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How Tesla Proved Critics Wrong

After stellar Q3 reports, Elon Musk’s critics are left grasping at straws

Enrique Dans
Mar 15 · 4 min read
Photo: Salwan Georges/The Washington Post via Getty Images

People have said pretty much everything about Tesla. Some said the company was selling its vehicles at a loss and would never be able to make those vehicles under the right conditions, or fast enough. Others said Tesla’s founder, Elon Musk, was crazy and would lead the company to ruin. In early 2018, one car industry veteran even called on collectors to buy the Model S “before the company goes belly up.”

But then Tesla’s numbers started to look more promising. In its 2018 Q3 report, Tesla boosted its share price and gave the NASDAQ its best day in months. The company had also fulfilled its production and distribution objectives during Q3, showing every sign of staying in the black (at least until it had to pay interest on loans during the first quarter of 2019).

The Q3 earnings report doesn’t seem to be an exception, either: Q4 was also profitable and everything indicates that Tesla has found a stable way to generate profits. What’s more, Tesla is no longer an industry quirk: Many people have laughed at its production difficulties (while grossly underestimating the achievement of moving from a standing start to mass producing 80,000 vehicles per quarter). But the company is now outselling Porsche, Mercedes Benz, and BMW. This makes Tesla the best-selling domestically-made car company in the United States. The Tesla is also more technologically advanced than any other car on the market. It’s also cheaper and much safer to drive.

Those spectacular Q3 results confounded analysts’ forecasts, proving what some of us have been saying for a while now: Few can understand the strategic vision of a company that is prepared to take risks to change the world. Virtually everyone was wrong about Tesla’s finances and its future. Now, those analysts are scratching their heads and trying to understand what happened. This is because people can’t get their heads around the idea that a company’s customers would volunteer to help distribute its vehicles, contributing to a project they consider themselves part of. Elon Musk will doubtlessly bask in the warm glow of his “I-told-you-so” triumph for months to come. He understands that people want to be part of a project that’s not about selling cars but changing the world.

Few can understand the strategic vision of a company that is prepared to take risks to change the world.

Understanding a business model like Tesla’s means understanding that the biggest startup difficulties aren’t necessarily the ones you’d imagine. Manufacturing cars is a difficult and tricky business, for sure, but creating a company with the potential to change the world is much more challenging. Tesla has shown that difficult challenges can be overcome, as many other companies have shown before. Tesla has shown that it’s possible to design long-term strategies and implement them successfully, even if that means listening to baseless nonsense from people who don’t understand what you’re doing. For example, critics said Tesla was wrong not to locate itself in China. They said its production costs were not sustainable and would drive the company out of business. Yet today, Tesla’s assembly line is making progressive savings as production increases. Next year, depending on global demand, it could consider moving part of its manufacturing operations to China (now, but not before).

Tesla’s profit margin for the Model 3 is 20 percent, well above the industry average in its segment. Overnight, Tesla’s prospects for growth and profitability seem to have become not only credible but probable (regardless of the belief in some quarters that Musk is crazy). I say the world would be a better place with a few more crazy people like him in positions of leadership.

Everyone was wrong about Tesla. In fact, the best thing about all this is that we’re not really talking about an automotive company here. Sure, some people still insist on calling Tesla a car manufacturer that’s not doing too badly, thanks to an innovative road map. But it turns out that the keys to Tesla’s future are batteries, not cars. The cost of batteries continues to fall as more and more batteries are produced and sold, not only for vehicles but also for homes and storage plants. Demand for solar power installations is growing consistently and thus, Tesla has miraculously found itself in one of the fastest-growing sectors in the world. Evidence shows that long-standing environmental concerns about traditional car manufacturing are fully justified. Suddenly, people are seeing the many years of hard work behind Tesla’s overnight success.

In other words: People who say it can’t be done should stop interrupting those who are doing it.

An earlier version of this article was published on Forbes. (En español, aquí.)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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