After Tesla reported earnings on Wednesday, CEO Elon Musk took questions from analysts. Analysts and media outlets have begun to address a possible decline in demand for the Model S. However, Musk insisted that demand is not the issue, it’s the production. “The battery industry has to have more B.S. in it than any industry I’ve ever seen,” Musk said during the interview, where he seemed ticked off that the battery industry doesn’t hold itself to a high standard of truthfulness.
As discussed in class, Tesla has been focusing on lowering the costs of production by mass producing car batteries (Tesla is preparing to construct a massive $5-billion battery factory in Nevada). However, it seems like the company’s pressing issue now is being able to simply build its cars, and build them well. Although Tesla is on top of the technology ladder, I think it still has a long way to go in terms of lowering manufacturing costs. Prices cannot be reduced if the marginal costs are high. And to further cut the marginal costs, Tesla has to invest more in its research and development. Otherwise, it will not be able to catch onto the rapidly growing demand for electric cars; and it will soon lose its slice of this big cake to other covetous competitors. Tesla definitely has the skills and technology, but the issue now is its affordability and surely the consumers do not appreciate such sumptuousness.
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