If Tesla Had Died In 2018, We’d Be So Fudged!
Published on January 9th, 2021 | by Zachary Shahan
January 9th, 2021 by Zachary Shahan
Tesla’s biggest positive effect on the world may not be direct emissions reductions from its own vehicles, solar panels, and stationary energy storage systems. The company has sold more than one million zero-emissions vehicles as well as many solar panel systems and batteries, and it intends to sell an enormous number more of them in the coming decade.
Tesla was formed to push the auto industry to transition to electric vehicles faster. The assumption was that it was inevitable eventually, but it needed to happen much quicker than it would have happened without a serious push from the outside. Tesla cofounders wanted to be that push.
A Side Note on Policy
There have also been policy pushes for decades to make automakers build electric cars. But that comes with a few problems. For one, even if automakers are forced to build electric cars, they don’t have to build compelling ones. (And we have a long history of proof showing that they preferred to take that route and typically did take that route.) They can also say that consumers simply don’t want the cars, while 1) creating lame electric cars, 2) not offering them in many places, 3) not pushing or persuading or even helping salespeople to sell them, and 4) not securing enough supplies or building enough production capacity to sell many of them anyway. It’s hard for policymakers to stick their necks way out there and try to require something that it seems is not technologically feasible at a level and cost that appeals to consumers. Indeed, we used to hear from basically every automaker that “consumers just don’t want electric cars,” and we even still get a trickle of such statements from industry laggards.
If Tesla had not gotten the Model 3 into mass production, there is no doubt about — automakers would say compelling electric cars can’t be both mass produced and profitable, and policymakers around the world would be pushed to have weaker fuel economy and EV policies. European automakers were pushing European policymakers very hard to weaken coming requirements, and there were even signs that many of them thought that was a given — that policymakers would be strong-armed and persuaded to water down or delay efficiency requirements. European and American automakers were pushing for essentially the same thing in China, the world’s largest auto market. In the US, policies were already quite weak (and still are), but the push to weaken fuel economy requirements carried on as well (and was quite effective under Donald Trump), and there was certainly no hope for stronger policies.
If the Model 3 project had failed, and taken Tesla down with it, there is no doubt about it: we’d have weaker policies, fewer EV sales (beyond Tesla’s own sales), less production capacity, weaker automative plans, and a much darker future.
Tesla’s survival and the broad success of the Model 3 was a wakeup call for the industry. It put many executives into shock and stimulated a frenzy of activity to try to actually compete in the electric vehicle market. This was no longer a joke — you had to have a serious electric vehicle roadmap if you wanted to succeed.
The covid-19 pandemic came along and crushed traditional automakers, all of which lost an enormous number of expected sales. Tesla skated through. In fact, it has logged a profit during every quarter of the pandemic. Not that long ago, industry experts thought Tesla couldn’t show a profit at all and that it was ridiculous to assume Tesla wouldn’t crash and burn. It started logging quarterly profits, the pandemic hit, and it kept logging quarterly profits. Again, this showed to other automakers that the electric era is here, it is alive, it is vibrant, and it is resilient. No more is BS-ing going to delay the market.
Europe’s strong policies also arrived right on time, and EV market shared exploded as people took deliveries of their pre-ordered electric cars in the midst of a pandemic and long economic shutdowns. Tesla proved the EU didn’t need to weaken its policies, the policies held, automakers delivered, and the market showed that it did, indeed, very much want cool electric cars. If Tesla had crashed and filed for bankruptcy in 2017 or 2018, automakers would have an army of lawyers explaining to policymakers why they couldn’t be forced to follow Tesla’s fate. 2020 would not have been such a great year for EVs. Now, instead, to claim that they can’t follow Tesla’s fate would be idiotic. Tesla [TSLA] has a higher market cap than any of them, and has a market cap of many of them combined. Try telling a policymaker for your country that you don’t want your auto company to be like Tesla.
Near Collapse in 2018
Everyone knew that Tesla was spending more money than it was making while trying to get the Model 3 to mass production. (Or “burning cash” as some people put it.) Much of the industry and much of the stock market thought Tesla would go bankrupt. It was the most shorted stock for a long time.
Of course, many of us also thought Tesla would pull through. Even though it was going through “production hell,” that was expected, and it was also expected that Tesla would pull through — as it had many times and as Elon Musk predicted.
What we did not know is that Tesla was struggling so much and there was such risk of failure building up that Elon actually tried to go to Apple CEO Tim Cook (aka “Tim Apple”) about a potential Tesla buyout. Incidentally, Tim Cook never took the meeting. Also, it turned out that Tesla didn’t hit $0 and those of us who had faith in the company were right to have that faith. The company got the job done and is now thriving.
It was a surprise for me — and for many, many others — when Elon tweeted this a few days before Christmas:
During the darkest days of the Model 3 program, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla (for 1/10 of our current value). He refused to take the meeting.
— Elon Musk (@elonmusk) December 22, 2020
As I think back and realize that my faith in Tesla pulling through and getting the Model 3 to mass production, unleashing company profits galore, was a bit stronger than the reality of the time might have warranted, I can picture George Clooney proclaiming with wide eyes, “You’re exposed!” (A reference to a 2003 Coen brothers movie starring Clooney and Catherine Zeta-Jones that is probably a little too dated and you may or may not make sense of.
We interviewed Tesla President of Automotive Jerome Guillen in 2019 about how the company pulled through that tough time. While the stories were dramatic, they also had an air of cool and ease being told long after the fact. There was certainly the acknowledgment that everything could have fallen apart, but there was also the message, “We were told to get it done, and we got it done.” (Not an actual quote.) For another insider perspective on those tough times, here are the two parts of our takeaways from that interview:
It is fun to look back on that challenging period in what is now a very positive era for the company with easy and calm reflection on how things might have been. But Elon’s tweet about going to Tim Cook was a little bit of a shock that made me think once again about how much worse the automotive industry and the world would look if Tesla had crashed and burned or had to retreat to the halls of Apple in 2018.
As this crazy week comes to an end, let us all recall: A bright future is not a given. We have to create it. And we create it every day, in every moment. The future is now.
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Selling Teslas in 2012 vs. 2021