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What the Tesla Model 3 Means for the Planet’s Future

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Tesla Model 3

Tesla CEO Elon Musk’s overarching goal of converting the world from using fossil fuel powered cars to electric vehicles is coming to fruition. Or so it would seem after the company has secured nearly 300,000 reservations on its upcoming mass-market Model 3.

But is the world really on the cusp of a green car revolution? According to the Washington Post, our enthusiasm should be tempered with a healthy dollop of reality. “Even if Tesla manages to scale up and hit its very aggressive target of 500,000 vehicles a year by 2020, that would still represent only about .5 percent of global light-duty vehicle sales,” said Colin McKerracher, head of advanced transport at Bloomberg New Energy Finance. “So it’s hard to have an overall impact from them alone.”

The U.N.’s Intergovernmental Panel on Climate Change estimates that greenhouse gas emissions from transportation transportation total 7 billion tons annually. That number is projected to rise to 12 billion tons by 2050 in the absence of any significant policy shifts. Several experts suggested this week that booming sales of Tesla automobiles won’t have a significant impact on the global vehicle market.

Today, global sales of light duty vehicles are a staggering 88.5 million a year according to Navigant Research. That number is expected to grow dramatically as sales in India and Asia skyrocket in the years ahead. In comparison, 500,000 Teslas are just the proverbial drop in the bucket.

The real question is what effect the success of the Model 3 will have on global cultural norms and other manufacturers. “It’s obviously important for Tesla, but I think it’s going to push other automakers to match what Tesla’s doing, and also get other people to think about switching to electric,” said David Reichmuth, a senior engineer in the clean vehicles program at the Union of Concerned Scientists.

Bloomberg New Energy Finance predicts electric vehicles sales will total less than 5% of total global sales until 2022. After that, falling battery prices will finally make electric cars truly price competitive with conventional cars. Bloomberg thinks it will be 2040 before the number of electric cars sold each year gets really impressive. By then, 35% of cars will be electric and EVs will comprise 25% of the cars in the world.

Regulatory and cultural changes will have a large effect on how rapidly the world decarbonizes the transportation sector. In China, government policies strongly favor electric cars. As a result, sales of so-called "new energy vehicles" -- which include hybrids, plug-in hybrids, and battery electric cars -- are expected to triple this year and continue to expand rapidly in the years to follow. Those policies will alter the Chinese culture. Electric cars will likely be preferred over conventional cars in China within a few years.

Tesla Model X Signature Red offered on Tesla China website (left). Tesla Model S in Chinese showroom (right) [Source: Tesla Motors]

Autonomous cars could also dramatically reduce transportation emissions.That's according to a study by Jeffrey Greenblatt and Samveg Saxena of the Lawrence Berkeley National Laboratory. Tesla obviously is positioning the Model 3 to feature advanced autonomous driving features when it goes into production.

Just like wind and solar power, electric cars may enjoy a period of very rapid growth, but that in and of itself will not solve the world's carbon emissions problem. Will people look back on the introduction of the Model 3 as the "tipping point" when the balance between internal combustion engines and batteries began to shift? Quite possibly. Certainly Tesla is raising awareness about electric cars and forcing other car makers to invest in battery and autonomous technology.

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But there could be a long way to go before the people on earth can say they have conquered their carbon emissions problem. A rhetorician would argue that Tesla is doing what's necessary to promote change but not sufficient to make that change complete.

Feature photo credit: Tesla Motors

 

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Investor's Corner

xAI targets $5 billion debt offering to fuel company goals

Elon Musk’s xAI is targeting a $5B debt raise, led by Morgan Stanley, to scale its artificial intelligence efforts.

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(Credit: xAI)

xAI’s $5 billion debt offering, marketed by Morgan Stanley, underscores Elon Musk’s ambitious plans to expand the artificial intelligence venture. The xAI package comprises bonds and two loans, highlighting the company’s strategic push to fuel its artificial intelligence development.

Last week, Morgan Stanley began pitching a floating-rate term loan B at 97 cents on the dollar with a variable interest rate of 700 basis points over the SOFR benchmark, one source said. A second option offers a fixed-rate loan and bonds at 12%, with terms contingent on investor appetite. This “best efforts” transaction, where the debt size hinges on demand, reflects cautious lending in an uncertain economic climate.

According to Reuters sources, Morgan Stanley will not guarantee the issue volume or commit its own capital in the xAI deal, marking a shift from past commitments. The change in approach stems from lessons learned during Musk’s 2022 X acquisition when Morgan Stanley and six other banks held $13 billion in debt for over two years.

Morgan Stanley and the six other banks backing Musk’s X acquisition could only dispose of that debt earlier this year. They capitalized on X’s improved operating performance over the previous two quarters as traffic on the platform increased engagement around the U.S. presidential elections. This time, Morgan Stanley’s prudent strategy mitigates similar risks.

