Why I will never own Tesla shares

Never is a long time. To say that you will never own something is a bold statement and probably requires a word of caution. So this is it. I’m going Probably never owns You’re here (NASDAQ: TSLA) stock and there are two reasons for this.

Before I list them, I must also tell you that selling Tesla stock was the worst investment decision I have ever made. Those 100 stocks I bought (and sold) in 2012 would be more than 100 baggers if I had kept. Yet, despite several compelling reasons for owning it, you are unlikely to find the stock in my portfolio.

A competitive market, in the long run

The first reason relates to the functioning of the markets. No product manages to conquer a global market without being challenged. This is especially true for an industry where it can take two to five years to get a new product from concept to customer. Add an annual capital expenditure of up to 10% of income and you will see why innovation in the automotive industry tends to be slow and very gradual.

Image source: Getty Images.

Electric vehicles (EV) are rapidly gaining a share of the overall automotive market, however. The 2.6% market share of electric vehicles last year set a record and leaves plenty of room for continued growth. When California Governor Gavin Newsom signed an executive order setting a target date for the state’s ban on the sale of internal combustion engines, he added California to a list of governments that included France, Spain, Canada and India all doing the same.

The traditional auto industry takes suspicion. In fact, the electric vehicle market is starting to look a lot like the traditional auto industry. The competition includes General Motors, which has pledged to introduce 30 new models of electric vehicles by 2025, and Volkswagen-the $ 250,000, 616 horsepower Taycan from Porsche, plus newcomers like the Chinese electric vehicle company NIO, American manufacture Fisker, and Amazon-supported Rivian. The global auto market is estimated at $ 2 trillion and Tesla’s market cap of $ 680 billion is for investors who credit the company for capturing much of it before it happened. Tesla produced just half a million vehicles last year, compared to a total of 70 million produced across the industry.

One of the reasons Tesla could get so much credit is self-driving. The company had logged around 3 billion kilometers of data from its vehicles around the same time last year. This data is the key to the training of machine learning algorithms. That’s about 150 times the 20 million captured by its closest rival, Alphabetis Waymo. The debut of the Tesla Semi company is also convincing. This electric semi-trailer will target the global $ 4.2 trillion trucking market. If Tesla CEO Elon Musk can turn the global trailer fleet into a self-sustaining freight transportation network, investors should add the $ 600 billion global rail industry as a potential market opportunity.

All of this can happen, but it will take a lot more time and investment than most investors are willing to allow. Even Amazon, which saw obvious success in 2010, has seen its shares drop 30% four times in the past decade. Amazon stocks even fell 90% for a while in 2001. Investors are patient until they aren’t, and it wouldn’t surprise me to see a similar upheaval for Tesla shareholders. in the next stock market crash, even if the company is ultimately successful.

Elon Musk: Is he PT Barnum or Steve Jobs?

The second reason has to do with Musk. I’ve read articles comparing Musk to PT Barnum and Steve Jobs. It’s not hard to see him as the embodiment of both. What worries me are the actions and decisions he makes that seem less mature than a typical 49-year-old CEO, even though he’s one of the richest people in the world. Don’t get me wrong, I love the billionaire thumbing his nose at convention as much as anyone. However, after making a questionable acquisition of his cousin’s solar roofing company in 2016 and settling fraud charges with the SEC in 2018, investors should expect more responsible behavior going forward.

Instead, Musk continues to push the boundaries between fun and market manipulation on social media, and he adds unnecessary fuel to the argument that he’s just as interested in trolling the establishment as he is in leading. You’re here. Another evidence over the past few days has come in the form of a supporting tweet Dogecoin – a cryptocurrency that started out as a joke based on a meme where a shiba inu dog is called a doge – then a tweet hinting at buying a cryptocurrency called Shiba Inu, when investors confused it have mistakenly traded above in response to the Dogecoin tweet. Now the billionaire comic has changed his official title from CEO to “Technoking of Tesla” and that of his CFO to “Master of Coin”.

Not just other people’s money

Despite all the shenanigans, most critics seem to miss two very important facts. One, Musk is brilliant. He has now been either the founder or the first investor (he didn’t actually launch Tesla) of three companies that have redefined industries: PayPal funds, Tesla and EspaceX. Second, he is not an incrementalist. After taking the wealth he earned from selling PayPal and investing all of his money in Tesla and SpaceX, he ran out of money. Fortunately, he got a loan from the Department of Energy to keep Tesla running. It’s a mindset that few people have, and it leads to drastic results. Of course, the automaker could have gone bankrupt, but it was willing to do anything.

Famous investor Warren Buffett likes to say that there is no strike call in investing. You don’t have to fight every step of the way, and you don’t have to draw a conclusion about every business. This is the main reason why I am not a Tesla investor and probably never will be.

Despite a one-time entrepreneur in a generation and growing evidence that all forms of transportation are included in the company’s addressable market, it’s pretty clear that Musk enjoys making potentially dangerous big bets. So far they have worked, but the line between being unconventional and irresponsible is often hard to distinguish. I will support the company and profit from the trolling, but I cannot bring myself to buy shares in a company that is so dependent on one person, especially when that person is so unpredictable.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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