Tesla’s `Disappointing` Results – Is Elon Really Bothered?

Written by Jonathan Simnett

According to the media, multiple Category creator and dominator, Elon Musk’s Tesla EV and battery manufacturer recently turned in a `disappointing` set of Q3 quarterly results.

Reportedly, both revenue and net income figures missed Wall Street analyst expectations, and shares were trading down nearly 5 per cent when US markets closed on the day. 

Do you think  Elon Musk cares if Wall Street was `disappointed`?  I doubt it.

ICE and Chinese competition

Tesla is the Category leader in EVs and wants to stay ahead in its mission to make cutting-edge EVs more available and affordable. 

It has been aggressively slashing prices, throughout the year, in a bid to keep ahead of transitioning internal combustion engine (ICE) manufacturers and an onslaught from China’s state-backed EV makers such as BYD and SAIC, the latter who own the MG brand.

In fact, Tesla announced recently it would drop the price of its entry-level Model 3 in the UK by £3,000. Price cuts worldwide have helped deliver on the Category leadership strategy by increasing sales growth by 9 per cent, particularly of its primary Model Y and Model 3 vehicles, resulting in a revenue jump of 9 per cent to $23.35bn.

Strike, strike and strike again

Musk is a tech Category leader, and not just in EVs. He knows that to stay Category leader you have to remain dominant through market share and strike, strike and strike again in continuing to execute your strategy to meet (potentially unappreciated) customer needs. 

Strikes such as introducing new, Category-defining, vehicles such as the Cybertruck. But given current global conditions Musk has been careful to set market expectations as the new vehicle is set to roll out of a new Texan gigafactory and hit the market. Category leaders have to be seen to deliver consistently and reliably. Credibility is essential.

“It’s a great product, but financially, it will take a year to 18 months before it is a significant positive cash flow contributor,” he said during the results call. Adding, “It is going to require immense work to reach volume production… at a price that people can afford.”  Whilst his CFO emphasised that Tesla would remain “unflagging” in its “pursuit of additional cost downs for 2024” in both engineering and factory operations.

Sticking to his Point of View

So much for not scaring Wall Street’s horses. But cutting prices to the consumer in the face of strong economic headwinds and rising competition so more can afford to buy and the ecosystem is expanded is the action of a Category-leading CEO eschewing short term gains and sticking to his Category Point of View. Ruthlessly pursuing his Category Blueprint to ensure that he stays Category leader whilst growing the Category for all. 

Remember, a Category Blueprint is a not-business-as-usual plan so expect people on the outside not to fully appreciate what you are doing.  If they did, you might not be driving real change and moving fast enough.

So given Musk’s Category creation and domination record, he won’t – and should never – be put off by the short-term opinions of a bunch of financial analysts about a set of quarterly results. Particularly when they’ll end up thanking him in the end if his Category strategy succeeds in delivering most of the shareholder value in the market.

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