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Is Tesla Just A Series Of Startups? Elon Musk Lays Out The Case

Chris Katje
·3 min read

Elon Musk would like investors to think of Tesla Inc. (NASDAQ: TSLA) as a series of startups.

The electric automaker's CEO discussed this on the recent third-quarter earnings call, highlighting the individual units that make up Tesla.

Musk On Tesla components: “There’s probably in excess of a dozen startups effectively in Tesla,” Musk said.

He referred to every major Tesla product line as a startup and every new plant as a startup.

Since other car companies don’t own their own sales and service, Tesla’s sales and service units could be startups, he said, adding: “The whole autonomy thing is a startup.”

Musk also termed the computer chip design and the Supercharger network as startups.

“We’ve maybe been a bit slow with some of the startups, but I don’t think we’ve had any of them fail,” Musk said.

Musk On Car Insurance: Musk called insurance “substantial” and said it could be worth 30% to 40% of the car business for Tesla.

“It’s going to cost less and be better,” Musk said of potential auto insurance from Tesla.

He mentioned having a better feedback group and said he believes “a lot of people” would select Tesla insurance.

Related Link: Tesla Beats Q3 Earnings Estimates, On Pace For Profitable Year

Elon Musk On HVAC: Tesla announced improvements to the heat pump for vehicles, which led to Musk discussing the possibility of HVAC for homes.

“I think there’s potential for an integrated home system that kind of does power generation storage, heating, cooling, air filtration, water purification in a really tight package.”

Tesla does not have a prototype yet, but it's “something that would be probably good to have,” Musk said. 

Musk has previously mentioned HVAC as a future area for Tesla to tackle. 

Why It’s Important: The automotive part of Tesla’s business is its largest revenue driver.

Musk has said before — and confirmed on the quarterly call — that the energy business is expected to make up a larger percentage that automotive in the future.

TechCrunch points out that Tesla treating different vehicle component divisions as a collection of companies instead of a collection of divisions has helped it rollout updates to existing products at a fast pace.

Musk said there are “no plans to spin anything out. That just sounds like added complexity.”

Benzinga’s Take: Tesla has a near $400-billion market capitalization.

While the company has seen massive growth, some analysts have begun to question its valuation and profitability going forward.

The growth of the energy business in the third quarter was a positive that analysts didn’t discuss enough.

Insurance and HVAC are exciting items Musk has mentioned that could be great growth drivers for Tesla in the future.

TSLA Price Action: Shares of Tesla lost 1.21% Friday, closing at $420.63. Shares are up more than 400% in 2020.

Photo courtesy of Tesla. 

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