Appreciating Assets and Realization – No, Tesla Is Not Falling Just Because of Twitter

Do not blame Twitter for Tesla's valuation collapse: it was just the fuse in this bomb 7 photos
Photo: Tesla/Twitter/edited by autoevolution
Elon MuskElon MuskElon MuskElon MuskElon Musk Jokes About Bankruptcy When It Was a Legitimate ConcernDo not blame Twitter for Tesla's valuation collapse: it was just the fuse in this bomb
I found a recent discussion on a Facebook group quite interesting these days. Someone was asking if the now frequent bashing against Elon Musk was not a plan from the evil mainstream media to hurt Tesla. I could not resist and replied that none of that was surprising for people covering the automotive world. Twitter just made all that the Tesla CEO does in its other companies more public. And it is not the only reason for Tesla’s stock collapse.
The signs are in the wild for anyone to see. Those seriously talking about cars and following what happens know that Tesla vehicles have issues that have been overseen for ages. In fact, Tesla started business in the most unsustainable way possible: with the “deliver now, fix later” motto, which preaches it is better to discover defects when the vehicles are already in production lines. Anyone familiar with mass production knows the multiplying effect it presents for anything, including serious flaws.

While Tesla claims to have fixed some of these flaws, the truth is that people just got bored of discussing them and jumped to other new problems Tesla vehicles present. When peeling paint cases with the Model 3 and Model Y started to emerge, they were soon obliterated by heat pump failures. Here and there, new cases of spontaneous glass shattering, sudden unintended acceleration, suspension fractures, and Autopilot crashes showed they were still alive and kicking, to name a few. And they still worry several customers.

Apart from the Twitter deal, there is the lousy quality of Tesla cars, which were also conceived not to be repairable in a way that saved money for customers: they are meant to save Tesla time. If a seatbelt buckle fails in the second row of seats, you have to replace the entire row. If your battery pack cooling nipple breaks, that’s not covered by the warranty. Good luck raising $20,000 to pay for a new component. Why is that so? Because Tesla spends less time replacing a battery pack than fixing it. It is quicker to replace the second row of seats than only the seatbelt buckle. And Tesla Services Centers are already crowded.

Tesla investors will tell you that none of that is important because the EV maker is not an automaker but a tech company. But what tech has it developed that makes it so valuable, in their opinion? Autopilot? Full Self-Driving (FSD)? Both systems are under investigation not only because of the crashes involving them but also because of how Tesla put them for sale.

In the U.S., you can only test autonomous vehicles, beginning with Level 3, with government authorization, and only with trained drivers. Tesla said that Autopilot and FSD were not meant to be autonomous driving software. Instead, they were just Level 2. In other words, simply advanced driver assistance systems (ADAS) are able to control steering, braking, and acceleration. Tesla has frequently promised more than that.

Although the company now argues that its cars do not drive on their own, that was not always the case. Tesla still has a video online in which it states that “the person in the driver’s seat is only there for legal reasons. He is not doing anything. The car is driving itself.” Elon Musk has said that in interviews more than once, apart from promising robotaxis multiple times. Tesla was supposed to have 1 million robotaxis on the streets by the end of 2020. Each and every EV it ever sold, starting with the Model S, would become an “appreciating asset.” At the end of 2022, Tesla vehicles depreciated more than other cars. As for FSD, the EV maker does not have more than 285,000 people buying FSD. And that is more than enough.

On Mastodon, the user NotJustBikes made a demolishing review of Tesla’s software. This person tried it in a Model Y in Toronto and considered the experience “terrifying,” even after turning off aggressive and assertive modes. Another option, “drive 20% higher than speed limit,” made NotJustBikes wonder why that is even an option. Here’s what they had to say:

“It tried to drive in the bike lane to avoid traffic multiple times, it got totally confused by angled parking, it had to do an emergency stop to avoid hitting a pedestrian when turning right, plus dozens of other issues. At my destination, it rammed right into a snowbank. Why is this legal?!”

That’s what several organizations are also asking. Ralph Nader already urged the National Highway Traffic Safety Administration (NHTSA) to remove FSD from public roads. Jennifer Homendy called Tesla’s naming strategy “misleading and irresponsible.” California agreed and forbade Tesla to use these names in the state starting on January 1, 2023.

It would not surprise us if the U.S. government decided enough was enough and ordered Tesla to follow the same rules everyone pursuing autonomous driving is subject to: getting authorization for trained drivers to test the company’s software instead of delivering a half-baked option that costs $15,000. It is still unclear why Elon Musk decided to make a wide release of beta software.

If the idea was to get the Tesla community support, it backfired. Most of these folks, now able to check what they paid for, are just wondering why they trusted the company’s promises. Some, like NotJustBikes, ask why it is even legal. If Musk just wanted people to lose the argument that they paid for something they never used, it might work, but Tesla is already facing a lawsuit for fraud with FSD. Like Jason Hughes, people who love and work with Tesla vehicles stated the beta software supports a cash-grab scam.

Elon Musk once said that Tesla was “worth basically zero” without “solving Full Self-Driving.” I wrote an editorial to show how he was wrong. After all, Tesla had vehicles people loved, a fast-charging network partially responsible for that, and said it wanted to become an energy company. Reflecting on its depreciation triggered by Musk buying Twitter, I probably now get what Musk wanted to say.

Tesla is not a tech company, but FSD could convince people it was. Its current market cap is still adjusting to this realization. Without more than cars to offer, Tesla should never have had $1 trillion in valuation, especially considering that all its true competitors were worth just a fraction of that. Tesla lost as much value in 2022 as most of the leading carmakers combined. In a world without such massive distortions, it could still be one of the most valuable carmakers in the world if it worried about selling high-quality cars, exhaustively tested and incredibly reliable, even if also easy to service when needed.

Ironically, those now urging Tesla to buy back shares to make the price go up again are precisely those who were trying to defend the EV maker from every criticism it received, especially constructive ones. Had Tesla fixed those problems at the very beginning, people would not have been wondering about its appreciating assets. If Tesla’s EVs fail to be what Musk said they would, there is no reason to believe its shares will. Absolve Twitter for that one: it was just the fuse, not the bomb going off.
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About the author: Gustavo Henrique Ruffo
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Motoring writer since 1998, Gustavo wants to write relevant stories about cars and their shift to a sustainable future.
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