It would be hard to find someone happier than an investor who bought Tesla Motors stock two years ago and has held on since. Sure, there have been bumps in the road and piques of volatility along the way but since March 2013 Tesla has jumped over 450 percent.
Still, the company has been a lightning rod for controversy. Critics say that Tesla, for all the outsized gains and attention, has yet to produce a single dime of profit. Such critics would be correct.
At the same time, however, Tesla enthusiasts – some of whom are a quite a bit wealthier today than they were two years ago depending on their initial investment – counter this argument by saying that profits can wait. Every successful company, they say, must build scale and take chances to achieve sustainable, long-term term growth, and that requires making targeted, deep investments. This is also correct.
The central issue is not whether the company has the right vision for success (though I believe that it does). Rather, the most important thing about Tesla is ensuring that it has the resources to ensure that it does succeed. That’s because its prosperity is crucial, not just for shareholders, management or employees but for the health and general welfare of everyone.
Indeed, due to devastating impacts of global climate change Tesla’s fortunes, in many ways, are tied to the future of the planet, since if companies like this fail, then there’s no telling what the earth could look like in 50 years.
If that sounds too alarmist, it’s not. Or if you would like to dispute the notion of climate change altogether, you shouldn’t. There is consensus among most reputable scientists that the earth is warming at an alarming rate. The science is so convincing, in fact, that anyone who refutes it either has an agenda or simply hasn’t studied the issue closely enough.
Global climate change is producing more extreme and unpredictable weather events each year, from extended heat waves, to coastal flooding and droughts affecting wide swaths of the country, including California, which has serious water supply issues if current weather trends hold. That’s why, collectively, the investment and business community needs to get behind companies like Tesla, which embrace technologies and innovations that recognize the reality of global climate change and reduce greenhouse gas emissions.
Up until this point, the large American car companies, like Ford and General Motors have made it clear that they will not be part of this group, having neither the ingenuity nor the willingness to seriously tackle the problem. This is partly a cultural issue, Americans love their trucks, and the recent dip in oil prices has only whetted our appetite for more and gas-guzzling large trucks and SUVs.
But once oil rebounds, sales of large SUV’s will decline, much like they did in the wake of the financial crisis, and such vehicles will become inefficient to own. Though it only makes sense to invest the time, money and effort into putting a fully electric truck on the road, no one should hold their breath – it’s not going to happen anytime soon.
This is why Tesla’s ultimate success is so important – almost no one is willing to pursue the electric car market as aggressively as it is. And while the company has strong leadership and an attractive business model, it needs an infusion of cash to fully support its initiatives, including the completion of a massive lithium-cell battery factory in Nevada. In many ways, this project will determine Tesla’s future because, if executed properly, it will lower production costs, increase battery efficiency and make electric cars more affordable for middle-market consumers – which will only inspire other car companies to do the same and eventually lead to a healthier planet.
In many ways, this makes Apple is a natural partner for Tesla. Not only is Apple sitting on a mountain of cash but it also has an incredible need to upgrade its own battery technology. More importantly, however, there is a broader strategic fit. Apple, by infusing its hardware and software systems into Tesla’s fleet of cars, would broaden its reach in the automobile market, where key competitors such as Google are increasingly becoming aggressive, while Tesla would receive the capital infusion it needs to achieve its objectives.
Given Apple’s record of investing in environmental initiatives, they would likely be predisposed to such and investment, potentially making the world a greener, more stable place. But let’s get real, as the most profitable company in the world, this arrangement would make business sense, too, further allowing Apple to pursue its goal of being on every screen in the world, whether it’s a television, smartphone, tablet, watch or car.
If you have doubts about the importance of investing into electric car technology and battery efficiency. Consider this: Even the Chinese government, which prioritizes economic growth above all other goals, is beginning to tackle its air pollution problem in Beijing. They are very interested in growing the electric car market. Other cities such as Paris have started putting driving limitations on gas cars due to pollution issues. It’s only a matter of time until we can’t breathe in our own cities. With so much at risk, there is nothing more important than the success of companies like Tesla.
By Ross Gerber
Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki, an independent investment advisory and wealth management firm with approximately $330 million in assets under advisement. Gerber Kawasaki clients and employees may own positions in various companies mentioned in the article.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
Ross Gerber is a registered representative with, and offers securities through LPL Financial, Member FINRA/SIPC. Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor and separate entity from LPL Financial. Please consult your investment professional before acting on any advice.
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