Tesla’s Crazy Valuation at Odds With Trump’s Coal-Powered Worldview
Wall Street loves Tesla, and Wall Street loves Trump—but when it comes to energy strategy, who does it love more?
Yesterday, Tesla surpassed General Motors as the most valuable American automaker, with a market capitalization of $51 billion, or about 2.6 times NASA's 2016 operating budget.
Valuation, of course, is an estimation of worth, not a hard accounting. Tesla is expected to deliver around 150,000 cars in 2017 and has lost money three years in a row; in 2016 GM sold 10 million cars and earned $9.43 billion. Tesla's massive valuation is a vote of confidence from the investing community about where the company is headed more than where it currently stands.
According to standard business orthodoxy, with Tesla being a company that has yet to master its core competency of building electric cars at scale even as it merges with unprofitable, debt-heavy companies and blows loads of cash on capital expenditures, it seems like a ridiculous overconfidence fueled by the sort of tech-induced mania we've seen before and from which we refuse to learn. But the Solar City merger does make the combined entity, in Musk's words, the "world's only integrated sustainable energy company." If true, that's no small thing, and not just from an ecological perspective; Wall Street isn't gambling that the advances Tesla represents—electric cars, alternative power, the safety promise inherent in autonomous driving technology, sustainable energy—is the moral bet, but rather the profitable one. (Relevant to this idea is the fact that Tesla's automotive revenue was down at the end of Q4 2016, but the company's overall earnings during that time were bolstered by "energy generation and storage" revenue.)
Meanwhile, the Trump administration continues its mean-spirited ruse about saving the coal industry, which currently employs fewer people in the US than does the "We Have the Meats" fast-food chain and only slightly more than the bowling industry. Whether you believe the premise that the decline of the industry has less to do with overly-restrictive legislation and more to do with shifts toward cleaner natural gas, even reigning coal baron Robert Murray—a climate-change denier who wants the government to stop classifying carbon dioxide as a pollutant and opposes Obama-era regulations prohibiting the dumping of mining detritus in streams—says Trump should stop making promises because the jobs are not coming back.
There's no joy in that fact that when an industry dissolves, the people who served as that industry's backbone are left bleaching in the sun (a theme upon which journalists meditate daily), but Trump's bit of theater is a crass excuse to roll back environmental regulations to boost business. Trump, and everyone who supports that thinking (which is not the same as climate-change denial, that idiotic refusal to believe scientific consensus by the actual smartest people on the subject) should just say that, instead. Make the argument that's there to be made: "I value the economic opportunities that come with deregulation more than I value the long-term health of the environment."* That's a defensible position, if a mercenary one.
In the context of Tesla's valuation, Trump's deregulation and fossil-fuel strategies come off as old and backward-looking—but old ideas are not bad ideas per se. It certainly poses a grave danger to the long-term health of the environment, but if the ecological hysterics would be dropped on one side at the same time Trump and Co. would lose the climate-change denial nonsense, then two opposing ideas could be pitted head-to-head: the Trumpist belief that there's still economic and social value in the domestic fossil fuel industry and that regulations have unduly constrained that potential; and its seeming opposite notion that a concerted and wholesale shift to cleaner and more sustainable power sources is not only possible, but desirable and profitable.
Wall Street, we're repeatedly told, loves Donald Trump, yet seems grossly misaligned with the president over the future direction of energy. If the president would forego the human props and absurdities like proposing NASA stop using orbiting satellites to collect climate-change data and instead lay out an honest and cogent argument for his position, we could allow Wall Street to do what it loves to do most: gamble on what constitutes a winning idea.
Josh Condon is The Drive's deputy editor. You can reach him at email@example.com.
(*The reason you rarely hear anyone make this argument is because it's the same as saying, "I trust that I and my kids can afford to experience only the un-poisoned parts of the world until we die, and I don't much care what happens after that." I understand completely why this stance makes sense to a wealthy and sheltered older man like Trump; what I'll never understand is why the people most adversely affected by this kind of policy continue to vote for it. In a perverse way, I hope it's sheer desperation rather than that particularly American fantasy whereby voting like you're a billionaire is somehow considered a viable wealth-building strategy.)