Also, the new idea is unrelated to electric automobiles.
After the investor gathering, Tesla stock has fallen 5.9%. The stock increased again the following day, ending the week up 0.6%, falling short of the 1.9% and 2.6% weekly increases posted by the S&P 500 and Nasdaq Composite, respectively.
Wall Street subsequently grumbled that the gathering was too lofty, intellectual, and protracted. Experts anticipated that Tesla would unveil a prototype of its small EV in a spectacular manner later that night. To wrap out the evening, they received a brief Q&A session.
During that discussion, Philippe Houchois of Jefferies raised an important point about the variety of car types that Tesla would have to sell to meet its eventual target of 20 million vehicles annually.
"Not that many. Really 10, I don’t know, not that many," Musk responded.
That's the shocking news. It's a really small number. One of the biggest automakers in the world by volume, Volkswagen (VOW3. Germany), has ten different vehicle brands and a staggering number of different models.
Musk further explained that with conventional automobiles, people just run out of things to do. So when one runs out of things to do, they simply shuffle the cards and you're left with pretty much the same. It's the same with how the phone has facilitated convergence. There used to be a huge variety of flip phones, but the tendencies changed .
He's got a point. When the flip phone was replaced with the so-called candy bar form factor, the great majority of phones now feature it.
A car is not a phone. In addition to cars and SUVs, people require vans and trucks. Even still, if Musk is correct and the number of vehicle models declines dramatically, it would save the auto industry money that it would otherwise have squandered on a cycle of perpetual model development and upgrades that lasts between eight and ten years.
The smartphone sector does it better. Global car manufacturers spend around $110 billion a year on facilities and equipment and produce about $90 billion in free cash flow. Apple (AAPL) and Hon Hai Precision Industry (2317. Taiwan), which works with Apple to manufacture the iPhone, spends around $15 billion a year on facilities and equipment and produces about $100 billion in free cash flow annually.
