Why Tesla can’t be a ‘money-making machine’ like Apple

American electric car maker, Tesla, is the most lucrative electric car in the world. In fact, Tesla is like the face of electric cars globally. However, can Tesla be a “money machine” just like brands like Microsoft or Apple? Well, world-renowned economist, Paul Krugman, does not think so. According to the Nobel Prize winner, Tesla will never become a “profit machine” like Apple or Microsoft. Krugman believes that it is impossible for Elon Musk’s Tesla to establish an unchallenged market position in the auto industry.

When more people use a product, users will benefit more, and they will rush to buy it. This is the network effect. That network effect has helped Apple gain market dominance with the iPhone and Microsoft’s personal computer devices. However, Krugman claims that Tesla electric cars are unlikely to benefit from network effects.

“Tesla is clearly not the type of brand that can be counted on to build an unchallenged monopoly by being one step ahead,” he said in an interview on Friday.

Krugman adds… “Even if everything works out the way it should, Tesla wouldn’t be Microsoft, and it wouldn’t be Apple”. With the network externalities that are used, it will be very difficult for people to break through it in that situation, so it’s extremely profitable that lasts for decades.”

In the past year, Tesla shares have dropped 65%. Rising interest rates weighed on all tech stocks, but some Tesla shareholders said CEO Elon Musk’s antics of buying and managing Twitter also adds to the sell-off.

Twitter purchase is not helping Tesla

Last year, Musk completed the purchase of social media company Twitter for $44 billion. After the deal, Musk had to cut the cost of running the company. The best way to do this is to lay off over half of its staff. As the Twitter controversy continues to linger, Tesla shares keep dropping. There are investors that believe that Elon Musk’s attention is divided. They claim that he will not be able to properly manage both companies in different fields. 

Prominent investor, Bill Miller has sounded the alarm about Tesla’s shrinking market share. Miller revealed that he was shorting Tesla last week because he believes that Tesla is starting to lose out to other major car makers gradually shifting to the electric car business.

According to Krugman, Apple co-founder and former CEO Steve Jobs is also known for being highly disciplined and completely focused on Apple products. However, the style of Elon Musk shows that he is very different from Jobs. Musk diversifies into widely different businesses and this somewhat distracts him. 

“Jobs had a vision,” Krugman said. “And let me say that Jobs was, at least on some level, considered a very cool guy who wore a black turtleneck and jeans and held a bag that people wanted. Fantastic equipment to buy, which helped to establish his status.”

“I don’t think Tesla will be a consistent profit machine like Apple, even if Musk is as disciplined as Jobs,” Krugman added, “It’s not his fault, it’s just that cars aren’t that kind of business“.

But Krugman also said, “But, you know, I don’t know anyone else who can do as much damage to his image in such a short period of time as Musk.”

Workers at Tesla’s German factory complain of long hours, poor working conditions

Tesla is going through a rough time and this is affecting its business in different parts of the world. Tesla has come under fire from the German trade union IG Metall and politicians because of workers’ complaints. They claim that Tesla factory workers are complaining about poor working conditions and too long working hours at Tesla’s German factory.

IG Metall said at its annual news conference that more workers were complaining that their hours were too long. These workers lament that they had very little or no free time. IG Metall has an office near Tesla’s German factory and is in regular contact with Tesla workers. It claims that workers were also increasingly afraid to discuss their working conditions publicly. This is because these workers signed a non-disclosure agreement alongside their work contracts. This means that if they disclose certain information, they will be breaching their contract. 

Separately, concerns have been raised about a new job posting on Tesla’s job site. The job title is a “Security Intelligence Investigator,” whose job it is to work with legal and human resources departments to collect some info inside and outside the Tesla factory to protect the company from threats. This further heightened concerns about the company’s operation in Germany. 

IG Metall said in a statement: “Tesla workers were enthusiastic about the project at the beginning. But over time, we found that this enthusiasm is fading. Tesla has not done enough to improve working conditions. Not enough, leaving too little time for workers to rest, relax and spend time with their families .”

German politicians also express concerns

In addition to IG Metall, local politicians in Germany also expressed concern about the allegations made by Tesla workers and called on Tesla and the local government to investigate. Some local politicians said: “The Brandenburg state government must strengthen occupational safety by strictly controlling Tesla”. As early as November 2019, the company announced plans to build a new factory in Gruenheide, Germany, to cater to the rapidly growing demand for electric vehicles in Europe. It was not until last year that the factory was officially put into operation.