Would Apple Acquire Tesla?
1. Driving the Tesla(TSLA) Model S for the first time, why are the investors so surprised that it is so awesome?
2. Should Apple(AAPL) expand its product line into TVs -- or cars?
Last Friday saw Tesla's first customer deliveries of its Model S to non-insiders. The goal is to ramp production from one car per day now, to 80 cars per day by November, for a total of 5,000 delivered by the end of the year. Next year, the goal is to deliver at least 20,000 cars, probably with some upside from the Model X minivan, which launches at the end of 2013.
The Tesla investment-expectations setup to Friday's event was a barbell's worth of extremes. On the one hand, some people were extremely optimistic and enthusiastic about the prospects for the Model S. I am clearly one of them.
Yet others were extremely bearish on Tesla. Short interest is said to have been as high as 24%. The question is why? Why were so many people so extremely bearish about the Tesla Model S?
I think I've figured it out. It wasn't that the bears were so pessimistic about Tesla as a company, or specifically the Model S. It was that they didn't think electric cars -- any electric car -- could be successful. And with Tesla being the market's pure play on electric cars, how could you go wrong in shorting it?
Here is what I found: Most critics of electric cars have never driven one. They confuse the entirely different issue of political aversion to subsidies and other interventions in the market -- that I agree are always bad -- with the notion that an electric car can have overwhelming positive performance attributes.
Alternatively, they are skeptical of new technology in general, always magnifying a few narrow drawbacks of a new technology, while ignoring the revolutionary implications of looking at "the whole forest."
For an almost perfect analogy, I remember the smartphone debate back in 2000 and 2001: Being an early BlackBerry user, I said almost everyone would want email on their phone, as well as a great keyboard on which to type. I was told that this might be a market for a few thousand Wall Street bankers, lawyers and high government officials, that's all. The 1%.
When I asked those smartphone bears in 2000 and 2001 if they actually had a BlackBerry, most of them said "No, why would I want to look at my email all the time?" They had never used one. Three years later, every single smartphone skeptic I knew had one.