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Winning on Wall Street: Tesla investors’ faith grows despite losses

Tesla's market value surged recently - but wherein lies its real value?

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Stephan Giesler
Stephan Giesler

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Hello, automated driving community! The emblematic case of the Tesla stock price and fears of cities’ revenue streams drying up because of autonomous cars: we bring you this week’s key stories from the world of automated driving!

You have to hand it to him: no matter what Tesla goes through, both Elon Musk and the firm seem to come out the other side rather unscathed (the fatal crash of May 2016 might have spelled the end for a less resilient beast). Thursday’s action on the trading floor following the electric car maker’s second quarter financials update once again begs the question: what would Tesla have to do to fall out of favor with investors?

At close on Thursday 3rd August, Tesla Inc’s (TSLA.O) share price had jumped around 7% to $347 (€295) since the markets opened. Now that sort of pop is pretty impressive in its own right but given what we know about Tesla, it seems somewhat…bizarre almost.

In a nutshell: the figures showed that while year on year revenues spiked by 120% to $2.79 billion (€2.37 billion) and sales figures increased, Tesla is still running at a massive loss. Indeed, the firm’s net loss rose to $336.4 million (€286 million) from $293.2 million (€249 million) for the same period last year. Not only that but it is burning through cash to the tune of $100 million (€85 million) a week right now and is expected to top $2 billion (€1.7 billion) this year.

Yet, despite this, investors appear to be keeping the faith. But it is not just blind faith. Mr Musk has something up his sleeve that both him and investors are placing quite a bit of trust in: the new Model 3.

On Friday 28th July, Elon Musk kicked off production of the most “affordable” Tesla to date with a price tag of $35,000 (€30,000). In the days since the event the firm is averaging more than 1,800 reservations for the car per day, adding to the more than 400,000 orders that were already placed. The production target? 50,000 Model 3s by the end of this year and an ambitious 10,000 vehicles each week by the end of 2018. It seems investors have faith that Musk will deliver on his promise of building a product that consumers want. This was already the feeling in April of this year when Tesla’s stock market value surpassed that of GM, despite GM selling 10 million cars in 2016 to Tesla’s 76,000.

For the rest of the industry looking on, this is an interesting case: a tale of the power of persistence and sticking steadfast to an innovative idea. Musk has not once wavered on his vision of revamping mobility via electrification and automation. In a bold move, he focused entirely on electrical cars a long time ago. He embraced the change and as it seems, that is the value that investors see in Tesla.

Mo’ driverless cars, mo’ problems? Pondering the fate of cities

When driverless cars take to the streets, cities’ budgets could take a massive hit. At least that’s what a recent analysis by Governing reports…and it makes for interesting reading – especially if you’re managing a transportation budget.

The analysis examined revenues for parking collections and fines, traffic citations, traffic camera fines, gas taxes, vehicle registration, licensing and select other fees for the 25 largest U.S. cities – all things that would be under threat from the widespread adoption of driverless cars. Combined, these 25 cities netted a whopping $5 billion (€4.3 billion) in these auto-related revenues in fiscal 2016.

It seems inevitable that autonomous driving will reshape our cities and the obvious positive benefits are well publicized. But have we overlooked some important flip-sides?

Take freeing up urban space for example. This assumes that since driverless cars will be able to park more efficiently, (closer together or even in out-of-city lots), we will be able to reclaim some valuable urban space. The flip side? Parking fees account for nearly 25% of Austin Transportation Department’s total budget with parking fines another money-maker. But it’s not just parking. If the dream scenario of autonomous, electric and zero-emission driving is realized, cities will also miss out on gasoline taxes – the single largest source of revenue for many of the largest cities.

Could these losses be recouped? It’s hard to say. But this analysis shows that cities should start now to plan with driverless cars in their thoughts. Did someone say autonomous vehicle tax?

So long, drive safely (until cars are driverless),

Stephan Giesler

Editor, 2025AD

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