Tech Brew Ride Home - (Bonus) What's Up With Tesla, With the Tesla Daily podcast

Episode Date: September 16, 2018

Literally, what the f*** is up with Tesla? With the Rob Maurer of the Tesla Daily podcast. Subscribe! Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Hey guys, surprise, a special bonus episode in your feed, an interview episode. We might be doing more of these in the future, but after all the stuff that happened with Tesla and Elon Musk last week, I was like, what is going on over there? So I reached out to Rob Marr of the Tesla Daily podcast.

Never heard of the Tesla Daily podcast. It's another daily podcast, just like this one. But it only covers one topic. Tesla. It makes a great compliment to this podcast, especially if you're into Tesla and EV and the whole automotive space. So definitely look it up and subscribe to it, the Tesla Daily podcast. This was recorded on Sunday, September 9th, so some stuff has happened since then. But I think Rob gives us a very coherent picture or the big picture of where Tesla.

is at this point. So enjoy. Hey, Rob, thanks for coming on and talking to us about Tesla. Hey, Brian. Happy to be here. All right. Let's, I feel like this is long overdue, at least for me. But let's just start with the very, the basic, basic, which is, I don't, like I said, offline, you know, I'm aware of Tesla. I'm aware of the space. I'm not super into it, so I don't know everything. But so what is up with Tesla? Is the company in trouble? Would you describe where Tesla is right now as crisis? Great question. I would not describe it as a crisis.

I can understand why it may appear that way from the headlines that are constantly being generated day after day. Right, exactly. For someone like me that follows it casually, the only things I see are these, he did what now? They're going to do what now? This happened? you know. Certainly. So yeah, in regards to what's going on at Tesla right now a lot. So obviously they're in the midst of ramping up really the most disruptive product in the auto industry, basically in the last century. And that ramp up while it's happening really quickly in terms of

the absolute volume that they're starting to produce and the time that it's taken them to get there, it has been behind what they said that they would achieve and what their goals have been. So that obviously comes alongside a lot of negative stories about them being behind their targets. and a lot of this perception of them being slow or not ramping up very quickly. And then on top of that, every other day we get a new headline from Elon Musk. He's been very much out there on Twitter. A lot of things happening there, obviously the privatization thing. So a lot of that gets mixed in.

And I would also say there's just in the media, there's probably a lot of incentive to kind of get these articles out there that have kind of these negative headlines. That's what's going to drive the most clicks. That's what's going to make people the most interested. And there's not a lot of incentive to kind of tell all the other side of the good things that are happening because it's just it's not as interesting, frankly. Well, I understand that. And, of course, I'm very familiar with stories like with an angle like that where it's like, you know, even in the in the crypto space or if you're an Apple fanboy, they only do the negative stuff. Apple's only going to hell. You know, I get that.

I get that. Yeah. But what about the articles that I do see? And we should say you're an avowed, proud Tesla bull. So investor, so I've been invested in Tesla for the last five years or so. Great, great. So, exactly. So granted, that's why I wanted you on.

I wanted to hear, okay, when I see headlines that like, you know, there could be a revenue run rate problem. Like Tesla might actually be running out of money. Is that possible? So I would say it's certainly possible. It's not something that I expect by any means. in terms of the cash they have on hand right now, it's, you know, above $2 billion. The worst cash burn they've ever had in a quarter was a billion dollars, and that's not going to stay consistent over time.

That was basically at the trough of Model 3 production, where they had spent, you know, tons of money to get these robots in place, get these manufacturing things and production lines set up. And then obviously you have to have huge expenditures for that. And then once those things are set up, you can start capturing the revenue, capturing the profits from the actual production that you spent all that money on. And you feel like they're right on the cusp of that. Right.

And that's exactly the point that they're at right now on the last earnings call. Elon said that this is kind of the best that he's ever felt about Tesla in terms of going forward. He feels like they're finally getting out of the production hell that they've been in for the last nine months to a year. So it's finally starting to change. He said he expects Tesla to be both profitable and cash flow positive this upcoming quarter and then pretty much in perpetuity beyond that.

