Volvo vs. Tesla

This past weekend I rode along while my son test-drove a brand new Volvo XC 90, a big SUV that bore a sticker price of more than $61,000.

VolvoMy son doesn’t want to buy a car; he doesn’t even want to own a car. But he had received an offer in the mail from Volvo promising $75 just for taking a test drive, and that was an offer he couldn’t refuse.

The car was very comfortable, even cushy. But all that cushiness couldn’t hide two things—the noise of the engine and the feel of the mechanical shifting of the transmission, two things that don’t even exist in my Tesla.

But Volvo isn’t going to stick with these gasoline-burners much longer. In fact, on July 5, Volvo announced that as of 2019, all its new car models launched would be either hybrid or fully electric cars. Unfortunately, many, many news outlets (including The Wall Street Journal) misinterpreted this to mean that Volvo will stop making traditional gasoline-powered cars at the same time. Not true. Volvo will continuing making and selling existing gasoline-powered models, and the market—among other factors—will determine when the actual end of the line comes for those traditional vehicles.

In any case, the market that Volvo is truly targeting with this new direction is not the U.S. but China, which is not only the world’s largest market for cars but also the home of Volvo’s parent company, Zhejiang Geely Holding Group (which bought Volvo from Ford in 2010).

Spurred by a need to reduce pollution, China is requiring automakers’ fleets to reach the equivalent of 47 mpg by 2020, and the only way for Volvo to do that (absent making little cars), is to go hybrid or electric.

The hybrid/electric power plants will also provide a great alternative to diesel in Europe. Volvo sales in Europe were 83% diesel in 2016, but thanks mainly to Volkswagen, manufacturers (and consumers) are now running from diesel as fast as possible.

But this doesn’t mean Volvo’s new offerings will be competitive with Tesla’s all-electric cars. The vast majority of Volvo’s cars will be built on existing (un-optimized) platforms and will be mild hybrids, in which electric systems assist a gasoline engine at times and store energy regenerated in deceleration, but are unable to propel the car on electricity alone.

Tesla, meanwhile, continues to lead the pack in the electric car market, with its “affordable” Model 3 beginning deliveries to the first of more than 400,000 reservation-holders later this month.

Tesla Model 3Conclusion, Volvo is moving in the right direction, but as of today has nothing that is competitive with Tesla’s all-electric vehicles.

Road Tripping in the Tesla

My daily commute is only one mile, but I’ve managed to put more than 46,000 miles on my Tesla since I bought it in September 2013.


Road trips!

So, given that many potential Tesla buyers still suffer from range anxiety—that uneasy feeling that your car’s battery will die before you get where you’re going—I’m presenting this account of my latest road trip, in which my wife and I not only got where we were going but enjoyed some fringe benefits from driving an electric car, too!

We started with a 3-hour drive from Salem, Massachusetts to New Haven Connecticut, where we had lunch at “The Study at Yale”, a hotel/restaurant that not only provided free valet parking to patrons but also had a Tesla High Power Wall Charger (HPWC). The result: after a good lunch and a visit to both of the college’s museums, we had plenty of power to drive first to JFK Airport, where we dropped my son off for a flight to Tokyo, and then to the 1 Hotel in the up-and-coming Brooklyn Heights neighborhood (braving the Van Wyck Expressway both ways).

Valet parking at the hotel normally costs $50 (Manhattan prices have crept into Brooklyn), but in support of Green living, it was free to us—as was the overnight charge on the HPWC.

Across the street, by the way, was the Watchtower Building, with a big digital clock on top. Long owned and occupied by the Jehovah’s Witnesses, the building was recently sold to Jared Kushner, who has been actively investing in the neighborhood.

The next day we drove to Longwood Gardens in Kennett Square, Pennsylvania, the amazing botanical garden developed by Pierre S. DuPont and well maintained since thanks to a very healthy endowment. Comprising more than 1,000 acres of land, the garden last year completed a $93-million upgrade of the fountains area. Parking at Longwood Gardens is free for everyone, but electric cars get a preferred spot, as well as free charging.

