Tesla took a big hit in the markets on Monday, down over 9% to $US253 a share at the close.
The collapse is largely being chalked up to a note that Morgan Stanley analyst Adam Jonas published Monday, in which he reiterated an overweight rating on the stock but but expressed several “sobering factors” to consider about the stock.
Of these, this factor might be the most sobering:
In an autonomous world, why will people buy a Tesla? Our 15 year DCF [Discounted Cash Flow] coincides with the end of human driving and the dawn of crowd source mobility and mega fleets. Assuming people even buy cars at all, what will determine Tesla’s strategic and competitive advantage as a provider of mobility? We see scope for an array of new entrants who can apply Moore’s Law and comput[ing] power to move people and things around the surface of the earth. The rules are changing and at least some incumbent OEMs (i.e. BMW) are not falling asleep at the (disappearing) steering wheel.
That “disappearing” steering wheel is a reference to the a Google self-driving car concept, which lacks conventional vehicle instruments…and a steering wheel!
In the context of what remains a fairly bullish case for Tesla — albeit a bullish case that limits Tesla to a niche market — this is a rather radical statement to make about the future of mobility.
After all, new vehicle sales in the U.S. climbed above a 17-million annual pace in August. Doesn’t that mean people are buying cars like crazy? Won’t they continue to do so in the future?
Not necessarily, if there’s an “end to human driving,” as Jonas suggests. As mobility requires less and less — and eventually perhaps zero — driver input, then what happens to the romance associated with Tesla? Although the company is certainly the most successful electric carmaker in history, a lot of its story is emotional: You buy a Tesla because you want to drive the future and feel good about saving the planet.
Jonas also astutely predicts that the entire automobile industry isn’t going to sit idly by as Tesla becomes the dominant electric-vehicle (EV) manufacturer (even in a modest EV niche).
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