So with the $2 billion cash cushion, even if they're not able to quite achieve that because Tesla does frequently miss those aggressive targets that they have, it's not going to be anywhere near as bad as the cash burn that we saw in previous quarters. And they've still got plenty of cushion if they're not quite at that profitable or cash flow positive level yet. And then Model 3 is just going to keep ramping up. They're going to keep capturing more revenue there. They're going to get more efficient with their production, which is going to make it more

profitable. So I think they're in a really good spot. I can understand why it doesn't seem that way. Certainly Elon's other distractions have, you know, cause other negatives around Tesla too, certainly the privatization thing. So there's a lot going on there that kind of creates that crisis feeling. But just in terms of the actual business model, to me, no, I don't feel at all like it's in crisis. So you feel like the flywheel is right about to start turning so that, you know, like you said, once they can get profitability with the model three and then it'll, it'll, it'll, fallout to other models and the production processes will all start running smoothly and things

like that. So you feel like there's this magical tipping point, maybe magical. Wrong word. But there's a tipping point where all the problems could potentially be solved if you get it over this line. Sure. And I wouldn't go as far as saying like every problem is solved because there's always going to be something new that's coming up and there's always going to be.

Well, but the idea of the flywheel where once these things start to work, it helps other things start to work as well. For sure, for sure. Elon, in a recent interview, I can't remember who exactly it was with, but he said that the Model 3 was kind of like the last bet the company project for Tesla. And now they're coming out of that. So once they get beyond that, it should be much more, I don't know, less concerning for investors, I think. In the future, it'll start operating. Certainly it's going to be a high growth business, probably more along the lines of. Amazon where you know they're putting all their profit really back into the business but

it's going to be less funded by debt or capital raises so I think we're to your point I think we're almost at that point and they can start recognizing some of those economies of scale so again as as someone that sort of looks at this casually why can't why did they have so much problem manufacturing the cars I again from just reading random articles is it just that they they tried to do this super modern factory with automated everything and the robots just didn't work. They maybe were a little too aggressive with that. Yeah, I think that's a huge part of it in terms of why they missed their targets.

And Elon's talked about this a lot on the investor calls because that's obviously a super common question is like why you guys not meeting your production targets. And a lot of what he's had to say about that is that they were too aggressive in terms of trying to introduce too much automation into the production process, which is both a good thing and a bad thing, I think in the short term, definitely a bad thing. because it caused them to miss those targets, caused investors to probably get a little bit upset. But in the long term,

Tesla's trying to push this production to a new level, bring in more automation than is common in the car industry nowadays. That's where the margins will come from. Exactly. So as they do these things, as they push so hard to improve these processes and introduce more automation, over time,

they're going to reap benefits from that, but it causes more problems in the short term because not all of those things are going to work. and basically what Elon has said is that they just tried to do too much in kind of all at once and there are a lot of things that humans are really good at that are difficult for robots to do. So probably doesn't make a lot of sense to automate those things, maybe over time, but certainly not to try to do that all at once while ramping up your product to a production level that you've never had before.

So over time they'll keep doing that and their goal is definitely to keep pushing automation in terms of production and that's going to help them in terms of the profitability and the competitive advantages going forward, but they just tried to do a little bit too much too quickly. And the other thing that I'll say on that, even though they have missed their targets, it's still ramped incredibly quickly. If we go back just 12 months, Tesla was basically producing 2,000 cars a week, about a model, about 1,000 of the model S, 1,000 of model X. So about 2,000 a week in total. Right now, they're basically producing 6,000 a week if we add in the Model 3 production, which is right around 4,000 per week right now. So over the course of the year, they've actually tripled production, which is really incredible growth.

Even though they have missed those targets, it's been extremely impressive. If you kind of say your expectations accordingly and understand that Tesla is going to miss their aggressive targets, then really shouldn't have a problem with the ramp. And that's what I've done because I've followed Tesla so closely over these years. And I've seen them do this before with Model X. So it's really a similar situation. The results are great, but the expectations were just set too high that they don't. seem great.

I want to come back to that last point in a second. And I hope you don't think that I'm trying to just poke holes in Tesla. No, these are really great questions. The other thing that I've read that would that actually rings a little true to me is that Tesla had early on a competitive advantage when it was basically the only but the only guy in town doing EV stuff. But now everybody is doing EV stuff. So the argument would be, you know, Toyota or whoever,

can do 6,000 in an afternoon or whatever in terms of production. So if at the beginning, Tesla had the only game in town and they knew how to do EV better than everybody, okay, everybody is getting on board the EV game and maybe they won't be able to do it as well as Tesla, but they can, they do know how to produce cars. So the argument is, is that when now it's a crowded, or not maybe now, but it's almost going to be a crowded marketplace. Does that take away Tesla's competitive advantage? Sure. So, yeah, I hear that, you know, that concern or that counterargument a lot. I think there are certainly more announcements about competition coming than ever before. But I wouldn't say it's entirely new.

