Welcome back to the show Evey Giant Tesla had a wild ride in 2021.
The company continued to dominate the US electric vehicle
space by commanding roughly two thirds market share.
And despite growing competition and some production hiccups,
the company finds itself richer than ever. Making Elon musk's pockets a lot heavier
While Tesla notched records for both deliveries and profits
in 2021 and also saw increased attention from regulators.
It's even been hit with multiple sexual harassment claims
in 2021. This company has seen the good, the bad and certainly
its fair share of the ugly joining us.
Now to discuss more as author of risk ritual newsletter. Richard Smith.
Richard, welcome to the show.
You've been following Tesla pretty closely.
What can you tell us about the company and how it's managed to gain profits
despite what seems like a lot of challenges here this last year,
I think musk has to uh, incredible things going for him.
One,
he is just a master at commanding attention and maintaining attention
on him and on his business and then he's a genius.
He is able to back up the attention that he has
attracted with by making some incredible deliveries. So
You gotta give him credit for that.
I'm a little personally nervous about the amount of
attention and the volatility of his stock and uh,
I think that, you know, could go south as easily as it's gone north,
but you've got to give him a lot of credit for what was accomplished in 2021.
But Richard, what, what makes it go south,
What could happen that hasn't already happened in the last 18
to 24 months and suddenly gets investors to start saying,
oh now we better start paying attention where we wouldn't before like what changes?
I think that
Tesla is part of what I would call the risk on trade. So
Tesla Elon has associated himself with Bitcoin and Doge coin and
other highly speculative assets and I think that he enjoys that,
you know,
the people that are interested in Tesla are interested in that
as well and the media has really been interested in that.
But if we see a shift in the markets, if we see a significant correction,
you know that sword can cut both ways.
So if you know, investors start to sour on sensationalism start to sour on risk,
Then I think that that could, you know,
do some damage to Tesla probably more than the regulators ever will.
Yeah, Richard, were there any surprises to you for the year? That was a Tesla in 2021?
I mean, I think the focus on Dog Bitcoin and Bitcoin was a surprise.
I think that the way that um,
must managed his tweets and everything on those
topics was really kind of mind blowing.
Um, but of course on the actual business side,
the way that they're generating profits, their profit margins.
I think one of the mistakes that people
make is thinking about Tesla and talking about
it as though it's a car company and I really don't think it's a car company.
I think we should be thinking of Tesla something more akin to Apple.
I think musk is really thinking about a much bigger picture. He's playing long ball.
He really wants to own our relationship with our cars and just like Apple owned the
relationship with the iphone and that morphed into
all kinds of other relationships for Apple.
I think that's where Tesla where musk sees Tesla headed and also, you know,
incredible focus on data as well.
Richard,
when you look back at a lot of these challenges that
the company has had with regards to various lawsuits and,
and the high profile accidents and crashes
that have unfortunately happened as well.
How has the company responded?
Do you think?
Well, again, I think the good and the bad is part of musk's game.
So yes, if you're going to be out in the, you know, in the spotlight,
you're gonna sometimes get the good and you're gonna sometimes get the bad and you
see that in the volatility of Tesla's stock for being a trillion dollar company,
They have incredible volatility there regularly up or down 5% or more in a day.
They've had more 5% down days lately than 5% updates.
But that's incredible volatility and it just comes with the territory
of how Musk has run this business and run the company,
he has, you know, taken risks and, but you know,
so far he's backed up and delivered and and impressed
Richard, What are your expectations for the company in 2022?
I think that he's going to continue to improve margins.
I was just looking at his gross margins third quarter around 30%,
apples are around 40%.
You know, I looked at Ford's margins and there are around 14%.
So again, I don't think we should be thinking about Tesla as a car company.
I think we should be thinking about them as a technology company as a major brand.
I think we're going to see Tesla continue to grow its brand.
You know, people love it and it's got great um,
customer feedback and they're gonna continue to grow that brand and they're
going to continue to diversify their business into other technology verticals,
technology
and batteries, et cetera. So I think they're going to keep growing.
But again, I do think
that there's more risk in Tesla as a trillion dollar company than there is in,
say apple or Microsoft or other trillion dollar companies.
Richard, if there is one thing that you wish people
more closely focused on as it pertains to the overall Tesla stories,
not the shiny things, not the tweets, not the Elon musk distractions,
but there's something of substance you wish people focus more on,
what would that be?
I'd say it's data.
I think that musk understands the value of data to building
artificial intelligence and I think that's where he's ultimately going.
And I think that's where he has an incredible head start.
You can talk about other car companies making, you know, electric vehicles,
but you need data to drive the artificial
intelligence to drive the self driving systems.
And musk has an incredible head start over everyone when it comes to data.
And I don't think people really appreciate how important
data is in the role of future technology.
And I think that is something that must understands,
and he's going to be very hard to catch on that point.
Richard smith is author of the risk ritual newsletter.
Richard, Happy New Year to you. Thanks a lot for being here.