And that night, our B&B also offered free charging, leaving us well prepared for the next day, as we drove down to Maryland to visit relatives, and then into Washington, DC for a publishing conference and a three-night stay. Parking at the Donovan, normally $50 per night, was half price for electric cars. The charging was free.

Three days later it was down to the Jefferson Hotel in Richmond, Virginia, where we paid the full $20 parking rate (for two nights), and once again got free charging between seeing the sights. These included the Virginia Museum of Fine Art, the Hollywood Cemetery (where Presidents Tyler and Monroe are buried as well as Jefferson Davis) and this mural from mid-2016. 2016 bernie sanders mural, Virginia

The first day heading back north took us to Annapolis for lunch and then to the Eastern Shore of Maryland to the beautiful Brampton B&B in Chestertown. Parking was free for all, and charging was free for me.

And the final day, a 4oo-mile-plus drive, brought our first use of Superchargers, the free chargers made available by Tesla at strategic places around the country. While an ordinary household 110V outlet (a Level 1 charger in electric car lingo) will charge my car at perhaps 3 MPH, and a Level 2 charger (Tesla’s HPWC or other brands that support other electric cars) will charge at between 20 and 40 MPH, Tesla’s Superchargers (Level 3) will often charge at more than 300 MPH, if the car can handle it!

joyce kilmer service areaOur first supercharger of the day (after 137 miles) was at the Joyce Kilmer Service area on the New Jersey Turnpike. We plugged in (in the far corner of the parking lot), took a quick bathroom break, stretched for a minute or two, and then hopped back in the car, with enough charge to get to our planned lunch stop, 90 miles away.

But as we were exiting the service area, we noticed the lines at the gas pumps! In New Jersey, it’s illegal to pump your own gas, and these were the lines on Saturday near noon.

gas lines New JerseySo we avoided that. And we also avoided the congestion of Manhattan, instead taking the Garden State Parkway up to the Tappan Zee Bridge and across the Hudson River to the Tarrytown Sheraton, which has twelve recently installed Tesla Superchargers. I plugged in, saw that the charging speed was an astounding 379 MPH, and we had a bathroom break and lunch, while enjoying the sideshow of a wedding in the hotel.

After lunch came the familiar drive up Route 84 to West Hartford, Connecticut, where we plugged into the Supercharger and did a little shopping at Trader Joe’s.

And then came the final leg, 125 miles to home. We arrived with 20 miles to spare, a comfortable margin.

The total mileage for the day was 428 miles, with no real waiting for charging, as we used every bit of our charging time productively.

And the total mileage for the whole trip was 1349 miles.

If my car burned premium gasoline (like my previous one) and got, say 25 miles per gallon and I paid $2.94 per gallon (the average cost in the Central Atlantic states recently), the trip would have used nearly 54 gallons, costing $158.

Instead, I spent nothing on fuel. I dirtied the air less than other drivers. And instead of spending $240 on parking in New York, Washington DC and Richmond, I spent $115.

Thus, road-tripping in the Tesla is not only smooth and enjoyable (providing you plan ahead), it’s also a great way to save money!

Stranded in a Tesla

The following story is true. And like most good stories, it comes with a lesson.

It started way back in the summer, when my wife and I were invited to a September wedding in Newry, Maine, near Sunday River ski area.

We not only decided to attend, we also decided it was an opportunity to go back to the University of Maine in Orono, a place I hadn’t seen since I left forty years ago.

Then we decided to extend the trip by adding Canada and upstate New York state as well, making a true nine-day road trip.

And of course we took the Tesla, even though venturing into some less-populated regions would make charging the car a bit challenging. After three years of ownership and 41,000 miles, I’m not afraid to push the envelope (given the support of thorough research).