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Beyond debt, xAI is in talks to raise $20 billion in equity, potentially valuing the company between $120 billion and $200 billion, sources said. In April, Musk hinted at a significant valuation adjustment for xAI, stating he was looking to put a “proper value” on xAI during an investor call.

As xAI pursues this $5 billion debt offering, its financial strategy positions it to lead the AI revolution, blending innovation with market opportunity.

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Tesla tops Cathie Wood’s stock picks, predicts $2,600 surge

Tesla’s future lies beyond cars—with robotaxis, humanoid bots & AI-driven factories. Cathie Wood predicts a 9x surge in 5 years.

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Cathie Wood shared that Tesla is her top stock pick. During Steven Bartlett’s podcast “The Diary Of A CEO,” the Ark Invest founder highlighted Tesla’s innovative edge, citing its convergence of robotics, energy storage, and AI.

“Because think about it. It is a convergence among three of our major platforms. So, robots, energy storage, AI,” Wood said of Tesla. She emphasized the company’s potential beyond its current offerings, particularly with its Optimus robots.

“And it’s not stopping with robotaxis; there’s a story beyond that with humanoid robots, and our $2,600 number has nothing for humanoid robots. We just thought it’d be an investment, period,” she added.

In June 2024, Ark Invest issued a $2,600 price target for Tesla, which Wood reaffirmed in a March Bloomberg interview, projecting the stock to reach this level within five years. She told Bartlett that Tesla’s Optimus robots would drive productivity gains and create new revenue streams.

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Elon Musk echoed Wood’s optimism in a CNBC interview last month.

“We expect to have thousands of Optimus robots working in Tesla factories by the end of this year, beginning this fall. And we expect to scale Optimus up faster than any product, I think, in history to get to millions of units per year as soon as possible,” Musk said.

Tesla’s stock has faced volatility lately, hitting a peak closing price of $479 in December after President Donald Trump’s election win. However, Musk’s involvement with the White House DOGE office triggered protests and boycotts, contributing to a stock decline of over 40% from mid-December highs by March.

The volatility in Tesla stock alarmed investors, who urged Musk to refocus on the company. In a May earnings call, Musk responded, stating he would be “scaling down his involvement with DOGE to focus on Tesla.” Through it all, Cathie Wood and Ark Invest maintained their faith in Tesla. Wood, in particular, predicted that the “brand damage” Tesla experienced earlier this year would not be long term.

Despite recent fluctuations, Wood’s confidence in Tesla underscores its potential to redefine industries through AI and robotics. As Musk shifts his focus back to Tesla, the company’s advancements in Optimus and other innovations could drive it toward Wood’s ambitious $2,600 target, positioning Tesla as a leader in the evolving tech landscape.

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Investor's Corner

Goldman Sachs reduces Tesla price target to $285

Despite Goldman Sach’s NASDAQ: TSLA price cut to $285, Tesla boasts $95.7B in revenue & nearly $1T market cap.

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(Credit: Tesla)

Goldman Sachs analysts cut Tesla’s price target to $285 from $295, maintaining a Neutral rating.

The adjustment reflects weaker sales performance across key markets, with Tesla shares trading at $284.70, down nearly 18% in the past week. The analysts pointed to declining sales data in the United States, Europe, and China as the primary driver for the revised outlook. In the U.S., Tesla’s quarter-to-date deliveries through May fell mid-teens year-over-year, according to Wards and Motor Intelligence.

In Europe, April registrations plummeted 50% year-over-year, with May showing a mid-20% decline, per industry data. Meanwhile, the China Passenger Car Association (CPCA) reported a 20% year-over-year drop in May, despite a 5.5% sequential increase from April. Consumer surveys from HundredX and Morning Consult also shaped Goldman Sachs’ lowered delivery and EPS forecasts.

Goldman Sachs now projects Tesla’s second-quarter deliveries to range between 335,000 and 395,000 vehicles, with a base case of 365,000, down from a prior estimate of 410,000 and below the Visible Alpha Consensus of 417,000. Despite these headwinds, Tesla’s financials remain strong, with $95.7 billion in trailing twelve-month revenue and a $917 billion market capitalization.

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Regionally, Tesla’s challenges are stark. In Germany, the German road traffic agency KBA reported Tesla’s May sales dropped 36.2% year-over-year, despite a 44.9% surge in overall electric vehicle registrations. Tesla’s sales fell 29% last month in Spain, according to the ANFAC industry group. These declines highlight shifting consumer preferences amid growing competition.

On a positive note, Tesla is making strategic moves. The Model 3 and Model Y are part of a Chinese government campaign to boost rural sales, potentially mitigating losses. Piper Sandler analysts reiterated an Overweight rating, emphasizing Tesla’s supply chain strategy.

Alexander Potter stated, “Thanks to vertical integration, Tesla is the only car company that is trying to source batteries, at scale, without relying on China.”

As Tesla navigates these delivery challenges, its focus on innovation and supply chain resilience could help it maintain its edge in the electric vehicle market despite short-term hurdles.

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