About Tesla and its results » Enrique Dans

Tesla’s third-quarter results, released last Thursday, were very positive and beat analysts’ forecasts (72 cents per share versus the 58 expected), resulting in the company closing at its highest level in thirteen months with a gain of 22%, and its main shareholder Elon Musk will increase his wealth by more than $33.5 billion.

Presentation of such positive results (470,000 cars produced, 463,000 shipped and 6.9 GWh of batteries installed), promises from Elon Musk, who predicts a 20-30% increase in the company’s car sales next year thanks to cheaper cars and the advent of autonomous driving at least in two states, as well as results from its energy generation and storage unit, which saw revenue rise 52% to $2.38 billion, sparked euphoria the brand hadn’t seen in a long time. Even the most controversial Cybertruck model has become the third most popular electric vehicle in the country and is already generating positive profits for the company.

The overall forecasts are also consistent: Far from meeting the predictions of some who had pointed to declining EV sales, record sales were achieved in the US and global sales rose by more than a third. It’s becoming increasingly clear: EVs are clearly a superior technology, and better technology always wins.

But what makes Tesla’s outlook remain so positive, beyond its quarterly results? The company continues to be the absolute technology leader in electric vehicles, with only a few Chinese brands beginning to consider eclipsing it, but more importantly, it sells all of its cars without investing a single dollar in advertising, and it does so in a direct way. to the consumer, without any dealership. While the vast majority of car companies spend huge sums to maintain a constant presence in media such as newspapers, radio and television, Tesla has not yet started advertising – it may do so at some point, but has not yet done so this. ), and also captures the entire margin from its sales.

On the other hand, Tesla has a high level of vertical integration, producing both cars and the vast majority of their key components, especially batteries, giving it significant control over the supply chain and costs. In comparison, traditional manufacturers often rely on a huge number of external suppliers for critical components, each with a logical commercial profit requirement, limiting their flexibility and control over pricing and supply.

Tesla cars also function as connected devices where software They are sent remotely and regularly with a frequency of more than one update per month. This allows their vehicles to continually improve safety, autonomy and functionality without having to go to a dealer to do so. On the other hand, traditional manufacturers are still starting to implement such capabilities in their cars. While the Tesla car continues to improve after purchase, the traditional one only gets worse.

Tesla’s Supercharger network, one of its main assets, allows its owners and vehicles from other brands to access an extensive fast charging infrastructure. This is a source of ongoing profitability and an important factor for drivers looking for the convenience of taking long trips without worrying about the availability of chargers.

And finally, Tesla, with millions of miles of data constantly collected by its fleet, has a huge database of real-life driving scenarios. This circumstance is key to the development of an autonomous driving system in which driving models machine learning They train in a variety of real-world conditions, improving their autonomous driving technology faster than their competitors.

While the radical political and ultra-conservative ideas its founder is now exhibiting may turn off many potential customers, all indications are that, faced with a product of such enduring nature, this damage may take a long time to manifest itself, if ever. A current Tesla customer, alienated by Musk’s ideological leanings and the prospect of helping fund Donald Trump, might consider buying a vehicle from another brand, but given its average lifespan, that decision may be delayed over time and diluted until it becomes insignificant .

All of these differences are fundamental when it comes to understanding the industry: for traditional car companies, they represent a completely insurmountable barrier. A barrier they cannot overcome as long as they continue to produce internal combustion engine vehicles, which necessarily require a network of dealers distributed throughout the territory to provide them with the necessary periodic maintenance. Dealers who obviously demand their own commercial markup, which hurts the profitability of the brand. If we combine this with the huge difference in Tesla’s investment in research and development compared to other brands, it becomes clear that its current competitive advantage may be sustainable and that the problem of traditional brands is not temporary, but structural.