In the midst of Lyft’s recent IPO, and Uber just filing: let’s talk cars. Have car sales peaked?? Car sales, both US & Globally, have declined. This is beyond a blip, and quickly becoming a trend.
Why? Urbanization (people preferring to live in major urban centers with more transport options), Mobility Services (Uber, Lyft, ZipCar), and eventually autonomous vehicles.
Startling Fact #1: For decades, in the US, 50% of people turning 16 would obtain their driver’s license, last year, that number dipped below 25%. That’s a huge gap. Because it’s safer/greener/cheaper to get your 16 year old the Uber app vs. a car/insurance/gas. BOOM. As of 2018, Norway, has become the undisputed Electric Vehicle leader. Due to amassing a fortune through oil & gas extraction, it made a conscious decision to create incentives for its citizens to purchase EVs. China also is pushing very hard to make EVs the norm. DiDi, the Chinese ridesharing company has 30 million rides/day, more than 2x of all Uber rides globally.
Startling Fact #2: For every one ridesharing vehicle, we can replace 10 regular cars, which largely sit in driveways & parking lots while we race through our day. Imagine what that means for car production as this trend continues to grow.
Cities currently are optimized for cars. Yes private companies like those mentioned above are changing this and increasingly, governments are injecting rules for more efficient, greener cities. This is more than a trend. Many European, Asian and US cities are now adapting the following rules in varying degrees.
-larger bike and scooter lanes -congestion taxes for those who drive vs. use public transport
A major question that needs to be addressed in all of this is – who, outside of the consumer – is the winner? Because as we know, capital markets need more than just the consumer to win. Companies need to win as well or they abandon providing products & services.
Lets circle back to the US – Tesla, right now has some of the best cars & most amazing self-driving tech. Ever wonder how they got their start? Is Elon Musk the founder? How much is this company worth and will they be around in 5 years? We answer all that & then some, below.
TESLA Elon Musk’s name is synonymous with the brand Tesla, but contrary to popular belief, he isn’t the original founder. That merit belongs to Martin Eberhard & Marc Tarpenning – two silicon valley engineers. Musk was the lead investor in the Series A round, injecting $7.5M of his wealth, mostly acquired from the sale of PayPal, of which he owned 11% of the stock when it sold to Ebay for $1.5B.
Tesla wasn’t the first to player in the Electric Vehicle market either, that honor belongs to General Motors, which designed the EV1 in 2003. In GM’s admission: it widely failed because it was too early & there was not enough demand to keep the dream alive. They eventually shipped all EV1s to the desert & destroyed them.
That action was the catalyst for the birth of Tesla. Martin & Tarpenning, used their wealth acquired from the sale of their NuvoMedia e-book business for $187M, and founded Tesla Motors.
Objective: build a greener car. 1. Focus on Lithium Ion batteries which they imagined would become cheaper & more powerful in the coming years. 2. First, produce the Roadster, a high margin, high powered EV sports car. This would help reduce the stigma around EVs & thrust them to popularity & intrigue. 3. Roadster revenues would then fund subsequent versions of the EV for the masses. 4. To achieve economies of scale in Lithium Ion battery production, they would soon produce
EV Semi Trucks, energy storage in home & autonomous cars.
They initially wanted to reduce complex manufacturing by building the Lithium battery & power train into the existing Lotus Elise car chassis, control supply chain & logistics; however, they ended up over-customizing parts, drastically escalating costs. Because of this – they almost went bankrupt. Many CEOs came & left, and in 2008, Elon Musk became CEO.
He began making significant changes to save the company. 1. Raised $40M in debt financing 2. Laid off 25% of the work force 3. Formed a strategic partnership with Daimler 4. Borrowed $465M from the Government
Almost 2500 Roadsters were made with 992 lb Lithium Cobalt Oxide battery with a 244 mile range, well placed in the sports & EV market. In 2010, Tesla’s IPO was the first American car manufacturer to IPO since Ford’s IPO in 1956. The IPO helped them raise $226M.
The next two cars to be launched: Model S and Model X – but high costs of Lithium batteries were still hurdles, prohibiting their ability to compete with gas vehicles on price or become mainstream.
In 2013 Musk revealed ambitious plans for a battery Gigafactory, to make them cheaper than gas driven vehicles. In this time, Tesla achieved many milestones: 1. built the Gigafactory 2. built the PowerWall battery for the home 3. launched the Model 3 in 2016
And in 2017, just seven years after its IPO, Tesla passed Ford in market valuation. $52.3B vs $49.9B! Still higher by $9B as of the time of this writing, $46B vs. $37B.
With all that is happening within the Tesla ecosystem, and if they actually reach their goal to completely change the energy paradigm, all bets are off!
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