Is There Anything Tesla Can’t Screw Up?
The problem with ignoring history is that you won’t recognize disturbing patterns when they emerge. Case in point, domestic manufacturers spent a lot of the 1990’s trying to wean themselves off of fleet sales. Fleet sales are like cocaine, they give you a momentary high, but the hangover is brutal.
Here’s the problem for automakers, fleet sales will boomerang in a year or two by flooding the market with nearly new cars for insanely low prices. This will cannibalize potentially profitable sales of new cars by the automaker. Companies like GM or Ford would sell their soul to the rental car companies to make that short term gain and hit their forecasted unit numbers. But then later when the rental car companies started dumping those one or two year old cars, Ford and GM were forced to offer incentives to compete with their own cars. And thus began the vicious cycle.
Tesla selling cars to Hertz is bad news for investors regardless of how the stock market reacted to the news. Anyone over the age of 40 would recognize that this is the beginning of a vicious cycle for Tesla. One in which it will be painful to extricate themselves from.
This is a continuation of the trend in which Tesla seems to be the repository for every bad idea that came out of the auto industry. They are making all the worst mistakes, but yet, they don’t seem to learn from them.
But more importantly, this says something about demand for Tesla’s vehicles. No automaker would willingly sell a hundred thousand cars to a rental car outfit if they thought they could lineup a hundred thousand willing customers who would pay full price. Fleet sales always come at a huge discount, so it’s always better to sell to retail customers. Plus retail customers aren’t going to be looking to offload that car for a few years down the road. So they won’t be competing with you very shortly.
Tesla sees growth stalling, which is the kiss of death for a momentum stock. This company has a market value which Tesla can never deliver anywhere near enough profit to maintain. So they need the momentum to keep the stock price afloat. That is the kind of desperation that would cause Musk to make a dumb move like this.
News of the Hertz sales made my week but for a very different reason than the Tesla Stans. I’m going to enjoy the show that is coming. It may be a while yet, but this signals that the beginning of the end is getting closer.
Tesla selling cars to Hertz is bad news for investors regardless of how the stock market reacted to the news. Anyone over the age of 40 would recognize that this is the beginning of a vicious cycle for Tesla. One in which it will be painful to extricate themselves from.
This is a continuation of the trend in which Tesla seems to be the repository for every bad idea that came out of the auto industry. They are making all the worst mistakes, but yet, they don’t seem to learn from them.
But more importantly, this says something about demand for Tesla’s vehicles. No automaker would willingly sell a hundred thousand cars to a rental car outfit if they thought they could lineup a hundred thousand willing customers who would pay full price. Fleet sales always come at a huge discount, so it’s always better to sell to retail customers. Plus retail customers aren’t going to be looking to offload that car for a few years down the road. So they won’t be competing with you very shortly.
Tesla sees growth stalling, which is the kiss of death for a momentum stock. This company has a market value which Tesla can never deliver anywhere near enough profit to maintain. So they need the momentum to keep the stock price afloat. That is the kind of desperation that would cause Musk to make a dumb move like this.
News of the Hertz sales made my week but for a very different reason than the Tesla Stans. I’m going to enjoy the show that is coming. It may be a while yet, but this signals that the beginning of the end is getting closer.
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