Like, you know, go back two years, the big concern about the Model 3 was kind of the Chevy Bolt and how it was going to beat Tesla to market with kind of that 35,000 level price point to be the first, you know, mass EV. Now we've kind of got the results from all that. And the estimates for the Model 3 deliveries in the U.S. for August is anywhere from like 17,000 to 20,000. The number of bolts that were sold in August in the U.S. is just over 1,000. So, like 16 times less.

You gave those numbers in a recent podcast. And you also made the point, I think, in that same one where just as a single car model alone in terms of revenue generated Tesla's way ahead, just by any measure, right? Exactly. So, which is super impressive. Like, I mean, the Model 3 in August probably generated easily over a billion dollars in revenue. The second most highest, the second highest revenue generating car in the U.S. was the Toyota Camry, which is probably somewhere around $750 million. So the Model 3 in terms of the revenue that's generating is like 33% higher than the next. next highest car. For an electric vehicle to do that is really incredible. And this is an electric

vehicle that, again, is new. They're in the first year of production. So even though that production paces seems slow, it's actually been really strong to my point earlier. And then kind of back to the bolt and the competition. Again, we've seen these stories like the bolts out there, the Nissan leaf is out there. Those are, you know, slated to be competitors for Tesla or Tesla killers. We've seen so many announcements from Audi over the years about the upcoming Audi Eatrons that have continue to get pushed or delayed. Now we do have some real competition coming with, you know, the Jaguar EyePace, that's gotten pretty good reviews so far.

The really, the thing to watch with competition is no one's really giving any indication on the actual scale of production. So a lot of these announcements from, you know, BMW, Jaguar, Audi, whatever the case may be, Porsche, they're going to be limited in production probably around $20,000 a year, if not lower than that. And that's kind of been the problem with the bolt, too. It's just a limited production vehicle. And those guys would also be coming in on the high end, right?

They'd be coming in the high end. So it might put some pressure on the Model S and the Model X, potentially. Obviously, Tesla has a huge competitive advantage with the supercharger network that nobody else is, you know, able to have that kind of a charging network available to them. And that's very important to customers, I believe. So that's one advantage. Certainly there are other ones, I believe. But even if you just look at the market and you look at these other. players coming in. The market is really, you know, it's very significant. All electric vehicles are like

1% of the market right now. So even if competition comes in, there's still plenty of market share to go around for Tesla to continue to grow into. Even with the Model 3, you know, they're targeting half a million per year of production. Even if all of these other competitors come in and let's say that, you know, there are 10 other major competitors and they're at, you know, 20,000 per year with their vehicles, there's still going to be room for Tesla to take market share and grow market share. And certainly their brand is pretty powerful at this point. So even if a Toyota came in with a competitor to the Model 3 or whatever, like you're still like, but you could get a Tesla. And Tesla is EV. Like Toyota is not. So even if Toyota brings an electric vehicle out, it's not,

it's not core to their DNA. They're not going to be known for that regardless of how competitive of their product offering is. So what was the whole going private thing? I'm even asking you to like speculate because I know you might not have, but do you think that it was just an impulsive thing that then he had to try to follow through on? Yeah, it's a great question. I wish I knew better. I think that it may have been a little bit impulsive, but it's been clear over the years that

Elon has, if he were given the choice, Tesla would be a private company. SpaceX is a private company. Obviously, that's the other company that he's CEO of. And that operates probably much more smoothly. So he has the opportunity to kind of compare how Tesla's run as a public company versus SpaceX as a private company, both multi-billion dollar entities. So he's got a really good perspective on whether or not Tesla should be private or should be public. And he said as much before, they really had to go public to kind of survive the recession and kind of get through the launch of, you know, their first product with the Roadsir and then launching the Model S shortly after they became public. So it was kind of something that they needed to do rather than, you know, their ideal state. So if he had the opportunity to kind of take Tesla private, he was probably going to take that. And that's been pretty clear for a while. So I think he saw that opportunity. I think that opportunity came to him from the Saudi sovereign wealth fund. So after that fund started buying stock and had to disclose their 5% stake, shortly after that, Elon tweeted that, you know, he was looking at taking Tesla private and had the funding for it. So I don't know if that was a reaction to the news that Saudi was buying on the public markets or what was that play there.

