Tesla is the company of the moment — the prime exemplar of just about any big and important trend that you might care about.
Why it matters: Almost every reader of finance and business news will have at least one strongly-held opinion about Tesla. What you might not realize is just how widely those opinions range, and the degree to which they map onto much broader views of the world.
Tesla, especially after its merger with Solar City, sometimes feels like a Utopian project — an attempt to populate a carbon-neutral future with fast, efficient vehicles that don’t contribute to global warming.
- Tesla stands to be a primary beneficiary of Joe Biden’s economic policy, should it be enacted. Biden has promised to spend $2 trillion over four years on a plan that includes: creating 1 million new jobs in the American auto industry; generating clean, American-made electricity; and investing in battery technology.
- Separately, Biden has pledged to buy “tens of billions of dollars of clean vehicles and products.”
U.S. economic policy
Tesla has already benefited from the Fed’s zero-interest rate policy following the global financial crisis — a policy designed to incentivize capital-intensive investment.
- Tesla has raised more than $20 billion in debt and equity since inception, almost entirely in years when it was losing money. Easy-money policies made such fundraising possible.
- $465 million of that debt came in the form of a direct loan from the federal government.
- Tax breaks for electric vehicles helped drive many of the company’s early sales. Tesla also received tax breaks when building its old and new factories.
Capitalists love and fear natural monopolies. Tesla’s flagship product — its cars, powered by its batteries, its home-built software, and its network of charging stations — is years ahead of the competition, and is synonymous with “electric vehicle” for many.
- Tesla has inspired a host of copycats. But so far none of the EV entrepreneurs, nor even the powerful global automakers, has penetrated Tesla’s competitive moat.
- That could change as EV adoption approaches a tipping point in the next few years, says Axios’ Joann Muller, but for now, Tesla is the undisputed king of EVs.
The one thing Tesla hasn’t made, despite many years’ worth of promises that it was just around the corner, is a self-driving car. That hasn’t stopped the company from advertising a feature called “autopilot.”
The billionaire economy
Depending on whom you talk to, Tesla CEO Elon Musk is the archetypal cartoon-villain billionaire — or else he’s the archetypal planet-saving billionaire.
- Musk is crude, obnoxious, and worth $70 billion; journalists cross him at their peril. He delights in his status as provocateur, and has never encountered a rule he didn’t want to break. All of this makes him very popular among would-be disrupters.