The Paradoxical World of Tesla and Twitter

dhruvtalksstech
Jan 8, 2023
6 min read

The world's most valuable car company is run by the eccentric billionaire Elon Musk. Tesla is one of the most well-known car brands in the world thanks to the immense popularity of Elon Musk. Tesla is an extremely polarizing brand, much like Elon Musk himself. There are people on the extreme ends on either side and you will never find someone with a neutral approach to Tesla. People either love it or hate it, just like how people either love or hate Elon Musk and all his other ventures such as Twitter, SpaceX, and the Boring Company. Tesla seems to have a lot going for it but just like any other company, it has its fair share of challenges. Some of them seem insurmountable while others can be worked around. But Elon Musk is one guy you would not want to underestimate - look at what he has done with Tesla and SpaceX.

Tesla is the most valuable car company on the planet by a huge margin. They have not sold even 10% of the cars Ford has sold since its inception but Tesla is still worth a lot more than Ford for other reasons that are seemingly inexplainable to a lot of people adding to their negative perception of the brand and the last thing a publicly-traded company wants to do is to upset the Wall Street guys because of the negative perception. Tesla is faced with a lot of challenges - from increasing cost of manufacturing, lead shortage, China controlling Elon, competition from the VW group, BMW, and Mercedes, and quality control issues. Because of the global supply chain collapse, millions of cars are sitting in lots waiting for semiconductor chips to come from China and Taiwan. They are complete except for the chips.

This has also prompted a lot of manufacturers to either remove certain features from cars such as heated and cooled seats or have hiked prices substantially than before. Several used cars that are over a year old are being sold at prices higher than their buying price just some time back. The used car market is booming as people are waiting for months and sometimes even over a year to have their cars delivered. India is a huge manufacturing hub for cars and the problem is very much visible in Pune which is the center of India's automobile manufacturing. Lead is the element that is used in the production of batteries. A lot of the world's lead reserves are being used at a rapid pace because of increasing demand and this has pushed up the price of making a lead battery, the most expensive component of an EV, even more expensive.

There is also pushback from environment conservation groups as they recently got aware of the deep mining that has to be done to extract lead. EVs run on electricity but there is no point in having EVs if the electricity they run on is produced by burning coal and other fossil fuels. China and Argentina control a lot of the world's lead supply and one nation is extremely hostile to the US while the other one is witnessing inflation only God can explain. China is the single biggest buyer of Tesla cars which naturally makes Elon extremely reliant on China for business. Tesla also has a mega factory in the city of Shanghai which produces 5000 cars a day. Since China is also the world's largest car market and also a dictatorship, it gives them huge influence and control over companies functioning in China, especially American companies which are of particular interest to Xi Jinping.

Meanwhile, the US is stepping anti-China rhetoric and Elon Musk is caught in the middle of it. He has to pick sides and cannot which one. One thing that got Tesla where it is right now is the headstart it had in the industry. They started mass-producing and selling EVs long before any other mainstream manufacturer even thought of doing so. Tesla also got a lot of marketing and earned a name for itself when the Tesla Roadster was sent to space using a SpaceX rocket. It is not every day that a car is sent to outer space to orbit the Earth. But that novelty and "wow" factor about EVs is long gone and all companies are all in to compete in the EV space, including legacy automakers. BMW, Mercedes, Audi, Ford, GM, and Hummer are fighting intensively for a piece of the market share pie. There have been several EVs that have come out in the last 2 years that are better than Tesla cars.

The Ford F-150 Lightning is a shining example of this. Tesla has been selling cars for almost 14 years now but one thing that still taints its reputation is low quality. The panels do not line up, there are big panel gaps, and there is not a generous use of leather, metal, and wood. A lot of the panels move and there are a few hard plastics here and there. A similarly priced BMW or Mercedes would feel at least 2X expensive to sit in. There is also no feeling of poshness and the cabin is too minimalistic. If I am spending more than $100,000 on a car, I expect to be wowed every time I get into the car just like the very first time I stepped into that car. I find Creta's cabin to be more exciting than a Model S Plaid's. There is nothing except buttons and not even buttons for basic functions such as opening the glove box. It is difficult to use the infotainment screen for such basic functions while on the move.

I certainly have a particular penchant for Elon Musk's companies just like a special place in my heart for Mark Zuckerberg's companies. Twitter has finally been acquired by Musk after a tumultuous saga that started in April 2022 and concluded in the final week of October 2022. Twitter is bleeding money and has laid off more than 50% of its talent. It has returned profit only for 2 years in its entire history of existence. The platform has over 200 million users but is struggling with revenues and Elon Musk recently said that Twitter may have to file for bankruptcy if it is not able to generate substantial revenue in the next 12 months. Twitter has started everyone the "blue tick" for $8/month. Elon Musk is widely known in the tech industry for taking very impulsive decisions.

This does not sit well with the advertisers and stakeholders. Several big advertisers have ceased operation on Twitter for now given the uncertainty Twitter has managed to shroud itself in. Twitter's share price is trading around $53 which is already lower than the $54.20 that Elon Musk paid for the company. Elon Musk wants to make Twitter a short-video platform and move away from just micro-blogging which is why tweets can be much longer now. Twitter also has to settle a lot of payments with former executives such as former CEO Parag Agarwal who was ousted from the company after Elon Musk officially took over and was reportedly escorted out of the building by security guards. Twitter is also on the American and European government's radar for banning Twitter accounts of journalists and media reporters who have spoken out against Musk in the past. So much so for free speech, Elon !!!!

Some of the accounts have been restored but things are not going well for Twitter in any sense. Musk may have bought Twitter but he has borrowed a lot from the banks to fund this purchase. He has also sold billions worth of Tesla stock. It will be difficult to pay the whole amount easily since the stock markets are in a sensitive position right now all around the globe. Some people also worry that Musk is invested heavily in so many companies - Tesla, Twitter, SpaceX, the Boring Company, Neuralink, etc. that it is only time before one of his ventures fails terribly marking a swift fall of the world's richest man. This is one thing I have been pondering as well and the reasons are genuinely concerning. I would be worried if I were an investor in any of his companies.