Weekly Brief: Tesla Rides Crest of Electrification Wave

Tesla’s newest vehicle, the Model Y crossover SUV, finally received its certification from the US Environmental Protection Agency last week.

The Model Y’s range came in at 315 miles per charge, with a 121mpg gasoline equivalent. To put that in perspective, the Model Y’s closest current luxury SUV competitor is Audi’s new E-tron, which claims only 204 miles of range per charge and 74mpg equivalent (That said Ford’s value-for-money Mustang Mach-E trumps both with 370 miles claimed range at half a Model X price tag – Ed). To add insult to injury, Audi had to completely suspend production on the E-tron last week owing to supply chain issues. The suspected culprit? Faulty battery cells.

The Model Y’s promise and the E-tron’s delay goes to show why Tesla is seen as on top of the EV carmaker world right now. After a decade of establishing a brand and a proof of concept, that an all-electric carmaker could even sustain itself, let alone turn a profit, the company has finally hit its stride. Last year the company sold more EVs than in its previous two years combined. Tesla now has four vehicles on the market, the Model 3, Model S, Model X and Model Y, not to mention solar panels, solar roofs and a pickup truck called the Cybertruck that people are by turns mesmerized and repulsed by (pre-orders are exceeding expectations, Tesla said last week). The Chinese government has given Tesla its blessings for a gigafactory in Shanghai. Germany has done the same in Berlin.

Add it all up and what you get is a joyride for Tesla’s stocks in 2020. The company has more than doubled its value in the first two months of the year. Its market capitalization is $165Bn. That makes it the most valuable carmaker in US history, more than Ford and GM combined. The only carmaker more valuable in the world is Toyota at $227Bn. However, it’s probably best to keep in mind that Toyota sells 30 times as many vehicles as Tesla does.

How does this make any sense? For one, investors see Tesla more as a tech company than as a traditional carmaker. Its strong performance in the past year has established the company, at least in investor’s minds, as the clear leader in electrification. That’s a good place to be in a world in which the climate is warming at alarming rates and where governments are eager to embrace technologies that help decarbonize their energy and transportation sectors. Not only is Tesla leading on electrification, as the Model Y range demonstrates, but it’s also leading when it comes to self-driving technology.

Tesla’s Autopilot claims to be unrivaled among advanced driver assistance systems. Granted, the system has led to a number of well publicized and tragic deaths, often it seems because drivers have believed that Autopilot was a full self-driving feature. Last week, for instance, the US National Transportation Safety Board released new details about a fatal Tesla Autopilot crash in the San Francisco Bay Area in 2018. The details confirmed that not only was Autopilot engaged when the Model X crashed, not only did it get lanes confused, but it had experienced the exact same glitch several times before. That gives credence to what the driver’s family had complained about in the wake of the accident but it’s claimed the driver ever reported the glitch to Tesla. Also, rather than pay attention to the road, the driver, allegedly, was playing a game called “Three Kingdoms” on his iPhone around the time that the accident occurred.

As this incident shows, Tesla’s march toward autonomy is complicated and controversial. Nonetheless, if this is a marathon, Waymo is way out in front on the commercial side of things while Tesla is way out in front on the consumer side. So, it’s becoming increasingly unclear if anyone can catch either of them. Yet another reason Tesla has become the most valuable carmaker in America.


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