Day One took us from Salem to Bowdoin College in Brunswick, Maine, where we had lunch on campus at what I sarcastically call the Malcolm Gladwell cafeteria. Gladwell had recently written an article claiming that the food at Bowdoin was too good, and that Bowdoin should spend more of its money on financial aid to needy students. The food was indeed very good, but just as good was the rebuttal of Gladwell’s argument by my brother-in-law, who works in the College administration, and had hard data.

We charged the Tesla on campus during lunch. Free. Then headed north and charged briefly at the Supercharger in Augusta. Free.

Arriving at Orono, we had a tour of the campus from my niece, a recent graduate who now works at the university, and then a delicious dinner at Fiddlehead restaurant in Bangor—one of the best meals of the whole trip.

We charged the Tesla overnight at a Nissan dealership next to our hotel. Free. But the charger’s circuit breaker quit when it was half full, so Day Two saw us crossing the river to Brewer and topping off at the new Supercharger there while reading the morning newspaper. Free.

While there we met a man who had both a new Tesla and a new baby—which explains why his wife was sitting in the back seat.

And then we drove west to Sunday River, which has a series of Level 2 Tesla chargers. Free.

Found the Airbnb that we were sharing with eight friends.

Enjoyed the wedding on Day Three.

Here’s the bride and groom. It was chilly.

September wedding in MaineAnd Day Four saw us heading north into the wilds of northwestern Maine

Here’s a view of Lake Mooselookmeguntic.

Lake MooselookmegunticWe drove through Canadian customs at the remote Coburn Gore checkpoint (one lane—no waiting), and rolled into Lac Megantic for lunch.

Lac Megantic is notable for the 2013 accident when 74 freight cars, full of crude oil from North Dakota derailed in town, killing 47 people and obliterating scores of buildings.

We charged the Tesla at the MusiCafe during lunch. Free.

Charging the Tesla at the MusiCafe And then headed for Quebec City, where parking in our hotel’s underground garage was free for electric cars. The charging was free too.

Day Five we toured Quebec City.

Day Six we drove to Montreal, and enjoyed a fantastic lunch at restaurant Bouillon Bilk as we entered the city.

The underground garage in this hotel was not free, but charging was.

Day Seven we toured Montreal.

One highlight was the beautiful Notre Dame Basilique.

Notre Dame in MontrealOn Day Eight, when I entered the car, I was greeted with a message announcing that an over-the-air update was available. Updates tend to take an hour or so, and run automatically, just as for smartphones. So as usual, I told mine to begin at 1 AM the next morning.

Then we drove back into the U.S. through the border crossing at Blackpool (several lanes, less than 10 minutes wait), and stopped at the Plattsburgh, New York Supercharger (free again), before driving into the Adirondack Mountains to our friends’ house in Keene Valley, a remote and beautiful place we’ve visited many times.

I plugged the Tesla into the 110 volt current in their shed, and we enjoyed a wonderful evening together.

Day Nine was our day to head home to Salem, but when I opened the car door at 9:00 AM, all its displays were blank, save for a message that appeared very briefly that said the Tesla update had failed or was incomplete!

Such a thing had never happened before, but very quickly I realized that the cell phone service in the area was so bad (usually non-existent) that the update had not completed!

So, I walked back to the main house, got on the landline phone, called Tesla Service in California, and described my dilemma to a pleasant young man named David

He checked the car’s logs, confirmed my diagnosis, and spent a little time trying to wake the car up remotely, without success.

And then we started talking about alternatives.

They could send a technician with a laptop to complete the update, but availability was thin.

They could send a flatbed to take the car back to Montreal where there was a Tesla service center—a journey of 113 miles.

They could send a flatbed to take the car to the Albany service center where there was a Tesla service center—a journey of 120 miles.

Or they could send a flatbed to take the car to the Boston service center—a journey of 279 miles by the fastest route.

None of those alternatives were especially appealing to me, particularly because the flatbed driver could only take one passenger.

So finally, we decided that they would send a flatbed and it would drive the car toward Albany, hoping to pick up a cell signal along the way that would enable the update to complete.

