Tesla Unmasked

Updated on February 1, 2021 in General Stuff
1 on February 1, 2021

Being an unrepentant automotive geek I found this fascinating:

https://amp.cnn.com/cnn/2021/01/31/investing/tesla-profitability/index.html

Turns out Tesla’s finally turned a profit after 14 or 15 years of existence. But not by selling Tesla cars. And embedded in here is an instructive lesson in the mechanics of the Administrative State. No, global warming isn’t real simply because Greta Whatshername whines about it. It’s real because the Federal government says it is. Because it’s good for their careers, everybody else be damned.

So what are “credits”. Simply put, it’s just “Cap and Trade” without the capital letters. The automotive industry is huge and complex. Roughly 17 million new vehicles a year in this country alone. With development times of half a decade or more. With a generally pretty large variety of models and purposes. So any significant change in vehicle regulation is phased in, generally these days by issuing credits that can be traded within the industry. So if your anything in your product line up isn’t going to make the standards in year 20XX, you buy unused credits from one of your competitors with some to spare.

OK, EPA’s 2025 standards are the first to require significant CO2 emissions reductions. So who in the auto industry has spare credits? Tesla. They get the same allotment as everyone else but they don’t need them. They have no CO2 emissions by definition (never mind that electricity generation has plenty. That’s just inconvenient to the scheme) so they alone have a pile to sell. There’s your trouble.

And now the enviros pile on. Oil’s dead. Electric cars are the next big thing poised to wipe out an entire industry that’s stood and been built for 150 years or so. Pedal to the metal, full speed ahead.

Despite the fact that Tesla’s never broken 1-2% market share. Ever.

So where does that leave the companies that make actual cars that will never, ever be zero CO2 emission vehicles given the fact that EPA’s been screwing with them for half a century now. Dancing as fast as they can, that’s where. GM announces they’re going to be all EVs by 2035, which is enough time to change their minds without any real consequences. Ford’s building an electric Mustang, which coincidentally don’t resemble the actual Mustang at all, while making actual money off anything nicknamed “Cobra”.

And they’re all bitching about changing the 2025 standards because they pretty much know they’ll be crucified if they don’t. But they all see the elephant in the room. Trump played the enviros. By rolling back Obama’s premature standards passed on the way out the door in 2016 and passing new standards in 2018 that simply didn’t go as far as the enviros wanted. They rolled standards back to where car companies could still pass even though they might have to offer (note, not sell. Depending on how the incentive structure values every EV sold you could have one sale worth 200 combustion engines which then circles back to the original point of the diatribe) EVs.

What does this mean for Tesla? Maybe nothing. But if CO2 regulation is spiked, they’ll be back to having to compete which they can’t naturally do.

 
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0 on February 1, 2021

I do think it’s pretty funny how there seems to be a broad consensus that the guys who shorted gamestop are the Devil, but the guys who have pumped Tesla up to like 2000x forward earnings are somehow “forward thinking”. 

Or something.

The gamestop shorts seem far more rational than the Tesla longs, at least to me.

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