Tesla Flying High: But When the Air Thins, the Moment of Truth Comes for Everyone

Tesla is in a state of euphoria, but Frank Thelen has a reputation as a level-headed man. He worked hard for his standing as Germany’s foremost tech guru; stakes in successful technology start-ups made him a multimillionaire and proved he had the right instinct as an investor. A wider public came to know Thelen as a judge on the VOX founders’ show “Die Höhle der Löwen”. Those appearances cemented his image as the country’s most important dealmaker in high technology.

Since leaving the programme, Thelen has been in near-constant service as a television business commentator, talk-show guest, start-up columnist and adviser to politicians.

Of highly profitable investments, though, one has heard rather less of late; instead Thelen appears intent on establishing himself as a brand.
There would be nothing to object to in that, if his media pronouncements were above suspicion. They are not.
His staccato eulogies for the electric car maker Tesla, above all, could hardly be more absurd. At times one has the impression that Thelen is Tesla’s head of public relations in Germany.

Consider the facts. The companyTesla (ISIN: US88160R1014; WKN: A1CX3T)is grotesquely overvalued at a market capitalisation of more than 600 billion euros; Elon Musk has yet to present a single set of annual accounts in the black; the prospects for a comprehensive worldwide breakthrough in electric mobility are decidedly mixed; the overall quality of Tesla cars is still extremely poor; the company hangs on the drip of venture capitalists, of politics and of the stock market; and the accounts are opaque.

That last point is one Thelen actually celebrates, when he notes that “accounts don’t matter” to him as long as a genius like Musk is at the head of the company.

Let there be no misunderstanding: Elon Musk is certainly an impressive entrepreneur and a man of vision, and electric mobility is without doubt an interesting growth market. But anyone who, like Thelen, classifies the current market valuation as too low and sees Tesla becoming a permanent trillion-dollar company before long has taken leave of reality — or is pursuing other interests that none of us knows about.

Imagine founders standing before Thelen in “Die Höhle der Löwen” whose business model and product he found promising, but whose company valuation was exorbitant in relation to revenue and profit. Thelen would rightly have done what he always did in such a case: taken the young founders apart and pointed out, shaking his head, the gap between claim and reality. Perhaps he would even have regretted that the unreal valuation kept him from investing in a business he genuinely found exciting. But had the founders replied that this did not matter, because one was really investing in them as people, Thelen would have lost his temper. And rightly so.

Yet this is precisely the error Thelen now makes himself, and with him a good many other analysts evidently befogged by Elon Musk’s rhetorical magic. How can anyone seriously claim that accounts and figures are irrelevant simply because the chief executive is called Elon Musk?
Nothing could be more revealing. A cult of personality standing in for analytical thought. It is alarming.

Another hero of our times, the self-appointed pope of the motor industry Ferdinand Dudenhöffer, director of the CAR Center Automotive Research in Duisburg, is in no way behind him. Although Dudenhöffer passes for an independent academic, he behaves everywhere as an advocate for Tesla. His defences take on bizarre forms. Nothing Elon Musk presents is ever wrong; Dudenhöffer finds sympathy even for the most questionable claims, as his statements on Tesla’s so-called Battery Day most recently showed.

What we are dealing with here is evidently a collective hysteria of a characteristically German kind. Because many academics, investors and politicians see electric mobility as the key to the transformation of transport, every critical argument is pushed aside and a general chorus of praise is orchestrated.

And everyone knows that if Tesla fails, the “great transformation” of the transport sector fails with it. That is why Tesla must succeed; that is why clever people like Thelen and Dudenhöffer regularly fall short of their own intelligence and resort to lines of argument that leave one speechless.
Meanwhile the Tesla project has long since run completely out of control.
Last year the global motor sector excluding Tesla generated 2,300 billion dollars in revenue and 100 billion dollars in operating profit — and carried a combined stock market value of 807 billion dollars. Tesla, by contrast, took 25 billion dollars in revenue, posted no positive EBIT, and is priced on its own at around 700 billion dollars. So while the average price-to-sales ratio in the motor sector is 0.35, Tesla is valued at 18 times the revenue it achieved.

The share is valued at 30 times the net profit of the year 2030 (!). Tesla currently takes one per cent of world car revenues and earns zero per cent of the industry’s profits — yet it accounts for 30 per cent of the total market capitalisation of the car makers. The share price can no longer be justified even on very optimistic estimates of vehicle sales.
The whole Tesla hype rests on the risky assumption that electric mobility will completely replace conventional diesel and combustion technology worldwide over the next few years, and that Tesla, as the only original electric car maker of any significance, will become something close to a monopolist. That assessment is problematic, if only because it is by no means certain that e-mobility can in fact enjoy an unrivalled triumph. Behind the scenes, research on hydrogen alternatives has long been under way, and combustion technology is far from suspended either — work on optimisation scenarios continues. The weaknesses of e-mobility are extreme.
Charging times are still far too long, range is miserable, the safety questions are contentious, and disposal and raw-material extraction are proving to be extremely damaging to the environment.
The main problem with electric mobility is not the approach itself, but that politicians want to decree overnight — on the basis of a technology that is in no way mature, a technology in its infancy — a mandatory mass-market mobility offering for the population as a complete replacement for conventional drive technology.
Consumers, quite apart from any running bulletins about record sales, delivered their verdict long ago: once the subsidies fall away, nobody buys a pure electric car any more (apart from status-conscious buyers and the ideologically fixated, who accept every drawback in order to save the environment). The product cannot hold its own in the market; every figure shows as much. Only politics is able to manufacture a pseudo-market, by compulsion. And there is a name for that: socialism.

One of the central problems remains the nature of the battery — its lifespan and its performance.