Elon Musk’s Playbook Has Lost Its Shine For Tesla Investors

Sixteen months ago, I wrote an article where I argued that to understand the chances of Tesla (TSLA) surviving the production hell, you had to look at previous Musk ventures. The idea revolved around the fact that Elon had, in the past, used a common play-book where he re-engineered processes and products in order to drive costs lower.

However, in this case, he went even further. For instance, capital expenses are getting dramatically reduced. The production tent was very mediatic, but, jokes aside, it proves the point. Tesla has become a lot smarter in the way it spends capex money. In the last earnings call, Elon Musk suggested that, for the Chinese factory, he expects CapEx to be less than 50% of what was needed for Model 3 production, in the US. And, the same for Model Y.

Now, the company is trying to calibrate its fixed and variable costs, as you can see by the overhead reductions all over the press. As a good engineer, Musk is always iterating in order to calibrate Tesla’s structure.

Elon Musk and Tesla in 2018

Elon Musk has followed the script. He went all-in on the production ramp for Tesla 3. He used his engineering skills to lead the company through that process and shown strong leadership by spending a lot of time on-site, sharing the employees’ pains.

However, some negative traits of Musk’s character have also surfaced. His outspoken personality and the unfiltered use of his Twitter account have led him into trouble. His $420 “funding secured” twit was a costly mistake. And, more recently, his production twits have awakened the SEC, that will likely pursue a case against Musk for violation of their previous agreement.

My story with this Tesla

I owned shares until the $420 twit. I exited the position two days later. I saw the whole “take Tesla private” as nonsense, a waste of time and energy that the company didn’t need. My problem then was that Musk never seemed very aligned with the rest of the shareholders. He might think that most of the investors with whom he deals won’t have problems in owning illiquid securities, but for most small investors, not having the choice to sell at any time is a no-deal.

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Dean Gilmore 1 year ago Member's comment

Neither #Musk nor #Trump should be allowed to have a Twitter account. It causes them more trouble than not. $TSLA