I was in the car listening to Elon Musks lethargic answers to investor questions yesterday and a long-simmering theory felt like it was being confirmed: Elon Musk doesnt want to be CEO of a car company. Hes bored! Im saying this not as a critique of Musk, because if Im right and hes right then hes creating a company many times more valuable than it is right now.
Is he right? Im less sure. Musks whole life has been a constant doubling-down on every bet and, thus far, its worked out for him. There are signs its not working out as well and thats important.
If you can get through a Musk-heavy Morning Dump I shall reward you with a discussion of Volvos financials, an update on Stellantis and its idiotic quest to alienate all of its suppliers, and a video of me trying to convince GM to build a PHEV Aztek.
Reutershad a story that Tesla was abandoning its $25,000 car, which seemed like a wild assertion and one that Elon Musk said was wrong. Yesterday, Tesla released its Q1 financials and they were bad. Whereas GM saw improving financials and more revenue, Tesla experienced exactly the opposite. The most interesting part of the day, though, was the investor call where CEO Elon Musk answered a bunch of questions.
Musk didnt confirm theReuters story, but he clarified it, and it makes a lot of sense. Heres the full transcript, by the way, that Im quoting from. Heres the key bit:
Weve updated our future vehicle lineup to accelerate the launch of new models ahead, previously mentioned start of production in the second half of 2025. So, we expect it to be more like the early 2025, if not late this year. These new vehicles, including more affordable models, will use aspects of the next-generation platform as well as aspects of our current platforms, and well be able to produce on the same manufacturing lines as our current vehicle lineup.
If youre not a close watcher of Tesla this doesnt mean that much to you, but Ill try to do a quick version of explaining it. Basically, Tesla has been working on an unboxed platform that will allow the automaker to build cars cheaper than anyone else can build cars, including Tesla itself. What I think happened is Tesla moved a lot of people off that team, which is what tipped off Reuters.
What does that mean? Tesla has decided (the timing is unclear and it could have been decided after a negative response to the story) that it is going to build the newer models on a more traditional Tesla platform, which will allow the company to introduce much-needed models much faster by using more of its existing manufacturing footprint.
Thebigquestion about this is can Tesla make a $25k car without the new platform? Fred Lambert, who pays more attention to this than anyone, doesnt think so:
Without the unboxed system, its likely that we can kiss goodbye to the previously mentioned $25,000 price point.
I will have to defer to his judgment on that, though one would think that saving money on re-tooling would help.
This becomes extremely important when considering the companys financial results. Which were bad.
Tesla reported a 9% drop in Q1 revenue, which is the biggest drop in more than a decade and below Wall Streets already lowered expectations. And, yet, shares jumped after the call.
FromCNBC:
The stock jumped in extended trading after CEO Elon Musk told investors that production of new affordable EV models could begin sooner than expected.
Heres the thing, Tesla spent a lot of time working on robots, self-driving, AI, and Cybertrucks instead of focusing on expanding its model line, which is what a normal CEO of a car company likely would have done. This meant that when the EV market slowed down Tesla was forced to heavily discount its inventory because instead of a mix of models it mostly had the same old cars build on the same old platforms to offer.
Ok, back to my premise. When the death of the $25,000 car was reported, I wrote this as my theory for why:
What if Teslas business isnt really cars? I know this is a wild statement since thats a big chunk of the companys value, but Musk is out there working on AI and robots and flamethrowers and tunnels. There are fundamental limitations to the amount of money to be made in the car business and its possible that Musk would rather pivot to the next thing rather than focus on the arduous, slow, and kind of boring work of making cars now that hes got to compete with BYD, and. Xiaomi and a bunch of other companies.
This call confirmed this theory. There was way more talk of everything that wasnt cars than actual cars. And Musk explicitly said the following on the call:
If you value Tesla as just like an auto company, you just have to fundamentally, its just the wrong framework and if you ask the wrong question, then the right answer is impossible. So, I mean, if somebody doesnt believe Tesla is going to solve autonomy, I think they should not be an investor in the company. Like that is, but we will and we are and then you have a car that goes from 10 hours of use a week, like an hour and a half a day to probably 50%, but it costs the same.
Thats it. If you think Tesla can make humanoid robots, autonomy, AI, et cetera work then it is so much more valuable than the company is today and the share cost is way low and you should buy shares in Tesla. If you think thats all a shell game you should run like hell.
