Elon Musk, chief executive of Tesla and SpaceX, is known for defying gravity. But despite rapid market growth, the electric car company faces major challenges and toughening competition. If Tesla crashes to earth, does this mark a dead end for the battery vehicle dream?
Tesla’s achievement has been to move electric cars from the joke stage of milk floats and the Sinclair C5, and to make them cool. Founded in 2003, the company targeted high-end early adopters able to pay a premium for acceleration and green, high-tech credentials, assisted by lavish subsidies in areas such as California and Norway.
From the Roadster and then the Model S, a nod to Henry Ford’s iconic Model T, and Model X, it then built up the critical mass to reduce manufacturing and battery costs. Last July, it launched the upper mid-market Model 3. It has introduced autopilot features with the hope of fully autonomous driving within a few years. In July, it opened its first Middle East showroom, facing the Burj Khalifa on Sheikh Zayed Road.
Solar City, which installs residential solar panels, merged with Tesla in 2016, and has combined with Tesla’s lithium-ion Powerwall battery to extend the time the sun can power a home. Since then, Mr Musk has moved into transport of all kinds: underground (The Boring Company), on land (the Hyperloop (a pod travelling at 1200 kilometres per hour in a vacuum tube), in the air (a supersonic electric plane), and SpaceX, which launches and lands reusable rockets.
Like Tesla, these promise to make travel faster, easier and – most importantly – much cleaner. Mr Musk’s ventures have certainly taken flight, with Tesla raising $38 billion of equity and debt over its lifetime, and attracting a legion of devoted fans willing to pay deposits for vehicles delivered years later.
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Read more:
[ Tesla chops $14,000 from cost of Model X in China ]
[ Tesla Model 3 a car for everyone? At $78,000, think again ]
[ Investors rebuke to Musk costs Tesla $2bn in market capitalisation ]
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But the firm has come under increasing pressure in recent months. Meant to be building 5000 Model 3s weekly last year, it reached 2000 per week in April but had to shut down its production line after automation problems and what Mr Musk called “manufacturing hell”. Consumer agencies have rated the Model X’s reliability poorly, and several crashes of vehicles using the Autopilot function raise safety concerns. Solar City contributes very little to earnings while Tesla’s electric lorry, unveiled with great fanfare in November, has gone quiet.
For now, Tesla sells about 60 per cent of US pure electric vehicles. Yet as batteries approach the mass market, it finally faces real competition. Almost all established carmakers have launched their own vehicles, such as the Chevy Bolt and Nissan Leaf, as well as plug-in hybrids which have a petrol engine for longer range – the plug-in version of the Toyota Prius, and the Chevy Volt.
In response to such concerns, the shares are down 27 per cent since their high a little over a year ago, badly underperforming tech, automakers and the wider market. Mr Musk has responded tetchily to criticisms of the company’s finances and the safety of both its workers and drivers.
Tesla needs to raise about $2 billion (Dh7.3bn) by mid-year to raise the lagging production of the Model 3. If it manages to make that profitable, it will sink cash into the planned Model Y crossover next year. Equity investors have been very patient but may balk at being diluted again, while Moody’s rates its bonds at B3, a junk grade.
The big question over the company is how to justify its valuation. With a bigger market capitalisation than Ford’s, Tesla sold about 100,000 cars in 2017 compared to Ford’s 6.6 million last year. Margins on luxury vehicles are higher, but those alone will not give it millions of sales. It will have to match the manufacturing size and prowess of Toyota, the quality of BMW, the experience in artificial intelligence and self-driving of Google, and the mass-market low costs of China’s BYD.
To keep going, Tesla must keep its fans happy, raise cash, address the safety concerns, ramp up output and stay ahead of its competitors until self-driving battery vehicles dominate the mass market. If it runs into trouble, it could find a deep-pocketed benefactor with an enthusiasm for new technologies and the environment; an alliance with a major legacy carmaker that is lagging in battery vehicles; or a strategic, perhaps Chinese, buyer, if they could overcome likely US hostility. Otherwise, its cash will dry up fast.
Some, such as the conservative columnist Bret Stephens, writing in the New York Times on Friday, have taken the impending failure of Tesla as both the inevitable result and harbinger of the failure of electric cars.
Even if Tesla does implode, the flaw in such an argument is to think of Tesla as the only maker of electric vehicles. Various projections suggest that electric vehicles will be cost-competitive with conventional ones by the mid-2020s and overtake them in sales by the 2030s. Chinese are already by far the leading buyers of electric cars; Tesla is the largest foreign seller there but has only 2 per cent of the market as domestic brands dominate. Cities such as Paris and London may ban petrol and diesel cars by 2030 or 2040.
Mr Musk’s financial engineering may not keep his company aloft. But his blend of vehicle design and salesmanship has moved battery vehicles close to the mainstream. His greatest achievement may be that the success of electric vehicles no longer depends on Tesla alone.
Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis
TWISTERS
Director:+Lee+Isaac+Chung
Starring:+Glen+Powell,+Daisy+Edgar-Jones,+Anthony+Ramos
Rating:+2.5/5
Tenet
Director: Christopher Nolan
Stars: John David Washington, Robert Pattinson, Elizabeth Debicki, Dimple Kapadia, Michael Caine, Kenneth Branagh
Rating: 5/5
T20 WORLD CUP QUALIFIERS
Qualifier A, Muscat
(All matches to be streamed live on icc.tv)
Fixtures
Friday, February 18: 10am Oman v Nepal, Canada v Philippines; 2pm Ireland v UAE, Germany v Bahrain
Saturday, February 19: 10am Oman v Canada, Nepal v Philippines; 2pm UAE v Germany, Ireland v Bahrain
Monday, February 21: 10am Ireland v Germany, UAE v Bahrain; 2pm Nepal v Canada, Oman v Philippines
Tuesday, February 22: 2pm Semi-finals
Thursday, February 24: 2pm Final
UAE squad:Ahmed Raza(captain), Muhammad Waseem, Chirag Suri, Vriitya Aravind, Rohan Mustafa, Kashif Daud, Zahoor Khan, Alishan Sharafu, Raja Akifullah, Karthik Meiyappan, Junaid Siddique, Basil Hameed, Zafar Farid, Mohammed Boota, Mohammed Usman, Rahul Bhatia
Fifa World Cup Qatar 2022
First match: November 20
Final 16 round: December 3 to 6
Quarter-finals: December 9 and 10
Semi-finals: December 13 and 14
Final: December 18
KEY DATES IN AMAZON'S HISTORY
July 5, 1994: Jeff Bezos founds Cadabra Inc, which would later be renamed to Amazon.com, because his lawyer misheard the name as 'cadaver'. In its earliest days, the bookstore operated out of a rented garage in Bellevue, Washington
July 16, 1995: Amazon formally opens as an online bookseller. Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought becomes the first item sold on Amazon
1997: Amazon goes public at $18 a share, which has grown about 1,000 per cent at present. Its highest closing price was $197.85 on June 27, 2024
1998: Amazon acquires IMDb, its first major acquisition. It also starts selling CDs and DVDs
2000: Amazon Marketplace opens, allowing people to sell items on the website
2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006
2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black
2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year
2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video
2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started
2009: Amazon introduces Amazon Basics, its in-house label for a variety of products
2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013
2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS
2014: The Amazon Echo is launched, a speaker that acts as a personal digital assistant powered by Alexa
2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition
2018: Amazon's market cap briefly crosses the $1 trillion mark, making it, at the time, only the third company to achieve that milestone
COMPANY PROFILE
Company name: Klipit
Started: 2022
Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant
Based: Dubai, UAE
Industry: Digital receipts, finance, blockchain
Funding: $4 million
Investors: Privately/self-funded
The Specs
Engine: 1.6-litre 4-cylinder petrol
Power: 118hp
Torque: 149Nm
Transmission: Six-speed automatic
Price: From Dh61,500
On sale: Now
Company profile
Name:+Dukkantek
Started:+January 2021
Founders:+Sanad Yaghi, Ali Al Sayegh and Shadi Joulani
Based:+UAE
Number of employees:+140
Sector:+B2B Vertical SaaS(software as a service)
Investment:+$5.2 million
Funding stage:+Seed round
Investors:+Global Founders Capital, Colle Capital Partners, Wamda Capital, Plug and Play, Comma Capital, Nowais Capital, Annex Investments and AMK Investment Office
SPECS
Nissan 370z Nismo
Engine: 3.7-litre V6
Transmission: seven-speed automatic
Power: 363hp
Torque: 560Nm
Price: Dh184,500
A cryptocurrency primer for beginners
Cryptocurrency Investing for Dummies+– by Kiana Danial
There are several primers for investing in cryptocurrencies available online, including e-books written by people whose credentials fall apart on the second page of your preferred search engine.
Ms Danial is a finance coach and former currency analyst who writes for Nasdaq. Her broad-strokes primer+(2019) breaks down investing in cryptocurrency into baby steps, while explaining the terms and technologies involved.
Although cryptocurrencies are a fast evolving world, this book offers a good insight into the game as well as providing some basic tips, strategies and warning signs.
Begin your cryptocurrency journey here.
Available at Magrudy’s , Dh104
Abu Dhabi Card
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Our legal consultant
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Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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Biography
Favourite book: Zen and the Art of Motorcycle Maintenance
Holiday choice: Anything Disney-related
Proudest achievement: Receiving a presidential award for foreign services.
Family: Wife and three children.
Like motto: You always get what you ask for, the universe listens.