Analyst: “All Of Us Likely Tesla Customers In 25 Years,” Has Some Love For BMW Too

NOV 10 2014 BY JAY COLE 30

Ready For Everyone To Have A Tesla - Setermoen Norway, The Northern Most Supercharging Station In The World (via Lennarth K)

Ready For Everyone To Have A Tesla In Setermoen Norway – The Northern Most Supercharging Station In The World – Arctic Circle North (via Lennarth K)

Over the past few years we have heard some pretty varied opinions on Tesla, both on its financial prowess and the ultimate adoption of its all-electric cars in the future.

Ronald Baron Of Baron Funds Fame

Ronald Baron Of Baron Funds Fame

Generally the wilder the story, the more obscure the source.

Not so for this one, as Ron Baron of Baron Capital (mutual funds) goes way out on a limb in favor of what the company can accomplish in an interview.  Typically, Mr. Baron’s management style has been one of “invest and hold” long-term – so this would seem to be a departure from the norm for the CEO.

Mr. Baron wrote to his shareholders and clients on the business of Tesla.

“We are a fan of Tesla’s business and of Elon Musk. One competitive advantage that we think will make Tesla “built to last” and  is that its competitors are being compelled to build and sell electric cars.”

While normally we raise an eyebrow when looking at some analyst’s projections of short term sales (past even Tesla’s own numbers) to justify future growth beyond the company’s 30 billion market cap today,  but Mr. Baron is not really advocating for today, or that Tesla has a particular secret sauce giving them an advantage – he is suggesting that everyone will be a Tesla customer at some point because of the stubbornness of the traditional automaker.

“As a result (of other OEMs disinterest), they are developing electric expertise so slowly that the lead Tesla has built up through its fast growing staff of Silicon Valley engineers may soon become nearly insurmountable.”

Could Mr. Baron be right?  If your belief is that personal vehicle plug-in technology is the transportation solution of tomorrow, you have to at least consider the possibility most of us will own a Tesla product over the next quarter century.

Here is Mr. Baron’s further statement in regard to Tesla.  The analyst also notes that BMW (probably considered to be the least traditional of the major auto makers today) is also likely to benefit in the future by their forward EV thinking:

Car companies don’t want to build electric cars because their existing plants that make engines, transmissions and drive trains would become “stranded assets.” Their unions don’t want electric cars since they are simpler to manufacture than cars with internal combustion engines (ICE), which means fewer factory assembly workers. Dealers don’t want electric cars, either. Tesla bypasse franchised dealers to sell its cars directly to consumers. Franchised car dealers also make a lot more money servicing cars than selling new ones. Tesla cars need less service than ICE cars. A standard ICE automobile has more than 2,000 moving parts. Tesla cars have 18 moving parts!

Tesla’s culture is far different from that of other car companies. Tesla’s mission is to build the planet’s best AND safest automobile.  Tesla’s car also happens to be best for the environment. The following says all we need to know about Tesla’s culture and why the best engineers in Silicon Valley want to work there. When Tesla began to manufacture its cars, its inspection process was not as strong as it needed to be. Elon then conducted line inspections personally until his fellow workers understood exactly how he wanted the process to work. Elon next moved his drafting table to the middle of the manufacturing floor to write software with his engineers. That was to make sure everyone knew how important the quality of the product was to him. Our kind of chairman, that is for sure. Our kind of culture, in which every employee does whatever it takes to provide Tesla customers with the best product possible.

One more thing. While many car companies doubt electric cars will ultimately represent a large portion of new car sales, BMW is not one of those companies. Two of our research analysts recently visited BMW’s headquarters in Munich, as well as its electric vehicle and carbon fiber assembly plants in Leipzig, Germany, and its battery pack assembly plant and research facility in Dingolfing, Germany. The BMW financial team believes a revolution in drive train is underway. We believe that BMW will likely phase out internal combustion engines over the next 10 years!

Categories: Tesla


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30 Comments on "Analyst: “All Of Us Likely Tesla Customers In 25 Years,” Has Some Love For BMW Too"

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I go back to the adoption curve. Whether it be a washing machine, indoor stove, etc. It takes time. The most comparable curve for EVs is the HEV. It has been moving along for roughly fifteen years now. I am very glad Tesla is all in and I look to be one of Mr. Baron’s numbers. I too am glad that BMW is so forward thinking, but I do not pooh pooh Nissan, Ford or GM. Yes, I wish there was an all electric Fusion, but I don’t see Ford’s approach as refusing to build. BMW may have a broader acceptance from the top brass down, but large companies are just that. I have no doubt that everyone working on the voltaic system is all in. Divisions can function with a bit of a different mind set until they become mainstream. I disagree with the concept that if you don’t get in now, you will not be able to join the race. Will you lose market share? Of course, but it is absurd that you can not get in the game. In 2000,there was no software standard in the coordinate measuring machine industry. At the same time, there was a… Read more »

Yet what happened to Blackberry half a dozen years after another Silicon Valley company launched the iPhone?

