Daily Observations
By michael v. blumeyer
Last week, Elon Musk decided to abruptly shut down all tesla stores and to only sell tesla vehicles and products online. Last Sunday night, Musk changed his mind, deciding to only close less than half of the stores. The decisions Musk has made in the past have both brought him business success, as well as his share of trouble throughout the journey of his ventures. His latest decision to suddenly lay off hundreds of loyal employees, increases even more uncertainty for the innovative automobile company. In Musk’s latest letter to the public, he shared that the Model 3 would finally be priced at $35,000, while the Model S and X would be priced 3% higher. What makes this time very interesting for the company is that this is the first time Elon Musk has deliberately put all of his workers’ jobs at risk. As politics and hype have both bolstered the company’s brand awareness, so too has bad news caused the financial security to plunge on so many occasions, that many traders have conceded that Tesla is “not a tradable company”.
Musk has already been under such scrutiny by the SEC, but continues to make big, rash decisions, as he temporarily did last week. The real question is, will Tesla continue to maintain and improve their revenue and gross profit margins if they were to only sell their products online? The change in decision represents two things about the firm. First, it represents the tracability in top management. The fact that they will support such a rash decision reflects Musk’s low tolerance to talk over issues, in which transparency and the ability for constructive conflict will be low. Another insight is that due to the fact that Musk changed his mind either represents Tesla’s lack of versatility in relation to Musk’s impulsive wishes, which is definitely true.
It is true that Tesla’s gross profit margin is increasing, although Bloomberg reports them to be still negative, as the last three quarters are shown as follows:
Musk has already been under such scrutiny by the SEC, but continues to make big, rash decisions, as he temporarily did last week. The real question is, will Tesla continue to maintain and improve their revenue and gross profit margins if they were to only sell their products online? The change in decision represents two things about the firm. First, it represents the tracability in top management. The fact that they will support such a rash decision reflects Musk’s low tolerance to talk over issues, in which transparency and the ability for constructive conflict will be low. Another insight is that due to the fact that Musk changed his mind either represents Tesla’s lack of versatility in relation to Musk’s impulsive wishes, which is definitely true.
It is true that Tesla’s gross profit margin is increasing, although Bloomberg reports them to be still negative, as the last three quarters are shown as follows:
In the midst of all this uncertainty, however, is the fact that Tesla has been well-known to be a company that is highly volatile, so much so that it might not rattle investors as much as in other companies. The firm has always been known to simultaneously be in the center of bad news, yet also has a reputation to pull through when it comes to achieving their goals in terms of business strategy, appeal, and expansion. Thus, despite the news, Tesla’s stock increased $5.52 today.
It is still unknown how the SEC will play out, as well as how other business executives and leaders will respond to Musk’s latest moves. It is expected that the competitors of Tesla, such as Ford and GM, will lean more towards taking better care of their employees, with using their company culture as a possible strength against the lack of job security that Tesla currently possesses.
It is still unknown how the SEC will play out, as well as how other business executives and leaders will respond to Musk’s latest moves. It is expected that the competitors of Tesla, such as Ford and GM, will lean more towards taking better care of their employees, with using their company culture as a possible strength against the lack of job security that Tesla currently possesses.
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