Tesla’s Top Secret Masterplan Is ‘Transport Company’: Morgan Stanley

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Tesla Motors CEO Elon Musk tweeted that he hopes to publish part two the “top secret Tesla masterplan” later this week, and since then, speculations about what he was referring to have been swirling. Some may see the tweet as an attempt to divert attention away from the accidents and investigation relating to the EV maker’s Autopilot system, while others are formulating more specific theories.

But is Musk losing his credibility because of everything that has happened recently? And if so, does his tweet about a “masterplan” really mean anything?

Tesla mobility?

Unsurprisingly, Morgan Stanley analyst Adam Jonas is one of those with a theory about what Musk meant by his “top secret Tesla masterplan,” which he described in a report dated July 12. He talked up the same speculation he has had for some time, which is that Tesla aims to transform itself from being just an automaker into a “transport company.” He again outlined his ideas for an “on-demand mobility service that complements Tesla’s skills in electric and autonomous vehicles,” noting that the automaker’s mission statement is about accelerating the development of “sustainable transport.”

Jonas believes that the auto industry is currently being transformed from a model of privately-owned vehicles to one of a “public transport utility.” He sees commercial opportunities in the 10 trillion miles that are traveled every year and 600 billion hours of driver and passenger time. He also believes Tesla is uniquely positioned to benefit from such a business model because of its expertise in machine learning and the fact that it isn’t exposed to the systems legacy automakers are exposed to, such as internal combustion technology and unconnected cars.

The analyst believes Tesla will launch its own mobility service with 5,000 cars by 2018, and he’s so sure of this that “a substantial portion” of his $245 price target comes from his valuation of the yet-to-be-announced Tesla Mobility, if it even exists. If he’s right about mobility being the automaker’s ultimate goal, he said investors should consider things like the timing of the ramp, who owns the fleet, financing for the fleet, the level of automation for the vehicles, and other details.

Was Musk’s tweet just a diversion tactic?

Musk’s tweet about the secret masterplan came at a time when Tesla is sorely in need of some good press. The automaker is surrounded by reports about crashes that potentially involved its Autopilot system. We’ve heard about three crashes in which the system was said to be engaged, one of which was a fatal accident that is under investigation by regulators. And then there’s the seemingly wild bid for SolarCity, which has attracted loads of criticism from investors and analysts alike. Tesla also missed guidance for deliveries again for the second quarter.

In a post on MarketWatch, Therese Poletti questions whether with all the bad press, Elon Musk’s credibility is waning. She notes that he does certainly deserve respect for all that he has done but adds that all of the negative developments that have been uncovered over the last couple of weeks should give investors pause.

She argues, “The company is failing to reach is own expectations while adding to future projections and attempting a risky, potentially unwise acquisition, all while under federal investigation for one of its most prominent technological advances. Yet the company and its CEO act as if they are made of Teflon, and don’t need to have the types of checks and balances that corporations use to avoid disaster.”

Indeed, there was a time when Tesla exceeded the ambitious targets Musk set when others said they wouldn’t be able to meet the targets, and investors rewarded the automaker handsomely. However, multiple missed delivery targets are a cause for concern now, whatever you think about the accidents involving Autopilot or the SolarCity bid. There’s no denying that betting on Tesla still means betting on Musk’s ability to deliver, but investors must ask how much they’re willing to pay for blind faith in him.

If he does end up being able to deliver, then the rewards will certainly be great, but if he doesn’t, then one day we may look back at his “top secret masterplan” and wonder what it was worth. After all, a plan is only as good as the ability of a company to execute it, so it seems a lot is riding on Musk’s credibility right now.

Tesla shares edged higher 0.04% to $224.88 during afternoon trading on Tuesday.

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