ELON MUSK IS BORED OF THE CAR INDUSTRY. THAT'S A PROBLEM FOR TESLA

It is entirely possible that Tesla could kick off a new autonomy arms race for the 2020s. But it has to get there first.

There's a lot you can say about Elon Musk. That he has an outstanding poker face is not one of them.

Astute Elon-ologists, and those who know him, can tell when he's bored. And probably the whole world could hear that boredom yesterday on Tesla's Q1 2024 earnings call, a discussion with analysts that came amid slumping sales and revenues, disappointments with the Cybertruck, mass layoffs, continued uncertainty around its so-called Full Self-Driving technology and Musk's own controversial public antics.

Investors wanted to know how Tesla plans to deal with intensifying electric vehicle competition as its aging lineup begins to feel stale. That isn't really what they got.

"We've updated our future vehicle lineup to accelerate the launch of new models ahead [of the] previously mentioned start of production in the second half of 2025," Musk said, reading off a script he only occasionally veered from. "So, we expect it to be more like early 2025, if not late this year." 

He added that these "new vehicles," including a long-awaited more affordable Tesla, will use "aspects of the next-generation platform" as well as the current one, so no new factory or production lines are needed. 

That was good news for investors, who loathed the idea that the more affordable EV might have been canceled. But beyond those pithy statements, we didn't get much else. And Musk clearly wasn't interested in elaborating.

Little was said about any new Teslas coming to market soon, besides perhaps the Model 3 Performance unveiled earlier that day. There wasn't even much talk of EVs or batteries in general; when asked about the ramp-up of the new 4680 battery cells, Musk even said they're not "super important, for at least in the near term."

At one point on the call, AllianceBernstein analyst Tony Sacconaghi asked a good question about whether these new models were tweaks to existing ones, like the Model 3 Highland, or entirely new ones.

He was shut down in quick order. "I think we've said all we will on that front," Musk said. "So, what's your follow-up?" 

That exchange spoke volumes. It's never been more readily apparent that Tesla is a car company run by a CEO who is bored with cars. 

It was painfully obvious from the call what Musk is not bored with: questions of autonomy, artificial intelligence, using the word "compute" as a noun, robotaxis, networked self-driving cars and humanoid robots like Optimus—which will be "more valuable than everything else combined" and in Tesla factories "doing useful tasks before the end of this year." (Whenever Musk says "this year" or "next year," it really means "sometime in the future, maybe.") He imagines a future where the cars sold are more like a fusion of Uber and Airbnb, deployable autonomously to make money for their owners—with Tesla presumably getting its cut as well. 

But selling cars—and to a lesser degree, revenue from software and charging—will fund Musk's dreams for fully automated driving. And right now, that's where Tesla is starting to lose in a big way. 

"Elon spent a lot of time delving into what autonomy can mean for not only Tesla, but kind of how our transportation system will work," Corey Cantor, a BloombergNEF analyst, told me after the call. The problem, Cantor said, is that Tesla is down on EV market share. It fell from about 80% at the end of 2021 to around 50% by the end of last year. 

Joined by his executives who also mulled the future of autonomous driving, yesterday's affair felt more like a TED Talk than a clear business strategy that lays out a roadmap for the future. It's never been more clear that yes, Musk is indeed betting the farm on autonomy and robotic taxis, not consumer-owned passenger cars.

"I think a lot of this felt like, 'we're gonna announce targets and goals without a way to get there'," Cantor said. "If you have no roadmap moving forward, you begin to see where a Hyundai, Kia or even a [General Motors] or BMW can begin to take a whack at Tesla's market share." 

And without market share, or being able to expand past its existing lineup, it feels hard to imagine how Tesla can bridge the gap between where it is now and this Airbnb-Uber-robotaxi future that Musk says will upend the entire car business. There is a reality out there in the multiverse where Tesla could've announced three new crossovers and two new sedans to replace the Model S, X, 3 and Y, and all of the big plans for autonomy as well. But that isn't the reality we live in, and clearly Musk's heart isn't in this rather essential side of the business anymore. 

But in focusing on this robotaxi future, he runs the risk of neglecting the fundamentals that would underwrite the bridge to that future. 

Granted, it's not shocking that the guy who says he wants to make humanity into a spacefaring race is disinterested in matters as trivial as duking it out with, say, Volkswagen or Hyundai over market EV share. And you can palpably sense Musk's ire at feeling left out of the AI conversation dominating so much of tech right now; his ongoing feud with Sam Altman and OpenAI is now a matter of public record. Musk wants Tesla in on that, because more than ever, it's key to the company's sky-high valuation. 

"If you value Tesla as just like an auto company, fundamentally, it's just the wrong framework and if you ask the wrong question, then the right answer is impossible," he said. "If somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company." He added that if someone has not tried FSD version 12, "then you really don't understand what's going on."

None of what Musk had to say on yesterday's call is new; for many years, auto industry executives have spoken vaguely of a far-off future where nobody owns cars anymore, and instead, sort of subscribe to them while making use of their automated features. Recurring revenue, just like how you "own" very little of your digital music or movies or video games anymore. Except Musk is talking about actually doing it, and very, very soon. 

I asked Alex Roy, a longtime Tesla owner, former Argo AI executive, Johnson & Roy co-founder, frequent operator of Autopilot (and, in the interest of full disclosure, both a longtime professional colleague and a friend) what he thought of that—the idea that FSD 12, which he has been using, would lay the groundwork for this autonomous future.  

"No," Roy said with a laugh. "It's probably the best driver assistance functionality that exists right now. But this does not necessarily mean that they can, or are guaranteed to, turn what I have driven with my Tesla into a fully functional robotaxi anytime soon."

Take Google's Waymo for example, Roy said. It operates in four cities with more coming soon. It can do airport pickups in one of those cities only, for now. "Waymo has been operating for 10 years, and it can only do that just a few months ago," Roy said. And Waymo is, right now, one of the last companies standing after a brutal few years for the autonomy sector that saw the demise of Argo AI and scores of high-profile incidents for GM's Cruise division. 

But we have never seen a Tesla capable of such things. Not to mention the countless legal, regulatory and insurance questions nobody has solved around fully autonomous cars in the U.S. yet—to say nothing of even tougher regulatory markets like Europe and China. 

"[Musk] has selected the hardest possible problem and given himself no shortcuts to get there," Roy said. 

I still think it's unwise to bet completely against Tesla. For better or worse, it has written the playbook the entire auto industry is now following, from over-the-air software updates to building fast-charging networks themselves to new manufacturing techniques. All of this is why investors have any faith in Musk at all anymore.

The problem is that now, he seems dead-set on playing an entirely different game, at a time when the market is clearly just demanding more affordable EV options. And winning that game hinges on a technology that's been the source of too many lawsuits, high-profile mishaps and investigations to count. Could advancements in FSD jump start a new autonomy arms race for the 2020s that every other automaker and startup will attempt to follow? Maybe. But that's a lot to bet on.  

Musk may not want Tesla to be a car company, but it is, and making and selling cars may be the only way Tesla is going to make it long enough to out-Waymo Waymo somehow. At least after yesterday's call, the path to that day feels no clearer than it did that morning. All of it feels further afield of Tesla's original stated mission than ever before.

Then again, Tesla's stock went up 12% in premarket trading Wednesday, so something must have worked.

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2024-04-24T18:24:56Z dg43tfdfdgfd