Reader Question: Elon’s Fanboi Investors

Here’s the latest reader question, along with my reply!

Jacob asks: How can the investors in Elon’s company be so stupid? How can the Saudis even be considering investing? Any smart investor knows government subsidies indicate poor investment since if private market money will not invest then the investment grade is poor. So why do these “smart” people invest in Tesla?

My reply: Part of it is wishful thinking, I think. Like the “climate change” thing, the electric car thing (which is related to the “climate change” thing) is an almost religious system of faith and belief. Reality does not penetrate for the same reason that Jim Jones’ followers didn’t see through his flim-flam; in both cases, the followers desperately want their beliefs to be real.

Second, there is the crony capitalist angle. Elon has in fact made billions – via subsidies and mandates. I suspect that his investors are counting on more mandates, to force the widespread adoption of electric cars. If the proposed 50-plus MPG regulatory fatwa goes into effect, a “market” will indeed be created for electric cars – because there is no way any car manufacturer is going to achieve a 50-plus MPG fleet average without lots of EVs in its product portfolio – to offset the much lower MPGs of the IC cars and trucks and SUVs for which there actually is a market.

The problem with that is we’ll all be paying dramatically more for cars, period. The EVs for the obvious reason and the IC cars because their costs will be increased to offset the losses incurred by the EVs.

As far as the Saudis – that one’s a stumper. It may be that they are looking to whitewash their “dirty” image as purveyors of oil by touting their ownership of “green” technology companies like Tesla.

Or they may just be stupid!

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Got a question about cars – or anything else? Click on the “ask Eric” link and send ’em in!