At that point, which was about 10:30, I went back out to the car, to take some of my wife’s gear out, not knowing whether I’d be back later that day or not.

And lo and behold, the main screen lit up in full color, with a message saying “Update Complete.”

Apparently, the cell phone network, meager as it was, had finally completed the task.

So, I got back on the landline to David in California, told him that the update had succeeded and that he could cancel the flatbed, and that we were headed home.

He said he’d keep an eye on us, just in case, but the fact is, everything went smoothly from there on.

We stopped briefly on the way home at the Supercharger in West Lebanon, New Hampshire. Free, of course.

And then we drove home.

So what was the lesson? That’s easy, never do another update unless I’m home in my own garage (where the wifi network makes it fast) or in a place where I’m very confident about the signal.


The Secret Tesla Motors Master Plan

Way back in 2006, four years before Tesla’s initial public offering (IPO), CEO Elon Musk released The Secret Tesla Motors Master Plan, which detailed his long-range plan to move the world from a mine-and-burn hydrocarbon economy towards a solar electric economy. At the bottom, he concluded:

“So, in short, the master plan is:
1. Build sports car
2. Use that money to build an affordable car
3. Use that money to build an even more affordable car
4. While doing above, also provide zero emission electric power generation options.”

Now, ten years later, Musk has accomplished numbers 1,2 and 4 (though the “affordable car” was priced higher than he originally envisioned). He’s on track to accomplish number 3 next year. In the meantime, he’s also built a gigafactory, produced an SUV, built a network of superchargers and introduced Autopilot, which is the first big step to the true the self-driving car.

tesla-chargingAnd now Musk is promising an update to this master plan, which is totally appropriate given that it’s been ten years.

What might be in it?

Certainly, greater integration of car and home energy storage and solar power systems, all of which are true to Musk’s originally mission and would also help combat climate change, a problem that has become clearer in the past decade.

Hopefully, more partnerships with established stakeholders in the automotive and energy worlds. Getting more charging stations in locations where people like to stop would be nice. And getting a foothold in the car-sharing business, through giants like Uber and Hertz would be cool.

And possibly more news about self-driving cars, with the focus on reducing the number of human-caused accidents.

But I hope there’s something even bigger. Because Musk is a very big thinker and the world needs people like him so that the rest of us have someone to follow.

Tesla Model 3 and an Underappreciated Aspect of Tesla Ownership

This is a prototype of the Tesla Model 3, a battery-powered car that will go 215 miles on a charge and cost $35,000.


In the hours before the prototype was unveiled last week, Tesla accepted $1,000 deposits from 115,000 people.

In the days that followed, the number grew to top 276,000 people, and it’s still climbing. And that’s for a car that won’t even go into production for more than a year!

Those reservations will translate into revenue of $9.8 billion for Tesla if everyone buys the base model—less if some people cancel their reservations and more if some people add options.

To this point, most commentators on the situation have focused their attention on the car, and that’s understandable; it’s a revolutionary, beautiful, yet practical machine.

But few people have mentioned another revolutionary aspect of the car that is equally appealing to many people—the fact that you don’t need to deal with car salespeople to buy one!

Note: I’m far from an unbiased reviewer; my Tesla Model S, delivered in September 2013, now has more than 33,000 miles on it. And while I’ve had occasion to visit a Tesla service center several times since then, every visit has been refreshing, because Tesla’s culture is entirely different from those of traditional auto dealers.

Traditional auto salesmen make their money through commissions, and the main profit center of the dealership is through service. As a result, car salesmen are not well respected.


At Tesla, contrarily, the service centers don’t aim to make a profit; they aim to make their customers happy. And so far they’ve succeeded.

So, when you’re evaluating Tesla’s cars versus those of the competition, don’t forget to factor in the value of a retail/service experience that is actually pleasant. It’s an underappreciated aspect of Tesla ownership.

