It’s obvious to anyone not part of the Elon Musk cult that the wheels have come off Tesla (NASDAQ:TSLA). Tesla stock is going to keep suffering. Sales are falling. The product line is aging and Tesla is shedding employees. Musk’s attention is easily diverted. Its innovations, both in making cars and keeping them going, are being cast aside.
There is a way to make this right. The idea springs from the $47 billion in stock Musk wants from Tesla’s board. They can do something much better with that money.
M&A and Tesla Stock
With $47 billion in stock, Tesla could buy Rivian (NASDAQ:RIVN). They could buy it two times over.
Rivian makes a good product. Rivian has a good truck. It knows how to scale, and it understands vertical integration. Rivian CEO R.J. Scaringe is a car guy who knows the car business
Anyone who wants to be making electric vehicles in the next few years needs to sell them at mid-market prices. I have been saying this for years. The first step is making a $25,000 car. BYD (OTCMKTS:BYDDF) is doing it. Nio (NYSE:NIO), will too. It’s a requirement for staying in the market.
Rivian is ready for this. Scaringe is now betting his company on the R3, a scaled-down design that will bring its SUVs and trucks inside that $25,000 price point.
All About the Batteries
The $25,000 price point is just the first step toward making EVs ubiquitous by 2030. An EV is just a battery on wheels. The cost is in the battery. Everything above the wheels is just a topping, like icing on a cupcake.
Once upon a time, Musk understood this. In 2020, he called batteries “the gating factor” for EVs. He was right. The company’s 2020 “Battery Day” should have been the start of its run to the top.
Scaringe understands this. Rivian’s Georgia plant will be supplied by a battery plant just up US 441 in Commerce. That won’t be its only option. The new Rivian plant will be surrounded by battery manufacturers, all of which will need customers.
Scaringe sees competition among Korean suppliers giving him the vertical integration Rivian needs to compete. What’s needed to compete are designs and marketing that win in the U.S. market. Rivian has that.
Fire Musk
Musk is no longer a car guy, if he ever was.
Tesla’s layoffs are designed to pivot the company into robots and artificial intelligence. Musk sees Tesla’s balance sheet as a piggy bank. He sees the factories and production Tesla has already established as old news, and he’s bored.
The turning point for me was Musk’s purchase of Twitter. What you or I think of Musk’s politics is not the point. Media is not Tesla’s business. Microsoft (NASDAQ:MSFT) learned that and jettisoned MSNBC decades ago. Walt Disney (NYSE:DIS) learned that and made peace with Florida.
The Bottom Line on Tesla Stock
Tesla’s shareholders should reject Musk’s proposed pay package. Tesla’s board should fire Elon Musk.
Firing Musk would bring half of the American car buying market back to Tesla’s side. Buying Rivian would bring the other half, along with the only strategy that makes sense.
Free Elon Musk. Let him play with his satellites and his rockets and his robots and his artificial brains. Don’t let him use Tesla as his piggy bank. Save the company.
Tesla is a car company. It should be led by a car guy. R.J. Scaringe is a car guy. Tesla should be led by Scaringe. Tesla should buy Rivian.
As of this writing, Dana Blankenhorn had a LONG position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
