EconByte

Issue 21/2019

Oh Elon...

What a week for Elon Musk, and not in a good way. If you need a refresher:

  • After markets closed on Friday, Tesla announced the departure of four board members once their current terms expire.
  • On Monday last week, a parked Tesla Model S randomly exploded in a Shanghai garage (and it was captured by CCTV).
  • Two days prior to Tesla's mid-week first quarter earnings release Musk promised self-driving by the end of this year. But given that we hear that promise every year - Musk first made the claim back in 2015 - he upped the ante, saying Tesla would have one million self-driving robo-taxis on the road in 2020.
  • The first quarter earnings report was unveiled and wow was it bad, showing a loss of $702 million, or $4.10 a share.
  • During the earnings call Musk was asked if Tesla planned to get into the insurance business, to which he responded "...yes we are creating a Tesla insurance product and we hope to launch that in about a month. It will be much more compelling than anything else out there". A bold claim given how poorly Musk's promises have panned out in the past!
  • Tesla's share price closed at $US235.14 on Friday, its lowest since January 2017.

Tesla share price

Let's be honest, we're not going to see a million Tesla robo-taxis on the road by 2020; it's another Musk pipe dream on which he has applied an absurdly short, unrealistic time frame.

Really the only interesting announcement was the Tesla insurance product, and it wasn't even an announcement but an on-the-fly comment during the investor call. Does Musk actually have an insurance company in the works, or did he just think it was a good idea? The guy has a reputation for shooting from the hip, but insurance does actually make sense: Tesla already spies on all of its drivers so Musk's statement that people wouldn't be allowed "to drive the car in a crazy way" if they want to keep premiums down claim should actually be relatively easy to enforce.

It's also a means for Tesla to do one of two things: crack the cash flow market that the likes of Apple have recently pivoted into (monthly subscriptions for everything); and/or bundle the insurance into the sale price as a bit of a loss leader, which is similar to how traditional car dealers bundle free annual services into their vehicle sales.

The latter is the most intriguing, as it's a point of difference for Tesla which is finally starting to face some healthy competition in the pure electric vehicle sector. That competition is coming at the same time as governments around the world are finally winding down their extremely generous electric vehicle subsidies, which have been Tesla's bread and butter for some time.

But will insurance be enough to save a company that haemorrhages nearly a million dollars a day? I'm not so sure and I'm clearly not alone, hence the Tesla share price free-fall.

The bits


Only you, not Europe, can protect your privacy

The fabled General Data Protection Regulation (GDPR) is enforced in the country in which tech firms have their "data controller". In most cases, that's Ireland, which "has yet to bring an enforcement action against a big tech firm". There are plenty of other flaws in the GDPR, but that's a topic for another day.

Learn more:


When a $3 billion fine is good news

Facebook was fined $3 billion by the FTC - a sum which could rise to $5 billion - yet it was interpreted as good news, with Facebook's shares rising as much as 10% following the news. Meanwhile Snapchat is dominating the young, US market but not much else.

Learn more:



China is winning 5G

China's economy is thriving (for now) thanks to some good ol' stimulus, but it's also dominating the 5G market via the likes of Huawei. The US really dropped the ball on 5G and it's definitely a sore spot, hence the only semi-successful push to have other countries reject it on unfounded privacy grounds.

Learn more:


Samsung's folding phone is a flop

The Samsung folding phone debacle is worse than I thought, as those plastic screens literally fell apart while reviewers were testing it. Meanwhile, how long until Apple starts hosting its own servers, rather than paying Amazon for the privilege?

Learn more:



Image of the week

View source
Tesla deliveries are dwindling

Elon Musk might say that demand is strong and he expects Tesla to meet its full year guidance, but the data tell a different story: deliveries were down 31% from the fourth quarter. Remember that Musk is the same guy who in January said he was "optimistic about being profitable in Q1", before presiding over a quarterly loss of $702 million. Take whatever he says with a very healthy pinch of salt.

That's all for now. If you enjoyed this issue, feel free to share it.

Oh Elon... was compiled by Dr Justin Pyvis. Feel free to send feedback, suggestions for future issues, ideas, insults, or pretty much anything that crosses your mind to his Keybase chat.