Tesla Motors Annual Meeting 2015

The annual meeting of Tesla Motors was held yesterday, and all is well.

The company expects to grow revenues at a 50% annual rate (more or less) for several more years.

The long-awaited Model X SUV is expected to hit the street in three to four months—and to be the safest SUV on the market when it does.

And the long-term goal of putting an end to the fossil-fuel automobile is increasingly realistic, as more and more automakers play catch-up with Tesla.

In addition, there were two surprises.

First, two shareholders submitted proposals that the company replace the leather used in seats and trim components with man-made alternatives, as companies like Mercedes Benz and BMW already do.

The logic behind this is twofold: One, it is cruelty-free, and two, given that cows emit lots of methane, reducing their population would be a positive step toward reducing the causes of climate change.

Management said they would consider it.

The second surprise was the news that people don’t want the battery swap option. Tesla offered it to a small pilot group in California, and then to pretty much every Tesla owner in California, but in both cases, the response was acutely underwhelming.

The fact is, Tesla owners on long trips have become accustomed to making brief stops of 10 to 25 minutes at Superchargers (which are free), and they don’t see a battery swap as an attractive alternative, particularly since it would cost money.

To me, this is very interesting.

To people who don’t own a Tesla, the limitations imposed by the need to take “long” stops to charge while on trips are daunting. But to Tesla owners who’ve adapted, they’re no trouble at all; in fact, they even become an asset, or a feature.

For more on the topic, see this column about my recent 4,218 mile road trip.

Also check out this picture of me with Mr. Nikola Tesla himself at Niagara Falls, where he and George Westinghouse built the first hydroelectric power plant in 1895, marking the final victory of Tesla’s alternating current over Edison’s direct current.

tim and tesla


Walking The Green Mountain College Labyrinth

Up in Poultney, Vermont, a 30-mile drive west from Rutland, sits Green Mountain College, one of the more progressive colleges in the country.

With roots going back to 1834, the college today has a strong focus on the environment; its 25 undergraduate majors include Adventure Education, Environmental Studies, Natural Resources Management, Renewable Energy & Ecological Design, Sustainable Agriculture & Food Production and Sustainable Business & Writing.

Its 710 students have no baseball or football team; instead they play rugby, ultimate Frisbee and quidditch.

Best of all (in my opinion), the college has a labyrinth, which looked like this when I visited recently.

labyrinthA labyrinth is not a maze. It’s a path—with a beginning and an end—that’s designed to be walked in meditation. Ideally, the walker focuses on the process of walking and lets thoughts of the outside world slip away—and that’s what I tried to do.

The good thing is that I was alone.

The bad thing is that it was snowing and raining at the same time, a heavy wet early-December mix. And I was holding an umbrella. And my head, as usual, was full of questions, which I found answers to soon after.

When was the Green Mountain College Labyrinth built? 2006

Who designed it? Bill Vanderminden, copying the most famous of all labyrinths, the one in Chartres Cathedral.


Chartres Cathedral Labyrinth, built in the early 13th century.

Lastly, who built the Green Mountain Labyrinth? Students of the college and other volunteers, who laid slabs of Vermont slate on the designated path.

Despite these intruding thoughts, however, when I finally attained the center of the labyrinth, after several minutes of walking, there was a good feeling, which I won’t try to define further.

But I wasn’t at Green Mountain College simply to walk a labyrinth in cold wet snow. In fact, if you look back at the first photo, you can get a clue to the other feature of the college that attracted me.

The photo shows the edge of the college’s main solar array.

And this photo shows my Tesla Model S charging near a smaller array—for free.

tesla-feuling Now, as the sun wasn’t shining that day, the electricity I got was produced in some other fashion. But it wasn’t necessarily from hydrocarbons!

In fact, according to the U.S. Energy Information Administration, “About half of all electricity consumed in Vermont comes from renewable sources, the majority from Canadian and New York hydroelectric generators. Vermont has several dozen small hydroelectric dams, which typically produce about one-tenth of state consumption, and several generators using wood and wood waste products.”

