As we start 2023, Tesla is still setting the pace: who’d have thought it?
By: Enrique Dans
“Oh my God, Tesla is headed for disaster, there’s no way it can manage when its top executive and representative figure is on Twitter all day and tied up in lawsuits of all kinds; these are going to be the worst results in its history…”
Meanwhile, in the real world, Tesla has just released its results for the last quarter of 2022, showing a 12% increase in profits, revenue of $24.3 billion and an annual profit of $12.6 billion, thanks to selling more vehicles than ever (1.3 million, with manufacturing growth of 43% year-on-year) and beating the analysts’ forecasts. Earnings per share came in at $1.07, up from $0.68 last year. Any other automakers announcing anything like that?
All this in a terrible year for the industry, with chronic supply chain problems, factories shutting down, problems in China over zero COVID policies, and difficulties in getting hold of microprocessors and other components. But Tesla has not only done well, it has even managed to cut prices significantly, which is resulting in much higher demand during January. This year, goal is to reach two million vehicles, although it doesn’t want to commit to that number due to external factors that could affect production capacity.
Who knows, maybe Elon needed to distract himself? I said it at the time: management focus is a myth. Anybody who believes CEOs need to dedicate all their time to the business, when they have demonstrated their ability to create a completely new kind of company — breaking the dreaded isomorphism — and has managed to turn it into the industry benchmark, has failed to understand today’s world. Tesla, like any company led by Elon Musk, is focused on achieving ever greater economies of scale, which means that once the processes are in place, the need for immediate and close managerial oversight is minimal. As a result, the analysts now say Tesla is going to do well, and the company announces that it will emphasize cost reduction. Why? Because it can. That’s precisely what economies of scale and learning are about.
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The same people who criticized Tesla when it wasn’t making money are now criticizing it because its CEO is busy doing other things, when the company is producing more and more vehicles, keeps opening factories like there’s no tomorrow, and maintains margins far above those of the rest of its industry. What else were they saying? Ah, yes… that their vehicles were “poorly made”, and “failed a lot”. Interesting, isn’t it? Normally, when things like that happen, people tend not to buy your products. I don’t know how to reconcile that with Tesla’s soaring sales and legions of extremely loyal and satisfied owners?
In 2022, the company has made more money than ever, but some people are still “terribly worried”. Maybe they want to see Elon walking around the factory every day, patting his employees on the shoulder.
Innovations such as selling directly online, are now being imitated by an industry that Tesla forced to speed up its transition to electric vehicles. A company that simply took advantage of an opportunity that was always waiting to be found, Elon Musk’s Tesla has driven the evolution of the entire automotive industry, to the point that today it not only leads it in market capitalization, but practically sets the pace.
Those who said that Tesla’s technological leadership would disappear when the traditional brands started to manufacture EVs, are now seeing that while the vast majority of automakers already have a significant and growing number of electric vehicles in their catalog, they are still either distracted by the false promise of hybrids, or making EVs that still look too much like the internal combustion vehicles of the past, that do not really take advantage of electric propulsion, or do not understand the role of a microprocessor in an automobile. Abandoning a whole way of doing and approaching things is costly.
And let’s not forget: the more EVs on our roads the better. In short, Tesla, the company that has made the automotive industry finally start evolving towards EVs, has shown itself to be a very good thing. Who’d have thought it?