"They are who we thought they were!"
With that quote, Harrisburg, Penn.-native Denny Green, then the head coach of the Arizona Cardinals, entered sports media history. As the U.S. markets rally in Thursday afternoon trading, despite yet another scary selloff in bonds -- with the 10-Year U.S. Treasury yielding 4.06% as of this writing -- Tesla (TSLA) is lagging its Nasdaq peers by a wide margin today.
Tesla's much-hyped (what isn't much-hyped when it comes to Tesla?) Investor Day on Wednesday, proceeded to be a big, fat nothingburger. There just wasn't anything there to convince gullible Wall Street analysts that Tesla is anything but ... a car company. Energy storage and solar are small bolt-ons to Tesla's main business, which generates more than 90% of the company's revenues.
They are who we thought they were.
So, as a car company, even after today's plunge, TSLA shares are accorded more than 6-times 2023 revenues, vs. the best comparable, Porsche. But luxury car makers should only be compared with other luxury car makers, which is accorded about 1.5-times this year's estimated revenues.
It makes no sense. Elon and co. said nothing Wednesday to make the valuation gap between TSLA and its peers any more credible, although the stock market is doing its part now to narrow that gap.
From my old days as a sell-side autos analyst, I remember well the phrase "surprise and delight." You had better damn well keep surprising and delighting the ever-fickle consumer, or they will take their business elsewhere. At Investor Day, Tesla showcased the following new products ...
Tesla didn't even have an in-the-wild Cybertruck to display. Also, all the pre-meeting hype about the potential for the introduction of a "Gen 3", less expensive, Tesla to retail for $25,000-$30,000, turned out to be just that. Hype.
This company is just not introducing new products. EV competitors have already caught up well to the now 5.5 year-old -- and in undesirable sedan configuration -- Model 3, although sales of the Model Y remain strong. Contrast that with Volkswagen and check out this new product, the ID.Buzz Cargo, which is currently being sold in Europe. Tell me you don't want to drive that thing. I do! It is rumored to be heading across the pond to our market in 2024.
Tesla is still selling two models that look similar, with occasional S and X sales sprinkled in. This company seems to be totally bereft of product ideas. We will see if Cybertruck kicks that malaise, but, again, without a date for first deliveries of the Cybertruck ... who knows?
Tesla focuses on the tech side of things, and Elon was no doubt happy with the tech-y valuation given to TSLA in 2021, vs. the mundane valuations that we sell-siders always handed out to auto companies, even premium ones like BMW or what is now Daimler. But once the forced the recall of every Tesla model equipped with full self-driving beta -- a topic I have covered in several other Real Money columns -- Tesla lost, or should have lost, anyway, its mantle as a Big Tech stalwart.
They are who we thought they were. Tesla is a car company. Period.
Tesla also happens to be a car company whose products are beset by poor performance in initial quality surveys globally and whose management does not delight in showing off the "car porn" of new or re-styled models. Henry Ford famously said you could have any color Model T you wanted ... as long as it was black. Elon is essentially saying, you can have any EV you want ... as long as it has the same angular shape and spartan interior of the 3 and the Y.
The consumer is not that easy. Different folks want different strokes. As I noted in my last Real Money column, Tesla customers in China specifically, seem to be showing some real fatigue at Tesla's tired product line. That inevitably, as it has with Tesla, leads to discounting of older products. Innovation is key in automotive. If the consumer thinks, "They are who we thought they were." your company is going to lose market share to more innovative competitors. Painful, but true.