If you ever find yourself near Poultney, I recommend the Green Mountain College labyrinth.

In the meantime, for more info on labyrinths, click here.


zoes-kitchenSome investment stories are simple, and some are complicated.

On the simple side are companies like Zoe’s Kitchen (ZOES), a restaurant chain that serves healthy Mediterranean fare at reasonable prices. With 130 locations in 15 states, Zoe’s has the potential to expand substantially, using the cookie-cutter principle employed by all successful chain restaurants.

On the complex side is a company like Tesla Motors (TSLA), which sells electric cars. Not only is a car a far more complex creation than a spinach rollup—barriers to entry are high, competitors are well entrenched, and even the dealer infrastructure is a captive of the status quo.

Yet Tesla has managed to surmount all those difficulties, and done it so well that in the latest Consumer Reports customer satisfaction survey, the Tesla Model S came out on top for the second year in a row, with a rating of 98. (The Corvette Stingray earned a 95, while the Mercedes-Benz E-Class sedan earned an 88.)

tesla-redWhat the typical Tesla owner loves about his car is its drivability, its elegant styling, its low repair and maintenance costs and its low fueling costs. To most of us, that driving experience (sheer silent acceleration) is the best thing about the car, and that’s a direct result of its single-gear electric motor, which supplies instant torque with none of the noise, vibration and harshness (NVH) of an internal combustion vehicle.

Going forward, Tesla promises to come out with a $35,000 car in 2017, as it drives down the cost of batteries with its huge gigafactory near Reno, Nevada.

But the battle to replace the internal combustion engine is far from over.

In fact, Toyota, which is 100 times larger than Tesla as measured by revenues, is betting that hydrogen-fueled cars (not battery electrics) are the solution. Its Mirai, which will use fuel cell technology to convert hydrogen into electricity, will be available for sale in 2015 (in Japan and California) for about $57,000, which though not cheap, is $14,000 less than the least expensive Tesla.

But Toyota will only make 700 vehicles that first year, and the biggest problem their owners will face is fueling. While I plug my Tesla in in my garage every night, just as you plug in your phone (and I can also plug in anywhere else there’s electricity—including Tesla’s excellent network of Superchargers), Mirai owners will need to find a hydrogen station. At the start, that won’t be easy.

Once fueled, the Mirai will accelerate from 0 to 60 mph in 9.0 seconds, slightly quicker than a Prius. It will seat four, and the hydrogen probably won’t pose any more safety hazard than gasoline does in gasoline-powered cars. They seldom explode, but roughly 9,000 catch fire in typical year.

Oh, and as far as looks go, I think the Mirai resembles a futuristic bottom-feeding fish—and I’m sure some people will like that.

toyota miraiSo, who will win?

This is not necessarily an either/or equation. It’s possible that battery electrics and fuel cell electrics will both have their place in the future, along with a dwindling percentage of internal combustion vehicles.

But one of Toyota’s challenges is the risk of cannibalizing its current well-established business. While Tesla was able to start with a clean slate, Toyota has legacy systems everywhere, some of which will help it produce a competitive desirable vehicle, and some of which won’t.

The future will be interesting.

Kooky Tesla Flyer

Funny-strange or funny ha-ha. You decide.

For reasons unknown, flyers denigrating Tesla automobiles are being placed on the windshields of Tesla cars on the streets of San Francisco. For those of us knowledgeable about how wonderful these cars are, the flyers are hilarious. Judge for yourself.


Kooky Tesla Flyer

Tesla Motors Hit by Lawsuit

by Timothy Lutts

Tesla Model S on fireThis is a picture of a Tesla Model S in flames, after it ran over some road debris near Seattle back on October 1, 2013.

Since then, there have been two more Tesla fires. One was in Mexico at 4 AM. It occurred after a speeding driver drove across a roundabout and collided with a tree—not exactly recommended behavior. The other, in Tennessee, occurred after a Model S drove over a tow hitch on the highway.

