagen of America, and Volkswagen's (VLKAF) ID.4 electric SUV, which was officially introduced to the public via webcast Wednesday. Tesla's (TSLA) Battery Day, in contrast, was a weird mix of questionable scientific claims and, as usual, promises of future products without actual model introductions.
The difference? Scott Keogh's company sports a market capitalization of about $70 billion, while Tesla, even after this week's plunge, is still being valued at $370 billion.
I started following the auto industry in 1992, and while I left the sell-side analysis game years ago, certain lessons never left me. Selling cars is a brutally competitive game. As it does in all industries, competition restrains margins, and having to manufacture AND sell products involves two completely distinct skill sets. That's why auto companies are granted low P/Es by the stock market. Some things never change.
The internet is full of crazy-eyed Teslaphiles spouting Musk-love and less full of quotes from actual sell-side analysts, many of whom are guilty of the same thing. It's embarrassing to me as a former member of that fraternity. What these lemmings are missing is the impact of competition on Tesla. The Model 3 just passed its third birthday here in the States (its official launch was in July 2017) and with most global automakers now aping Musk's Silicon Valley background and touting their products as tech-tech-tech, three years feels like an eternity,
So, VW is well and truly in the game now. Musk's chummy photo op with VW Group CEO Herbert Diess a few weeks ago in Germany indicates the fierce competition that the world's largest automaker by volume can and will provide Tesla.
Want proof? Look no further than Norway.
Granted, Norway is a small country, but its move toward electrification is light-years ahead of ours in America. Thus far in August, 62.8% of cars registered in Norway utilize electrified powertrains. Yes, there are sites on the Internet like https://elbilstatistikk.no/ that track DAILY car registrations (I was based in London for five years following autos and learned that registrations are a decent, if not perfect, substitute for sales data.)
Thus far in September, the recently introduced VW ID.3 -- based on the same MEB platform on which the ID.4 will be built -- is absolutely killing Tesla's Model 3 in registrations in Norway. As of Wednesday, the ID.3 was outselling the Model 3 by about 50% in Norway in September. In August, Geely/Volvo's Polestar 2 outsold the Model 3 in both Sweden and Norway.
So, that's what the investing public should be focusing on, not Musk's tweets. Clearly his missives Monday night were intended to dampen enthusiasm around Battery Day, and that worked.
The stock market never lies. But stocks aren't -- or, I should say, shouldn't be -- valued on mere hype and hero-worship alone. They are valued on economic value created. Tesla has never produced any real returns on its capital and has never produced a profit other than accounting mumbo-jumbo related to the recognition of revenues from selling ZEV credits to other automakers.
As VW's ID.4 introduction and the strong sales performance of the ID.3 in the world's "greenest" car market attest, those "other automakers" are starting to figure out the BEV game themselves. Tesla has responded with multiple price cuts -- on the Model 3, S and X and even on the 2020-launched Model Y -- in multiple geographies this year, and I would look for that strategy to continue. Musk has no other option especially since all his cars -- including, to my trained eye, the Model Y -- look extremely similar in terms of exterior styling.
So, cars are, were and always will be sold on price. Cost-to-build is an important factor in being able to reach a given price point, obviously. In such a competition I will take a company that operates 125 manufacturing facilities around the globe, including Chattanooga, Tenn., which will begin delivering locally built ID.4 models to the U.S. market in 2022, over a manufacturer that is -- still!! -- building cars in a tent in a parking lot.
Watch out, Elon, the big boys are coming for you. Sell-side Tesla analysts will realize that... never. This current crop is not capable of realizing anything or producing any type of independent thought, so you had better make your investing decisions yourself.
