Tesla’s Growing So Fast That It’s Leaving Some Analysts Lost In Confusion
Tesla is growing at a rapid pace with the successes of its new Gigafactory in China and the even newer ones being built in Berlin and Texas. Its recent record Q1 2021 delivery numbers showed Tesla delivered more electric vehicles than it made. Demand is not an issue for Tesla as it continues to lead in the global EV sales space. However, a few critics are a bit confused over the matter and are unable to see its growth. I’m hoping this piece will help clear up some of that confusion.
Markets Insider reported that although Tesla’s stock is soaring on those record quarterly deliveries, GLJ Research CEO Gordon Johnson said that Tesla is barely growing. “So you’re looking at a company, a high growth company, that’s barely growing, is losing more money doing so, and is going to see all of its credit sales disappear next year,” Johnson said in the interview. “We see that as a big problem.”
Johnson also compared Tesla to Volkswagen and said that he didn’t “know what people are talking about when they say this is transformational growth.”
Disclosure: I am a small shareholder of Tesla [NASDAQ:TSLA].
In my October 2020 interview with the CEO of Gerber Kawasaki, Ross Gerber, Ross said something that helped me understand why analysts such as Johnson aren’t really able to fully see Tesla’s growth or its potential. Analysts who are so focused on short-term numbers — the black and white — are unable to see the grey areas where the magic happens. Tesla’s not just an automaker, but an energy company that is poised to not just disrupt the automotive industry, but the entire energy industry as well. In many cases, especially with Tesla’s critics, analysts simply lack the ability to see that far — or do not wish to look that far and consider the possibilities.
Some analysts are also biased against Elon Musk, and for them to truly see Tesla’s growth, they have to put aside their emotions. The analysts who are overtly critical of Elon Musk allow that bias to bleed into their analysis of Tesla, and it shows quite often.
How To Properly Analyze Tesla’s Growth
There are two main ways we can look at Tesla’s growth, and the two are linked with one another. The first is the financials. If you were to analyze only Tesla’s financials, you would most likely be confused by its success.
The other way is to see what Tesla is doing and what it is accomplishing while also keeping its mission in mind. Once you fully look at Tesla through both lenses, the picture becomes clear. However, some financial analysts do not have that other lens to look through, or perhaps they don’t want to take the time to try. I’m going to provide that lens here.
The Many Ways Tesla Is Growing
25 “Impossible” Achievements
In 2020, Tesla achieved 25 goals that were impossible. In a normal year, these impossibilities would have seemed daunting for any other young company that is trying to make a name for itself.
However, 2020 was a tough year for individuals, governments, and companies and Tesla was one of the few that actually blossomed. For some contrast, a few oil companies went bankrupt last year due to the pandemic. One of those “impossible” things that Tesla achieved was reaching a milestone of 500,000 EVs made in one year. Another was its 1 millionth EV. You can read the full list of 25 “impossible achievements” here.
Once hailed as nothing but a field of mud, Tesla achieved the impossible in the midst of a trade war between its home country, the USA, and China. HyperChange’s Gali Russel shared a video which I analyzed back in 2019 about this very topic and noted that Tesla was winning the US/China trade war. During those tense times, Elon Musk went to China and the move was ridiculed by many news outlets. Then Business Insider called Giga Shanghai a field of mud.
Today, Giga Shanghai is not only in existence, but is thriving in China and so is Tesla. It’s also exporting vehicles to Europe. Giga Shanghai made 24,800 electric vehicles in January of this year. It’s estimated the factory produced approximately 70,000 vehicles in the first quarter. For a mud field, that’s pretty talented.
Tesla also reached the milestone of 6,000 Superchargers in China just this year and is still growing.
Gigas Berlin & Texas
These two factories aren’t fully built and operational yet, but if you don’t adequately count the future growth from these sites, your charts will be off.
Giga Berlin and Giga Texas will be powerhouses for Tesla’s growth. These will be the sources of the next growth spurts of the company, as Tesla will produce both the Cybertruck and the Semi in Texas. It will also produce the Model 3 and the Model Y for the Eastern US there in addition to batteries.
In Germany, Tesla will manufacture batteries, battery packs, powertrains, and seats. It will also perform casting, stamping, painting, drivetrain assembly, and final assembly of the Model 3, Model Y, and future models, with an annual capacity that will eventually reach 500,000 cars.
This deserves its own category. Tesla held a Battery Day presentation last year that left many analysts lost and confused. One major takeaways from that event included Tesla’s creation of a new tabless 4680 battery cell form factor. This is important because it leads to increased energy density and lower manufacturing costs. You can learn all about the 4860 battery cell here.
Other takeaways from Battery Day include how Tesla is using vertical integration to make its entire production process more efficient. It’s doing this by building the “machine that builds the machine.” This enables Tesla to produce its vehicles in great volume. Another key point from Battery Day is that once Tesla achieves a 3 TWh battery production capability, it will change the entire face of the energy and power delivery system. And this is why Tesla is a threat to the fossil fuel industry giants that dominate the energy industry.
Tesla is collecting an enormous amount of data from its fleet of vehicles on the road right now and added to the road every day, and it is rapidly improving its self-driving software. If this leads to fully autonomous vehicles that can perform robotaxi service, watch out!
There are a lot more examples I can give to show Tesla’s phenomenal growth and what may be around the corner, but that would make this article around 5,000 words. These few things I touched upon are the tip of Tesla’s iceberg and you need to fully measure that iceberg to understand just how large it actually is.
Looking at financial data is just observing from a distance the visible part of that iceberg. You have to look at all aspects of the company and take into consideration what its mission is, what it’s going to achieve, its goals, as well as its finances to fully understand how Tesla is growing. Looking at short-term numbers alone will paint a dismal picture. A good analyst should look at what Tesla is doing if they truly want to understand why Tesla is valued so highly by its many investors.