We've said it before, but what Elon Musk peddles isn't cars but dreams. What makes Tesla such a phenomenal stock is that Musk is such a phenomenal storyteller. The side-effect here is that some Tesla investors become a bit starry-eyed in their admiration for the company, to the point where the being (eventually) profitable actually becomes a headwind in itself. But in the grand scheme of things, Tesla hype isn't that big a deal. The stock goes up as dreams are formed, and it'll go down when (and if) those dreams are crushed. Life will go on. It's not like anyone will die or anything.
Still, there might be some collateral damage in the form of certain people's, uh, let's say, credibility. Exhibit A: Ron Baron. A favorite of the squawk set, the billionaire fund manager has foretold great things for Tesla. As well he should, since he's got $300 million riding on it.
A recent investor letter of Baron's, however, raises some eyebrows:
Since Tesla can insource production, it has the advantage of knowing exactly what a product should cost and how to produce it. Mary T. Barra, General Motors’ CEO who has been trained as an engineer, has instructed her supply chain to “use Tesla suppliers…even if they cost more!” Her rationale is that despite incurring higher costs to build a car, maintenance and warranty costs will be lower; car safety will be improved; and GM’s reputation will be enhanced.
Did Mary Barra really say that? Is General Motors blindly following the supply-chain lead of Tesla because of its immaculatelyproducedvehicles? Strangely, Baron's letter seems to be the only place where this quote appears. Then again, perhaps Ron Baron has regular heart-to-hearts with the CEO of America's most-selling automaker. (Dealbreaker reached out to Baron Funds and GM. We will update this article if we hear back.)
That might not be Baron's only disconcerting Tesla rumination. Here's a report from the field:
For reference, the Fremont factory employs between 6,000 and 10,000 workers. Also – if these sorts of prosaic concerns matter to true believers – the plant boasts “about one-seventh the efficiency” of the GM-Toyota partnership that preceded Tesla in that facility, per Autoweek.
We're not trying to single out Baron here. ...OK, we are. And we know that septuagenarian billionaires tend to be pretty credulous these days, but this is another level. There's talking your book and then there's whatever this is. And whatever this is is seems to be verging on the fantastical.
The bottom line, of course, is that this is all very bullish for Tesla.