Science

$ 1 billion for Tesla: will there be a single European automaker in ten years?

Tesla CEO Elon Musk visits the construction site of the Tesla factory in Gruenheide, near Berlin, Germany.

© ODD ANDERSEN / AFP

Future European leader?

The Tesla company has approached $ 1 billion in market capitalization. Elon Musk’s Model 3 is the best-selling car in Europe in September 2021. Is there a danger for the European car industry?

Atlantico: The Tesla Model 3 is the best-selling car in Europe in September 2021, the company has taken off in the stock market and is close to $ 1 billion in market capitalization. How to analyze this phenomenon?

Don Diego de la Vega: It is not so much the T3 model as the Y model that is a success. There has been a willingness to power Tesla since this summer. Market capitalization has practically doubled in just a few months. There are many reasons for this. First, Tesla is a very good company. So the Tesla Model 3 performs very well, like the previous models, and the next one could be even better. We were supposed to make 850,000 Tesla cars this year, the figure will easily be exceeded. We are already practically at 1 million, although European production has not started. We’ll quickly get to 2 and then 3 million with current Tesla capabilities. But we can build other super factories. The company is not in debt at all (around 2 billion). It is one of the fastest growing firms in the world and with minimal indebtedness, but it only receives a BB + rating from rating agencies that are losing the mark, in particular because Telsa does not issue more debt. Tesla is not a client of the traditional financial system, it can grow with its own capital, it does not go into debt, it no longer issues shares and it promotes Bitcoin. It is the terror of the rating agencies. If Tesla is going up, it is thanks to very good results, a lot of publicity and millions of people watching for Elon Musk’s tweets.

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Can nothing stand in the way of this continued rise of Tesla?

All the obstacles invented in recent years to counter the rise of Tesla are disappearing one by one. The lithium shortage is not working because Tesla has been anticipating and stockpiling. Competitors are not coming, they are still in the prototype and the technological gap with Tesla does not stop growing, especially in artificial intelligence. The rest of the auto industry has made much slower decisions that work much worse. Tesla is the only one that provides artificial intelligence, future technologies, electricity storage, etc. All of Elon Musk’s strong choices have been validated and all obstacles removed.

Some compare it to other car brands that produce many more vehicles. Is this a valid argument?

Several things are wrong in this comparison. First, Tesla is quite exclusive and incorporates more added value, making it incomparable to a Renault Zoe, for example. So 80% of Tesla is Tesla because they do it without subcontractors. Most of the companies in the industry are engaged in assembly. Ultimately, what matters for the stock market is what will happen in the future. Two new factories will be operational in early 2022. They can build others. There will be three times as many Tesla factories in two to three years. For other companies, there will be considerably less than today.

However, the more Tesla produces, the more the unit cost will fall. They already have a gross margin of 30% and a net margin of 15%, despite a significant investment. These are the luxury corporate margin levels and will rise further. This will be the case in particular with your automated guide. Most likely it will work by subscription. It would be a financial windfall and would be accompanied by a large amount of data, potentially recovered by the Starlink satellites. If you add an insurance system like Elon Musk plans to offer it, the box will be colossal in value. It will be worth three times Apple. The market only plays early. The other auto companies only have inherited assets. And the technical vehicle factories have to be dismantled and that will cost you dearly. Businesses are looking for ways to survive. General Motors would no longer exist if it did not put pressure on the Democratic Party, Peugeot is on the wire, etc. Producing many thermal vehicles is, today, a counter-announcement because the authorities want to see the thermal vehicles disappear by 2035. It was explained that the companies would come to compete in the electric one but a pure player cannot compete with the diplodocus. . But the car, at the macroeconomic level, is revealing and crucial.

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Do the car sales figures for September show a conversion of Europeans and their cars to electric or Tesla?

A bit of both. For rich countries like Luxembourg and Norway, it is primarily Tesla. There is a more general conversion to electric, but Europe is in a particular situation. It is now only the third largest market in the world and is currently in very poor health. Furthermore, it is highly segmented and relatively political. Furthermore, there are very few terminals in Europe and particularly in France. Tesla has built more than 10,000 in the United States. It is the largest network of private infrastructure since the Eisenhower motorway network in the 1950s. The French state could have envisioned and built a comparable network, but it does not. This will considerably restrict the development of electricity. Tesla has chosen only one construction site, in Berlin, and for the moment imports its cars from China. Europe is not considered a priority. The Chinese, they, welcomed Musk and his super factory in a princely way, in the presence of all the CCP dignitaries. Beijing has also developed a national sector, CATL and BYD for batteries, for example. So they play the competition and make sure things get done. Musk’s only real competitors are the Chinese.

Can Europe still get hold of the ship?

Unfortunately, Europe is running late. He realizes that there is a theme and tries to create things to catch up, but the reality is that most builders have not anticipated enough. Volkswagen has put 50 billion on the table but it is too slow, others cannot afford it. And there are no credible emerging players. We are poorly positioned in the market. We got into it too late and Macron’s plan for France in 2030 won’t solve anything because it’s spraying. The money available is scarce and misdirected. Elon Musk should have been taken seriously in 2015-16. The result is that it is too late. We make the same mistake again with Tesla’s artificial intelligence.

If we suffer an automotive disruption, we will no longer have a mid-range industry in five to ten years. This is what the stock market is telling us. The ideal would be to have a European Elon Musk, but that cannot be decreed. So if you don’t have oil or ideas, you need a cheaper currency. We need a strategy. At the very least, Volkswagen has chosen because its CEO is smart. We have to find a niche and make decisions; It could be the Zoe for the low cost.

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