There is the economic theory: “winner take all”.
Hybrids: Toyota
EVs: Nissan
High End EVs: Tesla

It will be interesting when Tesla drops into Nissan’s market space.

By the way, my next car might be the Chevy Volt, but it has to win against Nissan sooner rather then later. And if it wins, it has to take on Tesla.

I see Ford and Chrysler in the non-compete zone, do they even have a long term perspective?

And what happens when Tesla builds a hybrid truck?

Tesla may well build an electric truck some day but they will *never* build a hybrid anything.

Time will tell but if Nissan can sell 30K Leafs at $29K, I’m pretty confident Tesla can sell a hella lot more Model III at $35K in 2017-2018. Holds true even if it is actually $40K. Most things move very slowly. There is little short term that can change the national fleet to EV’s faster than it turns over but buying preferences can change on a dime.

No mention of the car company that has sold more EVs than anyone else: Nissan.

That’s the problem with all productivity gains going to the 1%. They’ve lost touch with the general market.

But there will be a war between Tesla and Nissan in 5 years?

He makes a great point about why traditional auto manufacturers don’t want to build and sell electric cars.

However, he’s as clueless as Musk when it comes to quality. You don’t test to insure quality as he’s suggesting. Quality is the result of the production process. You test to validate your production. Having Elon Musk “personally” inspect the cars is a stupid PR stunt, staged for the unknowing, but inane for anyone who understands manufacturing.

You missed Baron’s point completely. Musk didn’t move his desk so he would personally inspect, he did this to show the whole company that reliability is job one, until their car is as solid as you would expect for a car with only 18 moving parts. The car was already designed for top quality. Production should have needed only minor coorrections.

It worked for Ford until Mulally destroyed the brand.

I was particularly impressed by how he reported on the stranded assets, it’s not an angle I knew about before. I thought most manufacturers were uninterested in evs solely because they don’t fit their business model of constant maintenance.

But I disagree with you on he “PR stunt” of moving his desk to the factory floor. I’m sure it’s also a great motivator for employees to see that their otherwise glib and arrogant CEO is hard at work, doing his best to ensure that the product they’re making succeeds. And not out playing golf and going to parties with other rich kids for “networking”. He’s at least doing his best to justify his stratospheric bonuses, unlike a good many other CEOs.

Stranded assets would only be an issue if the entire nation moved over to EVs in a relatively quick manner. Which wont happen. Most vehicles are built for 5-6 year life cycles. At the end of those life cycles the production line is recapitalized with millions and millions more in investment to tool up for the next generation of that vehicle.

In the case of the automakers, they should adjust their recapitalization downward to reflect the smaller demand for ICE vehicles and reallocate that to lines that produce EVs.

I think the 5-6 year cycle will be plenty of time for automakers to adjust how much they invest in their factories to reallocate their investment capital from ICE to EV. It’ll be 2040 or 2050 before we see all light-duty vehicles sold off the lot as EVs, and then another 20 years until all LDVs on the road are EVs.

Absurd. The major car companies already have the engineering talent to compete with Tesla. Plus, in every industry if there is a dearth of talent, companies that need engineers simply pay more.

This reads as a blog post by a fan, not the work of an analyst. It’s far too effusive.

Yes, engineering talent is not the question. I think it’s business leadership/direction that is lacking. Obviously this is where Tesla and traditional auto companies differ the most. Tesla of course is 100% committed, but we get the impression that most other auto companies are still testing the waters. Some are doing just the bare minimum, most likely just for CARB reasons.

Actually, Ford, GM, Nissan, Mercedes, VW/Audi, and others already have the drivetrains designed, tested, and built. The only trigger most appear to be waiting for is the batteries price and performance to improve to jump into to the pure BEV segment.

That’s why Tesla is going to be absolutely killed in the market if they keep delaying their future models.

Tesla needs to start hitting their milestones better. The only cards up their sleeve that will give them an advantage is the Gigafactory to make cheaper batteries and the Supercharging network.

Engineering great ICEs vs EVs are very different things. ICEs need great mechanical engineers to make thousands of moving parts work together flawlessly. EVs need great software engineers to make solid state systems work together flawlessly. The Model S has as much in common with a smart phone as a car. Why else is Tesla near San Fran rather than Detroit?

