Well, it's personal now. I will always have at least a minor interest in the car industry, having followed it for more than a decade in New York and London, and made countless trips to Detroit and Stuttgart. It really is only Tesla (TSLA) , and the "coverage" on Elon Musk's company by sell-side analysts and the financial media, that drags me back. That was until watching the General Motors (GM) commercial for its upcoming Hummer EV. In true GM fashion, they took one of the greatest songs from what I believe to be the greatest rock n' roll band of all time, Led Zeppelin, and absolutely destroyed it. "Immigrant Song" sounds like some sort of karaoke remix, and that just shows how clueless GM is at branding and marketing.
OK, so now I am in Andy Rooney mode and complaining about insignificant (to some) details, it is time to leave GM and go back to Tesla. Bloomberg reported this morning that Tesla will have to recall over 29,000 Model S and X vehicles sold in China from 2015 to 2018, owing to defects in their suspension systems. All those vehicles were made at Tesla's Fremont, California facility and pre-date production (which is currently composed of Model 3 with Model Y pre-production underway) at Tesla's leased facility in Lingang, China. But that's how recalls work. They always impact older production runs. The fact that these models were produced at Tesla's core (and at that time, only) production facility in Fremont show just how far this company has to go in terms of competing with the big boys.
That's what I think CNBC will never grasp, especially when they use the term "legacy automakers". No legacy automakers were ranked below Tesla in this year's J.D. Power survey. U.S. auto buyers indicated an extraordinary 2.5 problems per Tesla vehicle in Power's initial quality survey. Tesla actually finished 32 out of 32 brands ranked, one spot behind Land Rover, now owned by India's Tata Motors (TTM) and a habitual entrant at the bottom of J.D. Power's list.
So, let's not be surprised that Tesla is recalling cars made at Fremont. The internet is full of stories of Tesla consumer techs calling to "check" on Tesla customers who purchased 2020 Model Ys made in a certain VIN-range. Videos of the roof falling off on a highway will do that, and automakers have been pulling such "stealth" recalls constantly for the past 30 years that I have followed the industry.
Tesla does not make good cars. That needs to change. As I mentioned in yesterday's RM column, Tesla's position as #1 in EVs was basically unchallenged for three years as "legacy" automakers lived down to that moronic moniker and had to figure it out. GM's commercial is proof that they are on the right track, but as a car guy in a sea of Musk-slurpers and tech nerds, let me tell you that Volkswagen (VLKAF) is already there.
VW's MEB electric vehicle platform is finally true competition for Tesla in the fully-electric market. That platform is being sold as the ID.3 hatchback in Europe and will come to the U.S. in SUV form by year end - early orders for the ID.4 1st Edition have sold out, apparently. More importantly, the ID.4's introduction is imminent in China (I have read an on-sale date of 11/3) as true competition in the EV space for Musk's questionably-built Teslas. It's about time.
How's it going so far? Well after being confronted with the fact that JMP Securities' Tesla head cheerleader Joe Osha is unaware of how many Teslas are sold in Europe (he said it was 30,000 in 3Q; publicly available registration data show it was closer to 25,000), let me drop some knowledge on (RM) readers. The ID.3 was introduced in Europe at the very end of August. These are registration figures from Norway and the Netherlands, reported daily, since then.
European Registration Data 9/1/20 -10/22/20
VW ID.3 = 4,010
Tesla Model 3 = 890
VW ID.3 = 2,059
Tesla Model 3 = 1,008
Note that these figures include September, an end-of-quarter month in which Tesla used its normal delivery-stuffing tactics. Tesla will continue to cut prices on the Model 3 across the globe because it simply has no other tactics to defend its EV sales lead from VW's onslaught. Margins will remain under pressure and thus TSLA's profitability --derived completely in the third quarter from selling ZEV credits - they lost money selling cars -- will remain in question and TSLA stock's multiple on those pressured earnings still makes zero sense at current levels.
In 1984, VW was the first Western carmaker to fully commit to China, and they are about to remind Musk what brand loyalty and market penetration are about. GM is strong in China, too, and if they ever stop making Muzak versions of classic songs, they may just figure out how to capitalize on that.