Over the weekend, billionaire Elon Musk tweeted that he was about to release a “Top Secret Master Plan (Part 2)” for Tesla, his electric-car company.
Naturally, Wall Street started speculating wildly as to what this could be. No one likes secrets, you see.
And there is perhaps no one on Wall Street more equipped to muse on Musk than Adam Jonas over at Morgan Stanley. On Tuesday morning, he published his take on what the plan might be.
In one sentence, Tesla might be about to move from being a simple car company to being a commercial transportation company.
Here’s the key part of Jonas’ note:
“The auto industry is in the early metamorphosis from privately-owned model to a public transport utility. Exploiting the commercial opportunities embedded in 10 trillion miles annually (1.7 Light Years), 600bn hours of driver and passenger time (68 million years) and the associated content and data (for sale or analysis) may be worth a significant multiple of Tesla’s current addressable market for car sales.
“We believe that Tesla’s unique advantages in machine learning and lack of exposure to legacy systems (internal combustion tech, unconnected cars) provide it with an opportunity to tap into larger and faster growing markets ahead of its competitors.”
Like Musk, Jonas is thinking huge right now. We’re talking fleets and fleets of vehicles (self-driving or not) to cover some of the biggest problems in commercial transportation. Maybe it will focus on the pesky “final mile” issue – that final step before a product gets to you from a fulfillment center. Maybe, as Jonas speculates, we’re talking about an intercity network.
Who knows? It’s a secret.
But here’s what we do know. This will cost a bundle of cold hard cash, just like everything else. And that’s not really what Tesla has right now.
The company is burning about $700 million a quarter now that it has ramped up production of the Model 3. Tesla’s potential (if investors approve) new solar company, Solar City, burned $650 million a quarter over the past year.
Both companies are consistently overpromising and underdelivering. Musk said on his Q4 2015 earnings call that Tesla expected to be free-cash-flow positive starting in the second quarter of this year. That doesn’t seem likely, and neither company has proved that it has a return on capital.
On the other hand, we have no idea how long Musk plans to ramp up to a potential Tesla Mobility company (that’s what Jonas is calling this thing). We have no idea whether he would partner with the government, whether Tesla would own and operate the fleet entirely, how Musk would price this service, or whether it would be entirely automated.
But man, this is a great story to take to the stock market if you want to raise cash to get the dream going. And the stock market loves a good story.