In all three cases, the puncturing of the car’s battery pack resulted in a fire. And in all three cases, the occupants of the escaped unharmed, reinforcing supporters’ convictions that these cars, as the National Highway Safety Administration concluded, are the safest cars on the road. Also, in all three cases, the drivers were anxious to take possession of a replacement Model S.

But just last Friday, Tesla Motors was hit by a lawsuit from the firm of Pomerantz, Grossman, Hufford, Dahlstrom & Gross, alleging that Tesla’s management made false and misleading statements and failed to disclose material adverse facts about the company’s business. According the suit, which is open to shareholders who bought between May 10 and November 6, the cars’ battery packs suffered material defects that led to the fires, and the company’s failure to warn about that risk was misleading.

The lawyers also threw in a claim that “Tesla was unable to maintain a level of automobile deliveries sufficient to satisfy analyst concerns,” which to me is just silly. Tesla’s deliveries are growing at a nice rate, and the company’s job is not to satisfy analysts.

As to the fires, it’s worth knowing that there are roughly 150,000 car fires in the U.S. every year. These fires kill an average of four people every week. They don’t make national news; they’re far too common. But as battery-powered Teslas are new and unfamiliar to people, the three Tesla fires have made news.

But this lawsuit is not really about the automobiles; they’re marvelous vehicles, and everyone who has driven one wants one. This lawsuit is about money!

Specifically, it’s about getting investors who bought the stock relatively late to band together and complain about losing money in the stock’s decline since its peak of 192. If they win, the lawyers who initiated the suit get a nice payday.

winds-blow-hardWell, here’s my two cents, starting with one of the instructive buttons on my wall.

It reminds me that when a person or company is flying high, forces will eventually appear that work to knock that person or company down. I’ve seen it happen time and time again with both small hot stocks (Hansen Natural, for example) and big well-known stocks (like Apple).

When those forces arrive, the stock retraces a large part of its uphill climb, and that’s what Tesla is doing now. After gaining 466% this year, TSLA is now trending down, “helped” by stories about battery fires, stories about potential battery shortages, and stories speculating (among other things) that fearsome competitors like General Motors (LOL) will suddenly come out with competitive products.

Now, you can argue that this decline is not rational, given that the company is still growing at a good pace and projections for the future are bright. But the stock market is never rational, and success in investing does not come from being rational; it comes from understanding the irrationality of the market and using that knowledge to make intelligent investment choices.

For me, it was rational to buy Tesla late last year when the stock was just getting going and upside potential was huge. To many people, it looked irrational because there were so many unanswered questions about the company. But in the months that followed, more and more people discovered how good the cars were and recognized the company’s growth potential, and a lot of them bought the stock, pushing its price higher and higher. Also helping was a broad bull market.

But when the stock was up 400%, sitting on a high hill, and the object of admiration and adulation by so many people, buying was not so intelligent, because at that point, there were a lot of investors with profits in the stock, ready to cash out when the stock turned down.  And then the stock turned down.

This is a normal phenomenon. It happened with Hansen Natural years ago. It happened with Crocs. It happened with Apple more recently. And now it’s happening with Tesla. On the way up the mountain, the good news and the profit engender more good news. And on the way down the mountain, the bad news and the stock losses engender more bad news, and lawsuits (and today, even a little story about George Clooney, who was dissatisfied with his early Tesla Roadster, which from today’s perspective we might call a beta version.) Also helping is a weaker stock market, especially for growth stocks.

History tells me that Tesla’s downtrend will eventually run its course, and at the very bottom, the news will be bad. That’s when stocks bottom. But getting from here to there will take time, and there’s no use arguing with the stock while this evolution takes place. It takes time for the crowd to change its mind. And it will take time for this lawsuit to run its course.

Eventually, assuming that Tesla will continue to grow both revenues and earnings, the stock will begin a new uptrend. But until then, there are more attractive investments than Tesla.