Yes, the others are waiting for batteries to get cheaper . . . Tesla is doing something about it. They are building the gigafactory.

If the gigafactory succeeds, then they really will have revolutionized cars. Right now, they are just a really cool high-luxury EV maker. But that is just a niche player.

Tesla’s committment is in danger of becoming stained by the delays with the Model X and Model 3.

With the X, the falcon doors are the likely culprit causing delays – are they really worth the investment in time and $$ to get them working right? The more costs that must be passed on to the consumer is directly related to the kind of commitment a manufacturer has to the consumer.

With Tesla, their insistence on following a difficult and most likely expensive path to basically reinvent the wheel with something of relatively minor importance – third row seating access/egress – begs the question – are they committed more to the increasingly impatient consumers who have invested their own savings into the promises made by Tesla?

Or,is their primary committment to follow their own ego-driven dreams that has them wasting time and other people’s money chasing down an idea that addresses in its own fashion an obscure need that has already been sufficiently addressed by other means?

When MB CEO said they can’t make a profit in EV’s they Lost the Race.

Dr. Kenneth Noisewater

GM has had massive engineering skills for a couple generations, and yet they went bankrupt anyway. Engineering isn’t the problem, inbred idiotic management is. And for legacy automakers, that isn’t changing anytime soon, apart from sporadic bursts that get clawed back into the bucket.

If interest, the above comment was the 100,000th posted at InsideEVs.

Congratulations, Jay! It’s been a long journey from a analyzing and predicting GM’s financial/leadership meltdown in 2007-2008 at to hosting and moderating 100K posts at InsideEVs. Here’s to hitting 200K in half the time. And thanks for a great forum for continuing the on-going EV dialog!


There is one joining pattern between all of Musk’s investments. It is taking on monopolistic, bureaucratic organizations. Be it automakers, government and military contractors, financial institutions, or utilities.

I think I read where he owns around 1% of TSLA, whcih would be around 250 million. Now if he got in on the ipo at 15, then he would have capital gains around 225 million. I suppose that could make one effusive. Also TSLA ranks as their, his companies, 24th largest holding, so they have some coinage.
Of course being a billionaire does not make you right, but it does tend to have people not just willy nilly disregard your point of view.

Of course, many (More) of us would like a Tesla, be it a Models, updated 400 Mile Range Roadster, Or a Model X or a Model 3, and if we had the money today, we would! However, with the Thousands, no – the Millions of Millionaire’s in the world taking notice and getting their Tesla’s now, keeps them on track for lower cost future models, and other products, like the Tesla Truck – of which one co-worker is already dreaming of!

For many of the calculated under 40 mile commute people, they don’t buy new cars, so the coming $35,000 target price will still not attract them. It will take a Price Point at or below $20,000 to even get them to look, and the range at that price will need to be at least 150 miles, Winter or Summer, along with decent Quick Charging!

Most people who don’t buy new cars, wouldn’t suddenly buy one if it was $20,000. Most of those people know that cars depreciate the most rapidly during the first 3 years, and therefore look to buy one after that hit was taken by someone else (typically a leaser). They will come to EVs when there is a robust market of off-lease EVs. We are getting there, as most EVs today are leased.

I agree with Baron in almost every aspect but one, “sustainable” competitive advantage. Comparing Tesla vs BMW, both are companies that are branded and invested similarly. BMW essentially setup a separate company to design and manufacture the i series. But BMW still calls the i3 and i8 BMWs which signals EVs are now part it its core tech/strategy. Yet even BMW would not create a car like the Model S years after Tesla, not because it couldn’t, but because the car would cannibalize it’s own luxury sedan sales. This will remain Tesla’s best sustainable competitive advantage. In fact technology advantage is not sustainable because electric motor and battery tech is so pervasive. Given all the research efforts out there some company will soon leap frog lithium ion battery performance and make Tesla’s current tech insignificant.

So I’m guessing he bought a Tesla and became a quick Tesla zealot after appreciating the great things about the Tesla.

As another EVer, I appreciate his enthusiasm. But I think the overestimates how fast people will change habits. If the gigafactory pulls off a cost drop miracle, perhaps it will happen. But I expect the oil & gas industry to fight back hard and I expect the ICE industry to fight back hard too.

If the Model X were delivering Now, it could arguably be an insurmountable lead, and also extended the ‘production limited’ argument throughout the giga ramp up..

Early X placeholders are getting surly, and Signature holders deserve an apology – MHO.