- Volkswagen and Volvo have praised Tesla’s abilities. While several bears have said the company could go bankrupt amid its perennial losses, Volkswagen’s CEO disagrees.
- Volvo has also heaped praise on Tesla’s energy efficiency. Despite several EV (electric vehicle) launches by competitors, TSLA has held its ground. But then, does that even matter to bears?
Observer reports Volkswagen CEO Herbert Diess has shared optimistic views on Tesla (TSLA). Some time back, there were rumors Volkswagen intended to take a stake in TSLA, which Diess denies. Diess says that he “admires Tesla as a company and loves driving Tesla cars,” and admits that “Tesla is strong in software.” However, he doesn’t see much difference between TSLA and Volkswagen when it comes to hardware. Furthermore, he doesn’t believe TSLA will go bankrupt, contrary to some bears’ views.
Bearish views on Tesla
Tesla bears believe the company will go bankrupt sooner or later. This pessimism may not be totally unfounded. The company has barely made a net profit in just four quarters over the last decade, and hasn’t yet posted an annual profit. Add the company’s cash burn, which might not fade anytime soon, and you have a perfect recipe for bears.
Correction: An earlier version of this article suggested that Tesla had recorded a profit in only three quarters over the last decade. The company has recorded four quarters of profits.
However, it worth noting that making profits on EVs has been a conundrum for many automakers. Despite their efforts and mammoth resources, established automakers haven’t been able to crack the EV code.
Volvo also heaps praise on TSLA
Volkswagen isn’t the only car company praising TSLA. Electrek reports that an executive from Volvo’s Polestar, Ian Collins, said, “Tesla is far ahead of everyone else on energy efficiency.” TSLA has a competitive advantage with its lead in producing batteries, a key component of EVs. Tesla’s Autopilot and Supercharging network are its other competitive advantages.
While competitors are showing their support for TSLA, CEO Elon Musk continues to mock gasoline cars and rivals’ EVs. Recently, he took shots at Porsche’s Taycan, which analysts have named a challenger to Tesla’s Model S. However, the cars’ price difference makes a fair comparison difficult.
Tesla dominates EV discourse
When it comes to EVs, TSLA dominates the discourse and has established itself as a benchmark in EVs. Analysts compare every new EV to TSLA, inadvertently marketing Tesla’s cars. In many cases, rivals’ EV launches are serving as Tesla’s advertising platform. Volkswagen’s ID.3 unveiling is one typical example, as observers compared the ID.3 with the Tesla Model 3. To learn how they compare, read Should Tesla See Volkswagen’s ID.3 as a Threat?
A tipping point?
Another aspect to consider here is that TSLA is at a tipping point. The company expects to sell as many as 400,000 cars this year. With that growth trajectory, Tesla could hit the psychological mark of a million cars annually over the next few years. According to the carmaker, it’s not demand constrained. The company is reportedly planning another assembly line in Fremont. Furthermore, it expects its Gigafactory in China to begin production before the end of this year.
Still needs to answer bears
With its increasing volumes, Tesla’s visibility is increasing. Its cars’ popularity with existing owners and potential buyers also increases the company’s clout. Not surprisingly, competitors take TSLA seriously, but TSLA still needs to address its perennial losses. Musk’s disdain for critics who ask tough questions about Tesla’s financial condition isn’t helping matters, either. The company needs to show that its profitability is as sustainable as its products’ energy sources.