Ive got my sense of what reality is, but that sense has to contend with a universe in which betting against Elon Musk has almost never worked out for anyone.
Volvo definitely isa car company, and its Q1 financials reflect that. Sales were up in Q1 2024 by about 12% compared to Q1 2023 and EBIT margins hit 7.2%, compared to the same period in 2023 when margins were 6.6%.
The company is actually well-positioned in the marketplace with a strong mix of EVs and PHEVs. Total revenue for the company did fall, and the company blamed contract manufacturing (ahem, Polestar):
That and foreign exchange rates have been a bit of a drag. Volvo has a solution to the Polestar issue, though, and thats giving back Polestar to its investors (and Geely).
Stellantis, under CEO Carlos Tavares (pictured above), is playing a dangerous game with its suppliers, which is what the company does when its not antagonizing governments.
As previously reported, Stellantis is trying to keep parts costs low and has told suppliers they can no longer submit claims related to price increases.
On the Stellantis side, the company is essentially saying that it has contracts and its tried to help out as much as possible to offset inflation/supply chain-related pressures on its suppliers but it also has to worry about its own margins.
On the supplier side, these companies are pointing out that during the pandemic Stellantis made humongous profits while they got the squeeze and havent been made whole yet.
Suppliers have threatened to stop delivering parts and Stellantis has decided to stop paying certain suppliers. This has led to a flurry of court cases, and the most recent has come down against Stellantis. Heres the key bit fromAutomotive News:
Two of the cases are being handled by Judge Victoria Valentine, who granted court orders this year forcing Yanfeng and Kamax to continue supplying parts while the cases work through the court.
But Judge Michael Warren, the circuit courts other business judge, departed from those decisions by denying a preliminary injunction against MacLean-Fogg Component Solutions LLC. Despite FCAs oral argument that such circumstances will cause other suppliers to similarly threaten to stop shipping parts when they want a price increase, causing disruption of the entire United States auto industry, FCAs argument is speculation and conjecture, Warren said in the order.
Hold on, it gets better:
In the April 9 lawsuit filed against the supplier, lawyers for Stellantis argued the financial impact on FCA will be catastrophic and will cause tens, if not hundreds, of millions of dollars in shutdown damages, in addition to the incalculable losses from being shut out of future supply work with its suppliers and losing various employees due to forced layoffs.
In Tuesdays order, Judge Warren shot down the automakers claim of a risk of irreparable harm. This cascade will only occur if FCA refused to pay under protest, the judge said in the opinion. Akin to a civil contemnor, who holds the key to her own jail cell, FCA can avoid this impending economic disaster by paying under protest.
Looooooool. Its not fun to pay under protest, but thems the breaks (unless, of course, Stellantis tries to short its brakes supplier).
I had a great chat yesterday, above, with ABC 12 and a familiar voice around here (spartanjohn113). Mostly we talked about GMs Q1 results, and it did give me an opening to float my pet theory of what GM should do next.
Specifically, I challenged GM, Mark Reuss, and Mary Barra to build a cool, affordable crossover PHEV with a tent and call it Aztek. I also said, specifically itll sell. However, I did add: You have my word which is not trustworthy at all in this case.
Its not! Never build a car an automotive journalist asks for, it only ends in heartache.
Mark (who, in addition to being a car dude is also President of GM) found it funny, at least:
Maybe not confirmation of a GMC Aztek, but at least Im getting a sweet lapel pin! Thats a consolation.
I love Chromeo. I got to see them perform in Houston at a Basquiat exhibit (the most Millennial sentence ever written) and met Dave 1 and P-Thugg and they were delightful. Not only is their music smooth and funky as hell, all their videos seem to feature great cars, including the white Camaro in this video.
Fast forward a few years and Im living in Brooklyn and Im in search of a parking garage to ditch press cars. There are a few to choose from, but the best choice seems to be the one run by a guy with an Infiniti M30 convertible. He gets me.
One day while Im down there I go exploring the cars in the garage and theres a white Camaro convertible. I blurt out very Chromeo and he goes Oh yeah, thats P-Thuggs cars, he keeps some of his rides here. So, for a few years, I shared a parking garage with Chromeo. I will never get cooler.
Is Elon Musk running a shell game or is Tesla the future of everything? Or some other answer?
Top photo: NBC Universal/SNL Screenshot
See more here:
Elon Musk Clearly Doesn't Want To Be CEO Of A 'Car Company' Anymore - The Autopian