Tesla is not a car company anymore, according to their own first quarter earnings report released yesterday. They are a carbon credit company who also sells a couple of cars. Tesla’s earnings were beyond horrific, missing already lowered expectations as first quarter profits were down a staggering 71 percent. After factoring out revenue Tesla gets from carbon credits, Tesla lost money on their core business. This is the type of disastrous earnings report that in any other context, would lead to the CEO being ousted. But Tesla is a cult of personality, not a company, so Elon Musk will likely rule over it until he dies, or Tesla goes bankrupt, whichever comes first.
If I sound a bit fatalistic, it’s because as of this writing, Tesla is up around eight percent. This is coming on the heels of Trump announcing that his 145 percent tariffs on China will likely come down to 50 to 65 percent, and somehow the market is treating what still is a full-blown assault on global trade as good news. Tesla has its main factory in China, so it no doubt is moving on the back of the market’s hopium that president deals won’t do what he’s spent 40 years saying he wants to do and about 100 days preparing to do as president. I am becoming increasingly convinced that my time trading crypto far better prepared me to understand the stock market than my time spent in finance school studying this stuff.
Why do I need to own 20 stocks to reduce idiosyncratic risk when Tesla is proving pretty conclusively that it doesn’t exist when the market is up? Idiosyncratic risk only exists when the market is down apparently, and given that the market is talking itself into 65 percent tariffs on the engine of global trade being good news, I see very little difference between Bitcoin traders and Nasdaq traders anymore. It’s all hopium all the way down and very few people are investing with a plan to hold a stock for longer than a quarter.
That said, those of us expecting Tesla to be down today because of logic are making our own mistake of holding the market to a higher standard than it has ever held itself to with this stock. Tesla is a cult, not a company, and one of the valuable lessons I did learn in finance school that does seem to apply today is don’t short cults. They can stay unmoored from reality far longer than you can stay solvent. Tesla has long been far more elevated than any rational market would keep it, as people who buy Tesla are buying it on the premise that it’s not a car company. If it was valued like one, the stock would be about 90 percent lower than it is right now. Even Elon through his ketamine haze has always understood this.
But the Tesla cult looks to finally be getting their wish. It really may not be a car company for much longer. According to their own sales figures, Tesla really only sells two models at any kind of appreciable scale, and the Cybertruck is shaping up to be a world-historic disaster. Tesla’s revenue from their car business has cratered, and Elon Musk spent much of their earnings call yesterday talking up full-self driving and how most of their cars are supposedly already equipped to be turned into robotaxis. The subtext of Tesla’s robotaxi exhortations on their conference call yesterday was ‘don’t worry if people don’t buy our cars, we can repurpose our inventory as taxis.’
This brand is destroyed. Elon Musk built an empire selling cars to liberals and then branded Tesla as a Trump company. Tesla will never reclaim its core consumer so long as Elon Musk is in charge, and any normal company not dedicated to the whims and delusions of one man would oust him and work on rebuilding the brand so it could actually make money again.
But again, Tesla is not a company, it’s a cult. Tesla bulls buy the stock assuming that a man who has been promising full self-driving for a decade while failing to deliver is actually building the cutting edge of the future. He’s not. He’s a con man, but judging by the market today, it’s hard to blame Musk’s strategy when there are clearly so many willing marks in the market excited to buy the stock of a company that admitted it didn’t make money from its core business last quarter.
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