Tesla had a rough 2022 — to say the least.
Everything from economyto inflationto Russian invasion of Ukraine dealt blow after blow to the electric car maker – and to the rest of the tech and auto industry as a whole. However, the latest actions of the company’s CEO, Elon Musk, follow his reluctant purchase of Twitter, only dragged the beleaguered Tesla further into the deep trenches of financial crisis. In fact, Tesla almost lost 70 percent of its market capitalization in the year to date.
This is a huge change from just a year ago when the company, valued at an impressive $1 trillion, it seemed he could do no wrong. Some are questioning Musk’s leadershipwhile others go further – speculating that this could just be the beginning of the end for Tesla.
There’s no denying the influence the company has in both manufacturing and selling electric cars. After all, it did something that once seemed impossible: It convinced the public that electric cars are actually pretty damn cool. Now, legacy automakers are playing catch-up to get customers to buy their own electric car ideas.
Tesla has revolutionized the way the world sees and drives electric cars – but with its back against the wall and a financial situation looking ever bleaker than a tweet, we could very soon find ourselves in a situation where the biggest name in the game is gone belly up.
Let’s be clear: there’s a pretty slim chance of that happening… but what if it does?
How to make (and burst) an EV bubble
To understand the impact Tesla’s demise would have on the future of electric cars, it’s important to imagine how exactly we got here.
“I give a lot of credit to Elon Musk. He almost single-handedly made electric vehicles glamorous and sexy,” Raghunathan “Raj” Rajkumar, a professor of electrical and computer engineering and autonomous vehicle researcher at Carnegie Mellon University, told The Daily Beast. “People associated them with the man who was transforming the auto industry and doing the right thing for the planet.”
However, this was a double-edged sword. Musk hyped up Tesla through lofty—if somewhat unrealistic—promises and nonsense on Twitter. He cultivated an army of Elon Stans ready to go to war for it online to protect their companies from the slightest insult. Meanwhile, the cars were finally selling well. It all added up to the perfect mix to fuel Tesla’s stock rocketing into the stratosphere like so many SpaceX rockets.
“If Tesla collapses and they go completely out of business, I believe there will be dances in the streets against every giant [automaker] on the planet.“
— Sandy Munro
But the value has always been tenuous at best. It’s not like other car manufacturers don’t make electric cars. Thus Tesla’s market capitalization became a bubble of epic proportions.
One of the people holding a needle was Musk himself, whom he knocked out with the acquisition of his beloved social media platform, Twitter.
“It was complete nonsense,” added Rajkumar. “After all, business must be business. Sooner or later things that go up must come down and that is what we are seeing and will continue to see.
There are also basic economic factors. Demand is low everywhere due to the shaky economy. Also, the market looks a lot different than it did even a year ago. Tesla is no longer the only horse in the race. The EV industry is much bigger now, and with the added competition, it was really only a matter of time before Musk’s company started feeling the pressure.
A world without Tesla
Given Tesla’s profound impact on the auto industry and consumer habits, there’s really no doubt that this would have a profoundly negative impact on the future of electric cars.
“If Tesla collapses and they go completely out of business, I believe there will be dances in the streets against every giant.” [automaker] on the planet,” Sandy Munro, an independent automotive engineer, consultant and industry expert, told The Daily Beast.
Munro is known for his famous teardown reports, providing incredibly detailed analysis of various vehicles. His brilliant review of Tesla’s Model Y in 2020 has resulted in him not only being optimistic about the company’s future, but electric vehicles in general. A few years ago, he predicted that electric cars would compensate more than 50 percent of all cars on the market by 2030. Due to Tesla’s success, he updated this forecast to 2028.
However, Munro admits that if Tesla ever goes bankrupt, none of the predictions are likely to happen and he will “definitely give up on EVs.”
That’s because, to him, Tesla’s downfall would put out the proverbial fire under any legacy automaker’s bums to move toward new, emerging technologies — and instead incentivize them to go back to the old. There will no longer be pressure to build new factories and devote so much of their R&D resources to batteries, charging stations and electric drives. Even regulators would have much less incentive to make changes to the nation’s transportation and energy infrastructure.
Overall, we will see a return to our normal absorption of gases and emission of greenhouse gases. “If Tesla goes out of business, watch how fast the Keystone pipeline goes,” Munroe added.
Rajkumar’s rating is not that terrible. He believes that the technology and innovation that Tesla supports will ultimately continue. After all, consumers now want EVs more than ever –and that number is only expected to grow. Car companies see this too and are ready to take advantage of it.
“The global automotive industry is now focusing on electric vehicles, and many companies are publicly announcing that they will switch to an all-electric product line. I don’t think it’s going to stop anytime soon,” Rajkumar said. However, he acknowledges that it’s unclear whether many of the goals outlined by these automakers are realistic due to inadequate charging infrastructure and the slow pace of EV adoption by consumers overall.
The only real winner to come out of Tesla’s demise will be China. The country is already making a concerted effort to electrify its transport infrastructure, with targets in place 40 percent of all vehicles sold domestically be electric by 2030 and have enough charging stations to service more than 20 million cars.
Munro said this could lead to a kind of geopolitical situation of the tortoise and the hare, in which China plays catch-up and soon advances far more exponentially than the Western world, eventually eclipsing the dormant US with technologies such as electric cars that will be vital to our collective future.
“China will survive,” Munro explained. He added that we might get to the point where the US has relatively few EVs because we’ve been so focused on short-term profits.
Tesla will die another day
The future may look a little uncertain for Tesla, but it will likely survive its current slump. Sure, it might not reach the $1 trillion zenith it hit last year (at least for a while), but it’ll probably survive that.
“There’s no way Tesla is going to go up,” Munro said. “It’s just not going to happen.” He added that there are two main factors why the company will continue to move forward.
The first is actually Musk. While many may be troubled by his Twitter antics (Tesla stock investors chief among them), there’s no denying that he’s helped revolutionize and solidify the very industries the world will rely on the most in future: electric cars and space travel. If it can shake off the social media albatross it has wrapped around its neck, it may be able to help Tesla navigate the rapidly crowded EV market beyond 2030.
The second, Munroe said, is the children. Yes, kids. He believes that children—more than any other market indicator, stock trend, or McKinsey consultant—are precisely pointing the way to the future of things like cars and, therefore, Tesla.
“If you talk to kids, you suddenly know what they don’t like,” he said. “I don’t like the smell of gasoline. I don’t like the black smoke coming out of the car. I want to do more for the environment. That’s why I don’t think Tesla is going away.”
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