Should Tesla Make Batteries Instead of Electric Cars?

cartechboy writes: "Tesla seems to be doing quite well these days, but one bond trader thinks the company should quit making electric cars and focus efforts on making batteries instead. Bond manager Jeffrey Gundlach says he's already tried to meet with Elon Musk to persuade him to take the battery-only route. Speaking to Bloomberg, he said Tesla could be 'wildly transformational' in the same way electricity and electromagnets were at the advent of their discovery. Enough people are interested in Tesla's vehicles that Musk probably won't take Gundlach's advice. Should he?"

Comments

They've been pushing this angle for a while

[Anonymous Coward]

The analysts are pessimistic that a newbie can outperform the established automakers. I disagree. What better way to make a market for your battery factory than proving the technology that they will be used for? This is the type of thinking that kills companies traded on Wall Street.

Re:They've been pushing this angle for a while

[GameboyRMH]

They've also been doing a great job of building the cars themselves, making it even more baffling. It's not like they were putting good batteries in crappy cars.

Re:They've been pushing this angle for a while

[Grishnakh]

And it's not like there's many other electric cars to put them in. The only one I can think of is the Leaf. All the other EVs out there are just conversions from gas-driven vehicles, rather than purpose-built EVs, so they end up with very compromised designs. Many of them aren't even serious vehicles at all: the automakers are just slapping them together to satisfy government regulators, to say "look! we have EVs too! But no one wants to buy them!" Yeah, no one's buying them because they suck ass. The Tesla by contrast is actually really good, so they're selling like hotcakes, since it isn't a half-assed attempt like what the other automakers are spewing out.

There was another company that tried what this dumb bond manager suggests; it was called "Ovonics". It supplied batteries to GM's EV1 electric car, which was famously ill-fated. Ovonics has disappeared now after being bought up and then shut down. I guess that's what this bond manager wants to happen to Tesla.

Re:They've been pushing this angle for a while

[khallow]

The bizarre thing is that the obvious better solution here is to spin off the battery manufacture business.

Personally, I think the best approach here is to keep the battery manufacture in house for now (since it provides a powerful advantage over competitors) and build up electric car market share to the point where you're triggering anti-trust. Then use the spin off of the battery business as a playing chip to keep the rest of the business together.

Finally, if Musk wishes to exit this job at some point, that would be a good time to do so. He could appoint a competent successor and gradually divest himself from the business.

Re:They've been pushing this angle for a while

[MozeeToby]

Yeah, but manufacturing is only one piece (admittedly a big piece once you start moving tens of thousands of cars per year). What doesn't make any sense is how Tesla has innovated in car design outside of the electric aspects. Anyone could have put a huge glass cockpit in their luxury car. They could have negotiated lifetime data plans with cellular carriers. They could have auto-retracting door handles. They could have done OTA updates to fix SW updatable components of the car. They could have designed gullwing doors for SUVs that take just a few inches to open.

No one ever did. The major automakers got lazy, they stopped even trying to innovate decades ago.

Re:They've been pushing this angle for a while

[lgw]

They certainly could and should have let GM die, though. The biggest flaw in Americas take on capitalism is bailouts. Companies like GM need to die and be replaced by companies like Tesla. I've had quite enough "government propping up failed business models" for one lifetime, thanks.

Re:They've been pushing this angle for a while

[LordLimecat]

Whats baffling is that Bond manager Jeffrey Gundlach thinks hes a better judge of investment than a many-times-over millionaire who has launched 3 wildly successful businesses-- paypal, Tesla, SpaceX.

Re:They've been pushing this angle for a while

[ericloewe]

The Roadster is essentially irrelevant as anything other than a prototype for Tesla's propulsion system. Generally stating that Lotus is significantly responsible for Tesla's success (as was claimed, despite the fact that the hard part was not done by Lotus) is absurd.

Additionally, the Model S has literally sold more than 10 times as much as the Roadster, and it is the car that is viewed as truly significant.

Discussing the Roadster as if it were truly significant as anything more than a prototype is about the same as discussing the Ford Galaxy as proof that Ford typically rebadges other manufacturers' vehicles as their own.

Why can't it be both?

[ArcadeMan]

Even if Tesla becomes the best and largest car battery manufacturer in the world doesn't mean they can't make cars as well.

IMHO somebody's being paid by the other car manufacturers to steer Tesla away from making cars.

Then again, the "low-cost" electric cars sure aren't coming from Tesla any time soon, so I don't really care.

Re:Why can't it be both?

[Fulminata]

I actually understand his point. If Tesla just makes batteries for other companies, then they don't see Tesla as competition. If Tesla's also producing cars, then they are far less likely to do business with them regardless of how good their batteries are.

It's still a terrible idea. For the most part, the other car companies won't innovate unless they have competition. Tesla is far more likely to create real change by existing as a car company than they are by existing as a parts company.

No

[Fulminata]

This is an example of why listening to "investors" is a terrible idea. It's like listening to a gambler advise you on how to coach a sports team.

Yo Gillette

[rolfwind]

Stop making those stupid low margin shaving handles and FOCUS SOLELY on cartridges!!!!

Re:No, But Someone Should

[bluefoxlucid]

You nailed it. Tesla is not operating at a comparative disadvantage: they can produce cars more effectively than anyone. A $90k top-end Cadillac won't have the features of a $90k top-end Model S. They're comparable, but edged out by trim and safety features (what Cadillac warns you that it's on fire, and then doesn't burn the driver's compartment?).

The auto manufacturers are competing with each other; Tesla, a new entrant, clearly has gotten a step ahead. Detroit can catch up readily, but they're already in competition with Japan and Germany: it's unlikely they can just leave Tesla in the dust and build much better cars for the same price. That means Tesla is at worst a highly competent auto manufacturer, and possibly the top-tier American auto manufacturer.

It means GM and Chrysler should get out of the auto manufacturing business more than Tesla. If the big three keep trying to squeeze Tesla out, they might get kicked out themselves: a $20k Tesla offering could easily send the Ford Focus and Chevrolet Cobalt packing.

Notice something about that article?

[Weaselmancer]

Some quotes from the article:

According to Bloomberg, Gundlach has suggested the Tesla Motors [NSDQ:TSLA] CEO get out of the car-making business, and concentrate fully on developing batteries for use in other vehicles.

In contrast to those traders though, Gundlach says he'd much rather buy Tesla shares than invest in a company like Twitter--and is much more concerned about the "killer" return speculative investors could get from Tesla becoming a battery-only business.

He sees Tesla as a better investment than technology companies like Twitter, whose shares recently dropped to their lowest point yet, less than a sixth the price of Tesla shares.

This article has nothing to do with technology and everything to do with maximizing third party investments. This is exactly what's wrong with the world right here, in a nutshell. Here we have an honest-to-goodness NEW thing. The Tesla car company. Finally a viable alternative to gasoline cars. The future. Less carbon emissions. Something to help the world. It's a beautiful vision.

So of course some day trading jackass wants to strip the future of that vision so he can get a better return on his stocks. To hell with the future, money is involved!

Makes me sick.