Weekly Brief: Pioneering Tech a Double-Edged Sword for Tesla?

With greater success comes greater scrutiny.

Tesla capped off a record-setting quarter last week, even by its own lofty standards. The company produced a record number of vehicles within a single quarter (237,823 EVs), sold a record number of vehicles within a single quarter (241,391 EVs), and as a result raked in a record net profit of $1.62Bn. The last of these figures represents a 400% increase in net profit from Q3 2020. The company said in an earnings call last week that its figures could have been even stronger, were it not for delays owing to microchip shortages and logjams at entry ports.

Numbers like these prove that Tesla has pulled off what many analysts and onlookers once thought impossible: its has bridged the gap between novelty tech start-up and mainstream automaker. Last week I reported on Porsche’s stellar Q3, which included selling 28,640 all-electric Taycans. Strong growth on the electric front helped propel Porsche to 13% overall growth, with total sales hitting 217,198 vehicles worldwide. Remember, Tesla, sold 241,391 EVs within the same time period. The newcomer is outselling the icon.

Naturally, some legacy carmakers can still boast total sales that dwarf Tesla. General Motors, for instance, sold 446,997 total vehicles in the US alone in the third quarter. However, that figure represented a 33% decrease in total sales from Q3 2020. Tesla’s sales represented a 73% increase from Q3 2020. Which team would you rather be on?

Last week Elon Musk’s tunnel company, The Boring Company, got the initial greenlight to build a vast underground network beneath Las Vegas. The company already has 1.7 miles of tunneling that forms a loop under the Las Vegas Convention Center. The new, more ambitious plan calls for 29 miles of tunneling that will stretch beneath the Strip and offer 51 underground stations, including at the Las Vegas airport, Caesars Palace, the Bellagio, MGM Grand, Mandalay Bay and nearly every other neon-lit, money-swindling casino in Sin City. Guess what vehicle will be taxiing passengers from one destination to the next? A massive fleet of Teslas.

That’s what makes the EV maker so formidable. It’s more than a carmaker. It’s an ethos and an attitude that’s allowed Tesla to own the EV category in the same way that Uber owned ride-hailing for a decade, no matter how loud its competitors jumped and shouted for attention. Even when people used Lyft or other ride-hailing apps, they often used the verb “Uber” to describe what they were doing. Tesla has staked out a similar linguistic and cultural dominance in the EV realm. If you think of EVs, you think of Tesla.

Which is drawing a lot of attention, increasingly in the form of scrutiny from the US federal government. Last week the National Highway Traffic Safety Administration added a senior safety advisor to its team. Her name is Missy Cummings and she boasts an impressive resume that includes experience as a professor at Duke University, the director of Duke’s Humans and Autonomy Laboratory and a stint as a fighter pilot in the US Navy. Yet, she is perhaps best known for her outspoken criticism of Tesla and Elon Musk’s rush to get self-driving technology on the road, in her view and mine, without doing the proper work to ensure its safety before deployment.

Is it a coincidence that NHTSA hired Cummings in the midst of a string of federal investigations into fatal accidents that occurred while Tesla’s Autopilot technology was engaged? Elon Musk certainly thinks the two are connected. He took to Twitter last week to denounce Cummings as “extremely biased against Tesla”. A goon squad of Tesla evangelicals used that as bait to attack Cummings with such vulgarity on Twitter that she shuttered her Twitter account. Twenty thousand Tesla users, at Musk’s urging, have signed a petition that encourages President Biden to change his mind and give Cummings the axe within a week of her hiring.

I’m no fortune teller but the odds of NHTSA reversing course on Cummings are about the same as a dinosaur popping out of a chicken egg. Transportation Secretary Buttigieg has recognized the need for a regulatory framework overseeing the development of self-driving technology and its deployment into commercial and consumer cars. Cummings’ expertise fits this need and Musk howling about foul play and bias ironically could lead to stricter regulations around autonomous tech than the government might otherwise have adopted.

If that happens, it could put a serious damper on Tesla’s extraterrestrial valuation in the stock market. Part of the reason Tesla is the most valuable carmaker in the world is because of the company’s claim to be on the cusp of delivering self-driving cars and other technological revolutions. We’re about to find out if that promise holds up under increased scrutiny.

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