I wonder if Elon Musk and his Tesla Motors team paid any attention to a large recall from another small car company last week.
Because Tesla's future will surely be similar to Aston Martin's present. Recalls are standard in this business. Last week, the venerable British luxury car company said one recall for a very small part is going to cost an estimated $2.71-million.
That's a big hit for the tiny 101-year-old Aston, which on average has sold fewer than 4,000 cars in the past few years. Last year Tesla sold about 20,000 cars.
Tesla's volumes are bigger, but in age terms the company is in diapers compared to Aston. Still, I think the two are about equal on the world stage. Neither is profitable and both cater to niche markets – expensive battery cars for Tesla, expensive luxury cars for Aston.
Yes, speculators love Tesla and have driven the market cap to nearly $23-billion (U.S.). Aston is probably worth around $800-million, given Investindustrial put £150-million ($272-million) into the company in return for a 37.5 per cent stake about a year ago.
So Aston Martin is a low-volume niche auto maker with a global footprint and a shiny brand. Tesla is a low-volume specialty car company, too.
The difference is that Aston is a real car company facing real car company problems, like recalls. Tesla is not yet that car company.
Yes, Tesla's apologists say the company is disruptive, that it's reinventing the auto industry. Nonsense. The auto industry is massively regulated and Silicon Valley-thinking isn't going to change that. Like Aston now, Tesla will eventually need to operate in the world of recalls and such.
So two questions: Will Tesla still be worth more than Aston after a recall or two? And which company will be worth more after another 100 years? Or exist at all?
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