Tesla has been the subject of much discussion lately, so this week we applied our ESG Safeguard platform and Key Drivers model where we showed a deterioration in Market Position and Guidance sentiment scores over recent quarters. We also looked at how Tesla stacks up against competitors in the past year, namely Tata Motors (500570:IN) and Renault (RNO:FR) which have been making significant gains in the EV space.
Tesla (TSLA) and Elon Musk have long been synonymous with the highest of environmental ideals, removing the internal combustion engine from the road. This dream is now becoming a reality and the visionary CEO went from having a novel concept for electric cars to a company that changed the world. Tesla deserves a lot of credit for pioneering this trend and will forever be remembered as a company that was key for developing a low-carbon economy.
However, in the past few years this goodwill has been frittered away through labor issues, workplace discrimination, and erratic behavior from their CEO. As other automobile manufacturers have invested to develop their own electric vehicle capabilities, Tesla is becoming a victim of its own success and Elon Musk’s ego, to the point that they were removed from the S&P ESG index last week.
Sentiment for Market Position and Guidance have deteriorated in recent quarters for Tesla in our Key Drivers model. We last covered Tesla over a year ago and saw warning signs of this as VW made bold plans to play catch up in the EV market. Business fundamentals aren’t the only detriment to Tesla lately though as a slew of discrimination and harassment issues within the company have emerged. To make matters worse, the company is portrayed as anti-union with CEO Elon Musk being outspoken on the issue.
Furthermore, Musk was found to have violated labor laws in the past. Slipping market share combined with poor ESG credentials on Social and Governance factors are beginning to spell trouble for Tesla.
Conversely, in India Tata Motors (500570:IN) domestic sales of EVs increased 81% in the month of April, lending credence to a growing belief that Tesla is losing in foreign markets. Tata Motors also has a partnership with Tata Power to increase electric infrastructure in the country. Tata Power’s renewable energy division is now partially owned by Black Rock. The models Tata Power are producing are significantly cheaper than Tesla’s and are geared towards competing with other light vehicles like electric motorcycles that are popular in the country. As more companies develop solutions for their own markets, the harder it will be for Tesla to gain ground.
In France, Renault (RNO:FR) unveiled a new model this week that combines battery electric and hydrogen fuel cell concepts. The hydrogen fuel cell would increase the range of the model to up to 500 miles. This is a concept that was never entertained by Tesla, at least publicly. This is because CEO Elon Musk has been outspoken about the application of hydrogen fuel cell technology and has even tweeted phrases like “Fool Cells” in the past.
While most manufacturers have come around to the idea of purely electric models for consumer grade vehicles, hydrogen is still a viable technology being utilized for more industrial scale applications. If Renault can make good on building this model, it is potentially a game changer in the EV space. The new model has an increased range of up to 500 miles, much farther than electric vehicles on the road today. The company credits a lighter and more portable fuel cell as the reason for optimism in developing this new type of automobile. They plan to bring their new car into production within the decade and underscores the technological boom in electric vehicles since Tesla first came on the scene.
The automotive industry has come a long way in the past few years. With every major player onboard with their own EV roadmap, it's understandable how a company like Tesla, who was a pioneer in the industry, could lose some of its appeal purely from a market position standpoint. The ESG matters ranging from key man risk from Elon Musk, to the discrimination and harrassment issues, are putting more pressure on the company to the point that they were removed from the S&P ESG index last week. Tesla has a long road ahead to regain their place in the sun, and with stiffer competition than ever before it is clear the company will need to adapt to changing market conditions and a pro-labor environment.
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