But the timing is certainly interesting. And then I guess kind of how I imagine the situation was is that Elon knew from previous. conversations with that fund that they would be in support of taking Tesla private. He said as much. So in a blog post that he posted on Tesla's website. So I think that he did have the funding secured. And then throughout the process of potentially taking Tesla private, I think what he wanted to do with it was to use that Saudi investment as kind of a backstop to say, okay, like,

we're going to do this. And then go to his other investors, try to get them on board with going private so that he could still keep a very diverse investor set where no one was gaining too much control of the company in that deal. So I think he used the Saudi fund as kind of a way to go to other investors and say, we're doing this. Are you on board or you're not? And I think through that process, he envisioned much more of the current investors being able to kind of go into that private deal. But unfortunately, a lot of the investment in Tesla is in mutual funds, mutual funds that have rules on how much of a stake they can have in private companies

or how much of their portfolio, et cetera. It's difficult to get retail shareholders converted over a new private fund. There are a lot of different rules and regulations around those things. So I think after he kind of went through that process and realized that it would probably have to come from a not as diverse investor set,

then at that point I think is when he made the call to keep Tesla public. I'm going to ask you about the Rogan podcast in a second. But I you know the real news that probably moved the stock this week was the continued executive leave executives leaving the company sort of news. Is there anything there that concerned you? No, I don't think so. I don't have the stats in front of me.

So I wish I did. But I believe that the turnover at Tesla is pretty much in line with other, you know, major public companies. So personally, I don't have a ton of concern there. I can see why people do though, certainly. Obviously, it gets a lot of attention when someone... Well, like, yeah, right. The chief accountant can only last a month, which I, you know, listen, I'd even buy that as reasonable. Like, this is a hard guy to work for.

This is a crazy company that might chew you up and spit you out. So I get that. But, yeah, that doesn't look good, especially if that seemingly continues to happen on a regular basis. Right. And then, yeah, definitely with the case of the chief accounting officer, Um, that's not really, you know, that's not the ideal thing that you would see, you know, that sort of turnover. So, um, I don't love it. I don't, I'm not necessarily concerned by it. You know, certainly I wish you would have, you know, stayed on board for the long term.

But he kind of has an interesting background too that I wonder if, if it was kind of involved in the privatization deal because historically in his career, he was with Cigate, um, for his entire career. Oh, right. And he was actually with them in a financial role when Cigate went private and eventually came back and went public. So it's kind of interesting the timing of him being brought in. And then the privatization deal potential being announced and going public again or staying public rather. And then the C chief accounting officer departs at that point. So I don't know if that's playing into it. Kind of the statement that he gave was that just the public attention on Tesla and the pace of the company was, you know, too quick for his liking.

But he did say that he felt good with all Tesla's accounting practices and like all the books were online and everything. so it wasn't for those reasons, which at least we have a statement of him saying that because that is still him putting, you know, kind of his reputation on the line to say those things. He certainly didn't need to when leaving that position. So I think, you know, if someone has concerned that they can at least take comfort and kind of that, you know, checkmark. It is unfair to ask you to psychoanalyze somebody that you don't know personally. But I'm basically going to ask you to do that because is Elon okay? Like even on just like a are you okay dude? Do you need a rest like that sort of thing? Yeah, it's super tough to say. I mean the behavior over the last I would say three, six months has been probably more erratic than in the past. And Elon certainly not. I mean, because you've been following this company for a long time. Right. So even someone that's been following closely, it has been nuttier lately. Yes. I do feel like there has been a change. lately to what level that concerns me I guess that's up for debate right now I'm not

terribly concerned when I so I didn't watch the Joe Rogan podcast live so I kind of woke up to the headlines of like oh Elon Musk smoked weed on the Joe Rogan podcast I was like great like one more thing when I finally had a chance to watch the podcast you know as things tend to do the headlines you know draw the most interesting perspective on it and then when you kind of look at it you're okay this is not really that big of a deal like He basically took one hit of, you know, something that Rogan offered him. Right, which, by the way, because, you know, I, I'm a listener of the Rogan podcast. Like, it was exactly what I expected it to be.

Right. It was, you know, it's why people have been telling Joe to bring, and Joe's one in a month for so long. They talked about the singularity and robot and AI taking over and, you know. So actually, I'm just going to interject real quick. I think that a lot, there were two things there. First of all, I feel like a lot of people. haven't seen Elon speak extemporaneously a lot. And so if that's your first, because, you know, you've seen him give presentations and things

like that. If that's your first exposure to him, you're like, okay, this guy is a little weird. Anyway, no matter what they're talking about, right? So I feel like that that's part of the sort of reaction. And then the other reaction is just the, well, would you see Tim Cook go on a rando podcast, which, by the way, Tim, you can come on this one anytime. But, you know, or, and smoke, like, I get it. I get that.

