Quoted from Richthofen:What got those companies in trouble was a global economic slowdown and massive financialization. GM was a derivatives/finance/loan company with a car division at that point.
You seem to be dismissing the role that gas prices doubling had on the demand for the products that these companies were making. Not just was there a major problem with their loans, but they also didn't have products people wanted to buy.
Quoted from Richthofen:Shutting down small car development is simply Ford and others doing a calculation: they believe they cannot make profitable cars with the new EPA regulations and they don’t believe they can squeeze margins enough.
Actually, I agree with this. A lot of people think it's about "shifting tastes". I think it has more to do with a set of EPA rules that more or less punishes the production of vehicles with smaller footprints.
GM does. Ford doesn't.
As for deciding if it is a gaffe or not, you have to decide whether you think electric cars are a "segment" of the market or if they are a replacement product.
If they are a segment and they never cross, say, 10% market penetration, then they are probably doing the exact right thing. If instead they are a technology that is expected to fully replace existing product, it's a huge problem.
I know basically no one that bought an electric car because they thought it would save the planet. I didn't. They bought it because it's a better technology. That bodes poorly for it being a segment. So does California already hitting ~10% market penetration this past year.
Governments also seem to believe in the electric story. Not the US of course, but many other countries including China are planning to completely phase out internal combustion cars. That means the market is shrinking for the traditional Ice car and...
Quoted from Richthofen:But unlike Tesla they can’t go on a multi year money-losing binge to do the R&D to convert 100% to electric.
Right, because they can't idle their factories and shut down sales for that length of time since they have so much capital that must be spent just to stay afloat. They can't afford to transition, unless the transition takes place nice and slow, or they jump in with both feet and hope.
Quoted from Richthofen:The market doesn’t reward the existing, stable businesses. Everyone is all in on “disrupters”, regardless of whtether their business models will ever be profitable. It’s IMHO a side effect of ultra low interest rates since 2008 (yes even today’s rates are obscenely low by historical standards). No one wants to invest slowly in proven businesses, everyone wants huge multiple growth.
That's not really true. The market does reward existing stable businesses. I own a few handfuls of stock, and my investment strategy has always been to find existing, stable companies and invest in those. That strategy has worked out just fine.
The auto industry, which suffer massive bankruptcies just over ten years ago and had to be bailed out to continue to exist is NOT a stable industry. The recent introduction of a new propulsion system that a lot of customers and clients think is better does not lead to a stable industry.
A significant portion of investors, particularly institutional investors see this. They arent rewarding Tesla for not being Ford. They are rewarding them because there is a belief their products and their ambition to create those products will lead them to.be the better long term bet.