But if you knew all of the vectors here, there was nothing in that interview that was surprising to me. Yeah, I would agree. I mean, it is surprising to me that he did it. But at the same time, you know, it's not like extremely surprising. And again, like after he did it, he said that he very rarely almost never partakes in that and that he didn't feel any effect from it. So it's not like there's like some problem here. It's just, you know, should a CEO be doing that on a. podcast. That's really what it comes down to. And Elon Musk is not a normal CEO. So you're going to have to,

if you want to invest in Tesla, certainly you need to understand that you're not going to get Tim Cook because, you know, they're very, very different in terms of how they run the business. But so, okay, that brings me back to the original question, which is because you could also, and, you know, they, CNBC trotted everyone out on Friday to say, you know, a CEO shouldn't tweet this much. A CEO shouldn't, you know, if you look at the tweets that he does sometimes, he'll get in, you know, to entire threads with, you know, like, again, it may be. It's unique. It's unique or whatever. But like, I don't know.

So I'm just bringing back to that original question, which is, is he okay. Like, even on the level of is he bitten off too much, can he not delegate? That's sort of like, what's the deal with him? Yeah. So I don't want to, you know, go too deep into this, obviously, but Elon does seem to feel things very deeply. I think a lot of that comes out in kind of the mission-based aspect of his businesses, both with SpaceX and with Tesla. And I think that also extends into his personal life. He recently had been dating musician Grimes, and they recently broke up.

So I feel like he's really been dealing a lot with that. even prior to their relationship starting and ending, he, I don't know, maybe six months a year ago, he kind of did an interview with the Rolling Stones and talked a little bit about how difficult it's been for him to kind of find that companion or that partner. You know, he's talked about how the amount of time that he has to devote to his work doesn't really leave him much time for those personal relationships, which are very clearly important to him. So I think he's just kind of been through, you know, that happening time and time again. And, you know, this is kind of the most recent iteration of that.

And it just keeps happening. So I think that, you know, that's all obviously my speculation, but I think that that's been weighing on him a little bit. And certainly it seems to coincide with, you know, some of the more, I don't know, activity level spikes, I guess we'd say in Twitter or whatever it may be. So that's, that's kind of my personal opinion. Who knows if that's accurate? Like, no idea. It's just speculation. But after watching you on. really closely for a long time. That's kind of, you know, I guess my my thought. Well, let's end with take me like six months out or 18 months out. Like you, we began by saying maybe we're on the precipice of like this all this all, it's all happening, man. Yeah. So what's the big story or

narrative around Tesla that we should be watching for for the next, you know, six to 18 months or so? Yeah, for sure. I mean, I think we touched on a lot of them like pretty much everything that we've set is like something that we're going to keep an eye on for the next six to 12 months. In terms of what's upcoming for Tesla though, obviously the focus is continuing to rant model three, get that, get the production to a really good level, show the profitability, continue to be cash flow positive, profitable, things like that. So in terms of the business model, those are the things that I'm looking for. In terms of the products upcoming, we've got the Model Y.

So that's supposed to release or not release, but they're supposed to show the Model Y in March. Obviously, that date could change, but that's kind of the model Y. they're thinking right now. So that'd be upcoming here in kind of the next six months, which is, you know, really exciting. A lot of people have high expectations for that vehicle as well. And then kind of in that 12 to 18 months, maybe two years timeline, we're looking at the Tesla semi. They already have orders from, you know, pretty much every major company for tests of those vehicles. So that's going to be a super exciting product. The specifications on that are pretty crazy. Daimler went as far as saying like that it wasn't even possible. So we'll see.

We'll see if Tesla's able to pull that off. But there's a lot of upcoming things in the pipeline. They've got the solar roof too, which they talked about on the Rogan podcast. But that's an exciting product, really just integrating solar panels with kind of a traditional looking roof, which is going to be, I think, probably a pretty big market for that eventually, as I can get production up, costs down, et cetera. So, I mean, that's just Tesla in a nutshell, you know, trying to scale things and get them to be affordable for the mass market. Well, Rob, there's one podcast that I listen to to to keep up on crypto news, and there's one podcast that I listen to to keep up on Tesla News, and that's Tesla Daily. Appreciate that.

Yeah, it's a good – listen, if you're made a habit of the tech meme right home every day, you could complement that quite nicely with Tesla Daily. Yeah, I agree. It's really quick to generally five to nine minutes. Right, exactly. And so in and out, here's what happened in the world of Elon today, which is how I'm good titling those segments. Rob, thanks for coming on and telling us about all that. Great. Thanks, Brian. Appreciate it.