Much hullabaloo has resulted from Elon Musk’s tweet in August 2018, announcing falsely that he had secured funding to take Tesla private at $420 a share. The Securities and Exchange Commission’s (“SEC”) official fraud investigation reports that Musk seriously rounded to $420 to impress his girlfriend with a weed reference. Due to stockholder pressure, Musk recently settled with the SEC by agreeing to step down as chairman of Telsa’s board as well as personally pay a substantial $20M fine, a steep price to pay for a single tweet. Since the initial incident and Musk releasing more tweets taunting the SEC, Tesla short sellers are up by $500M in paper gains. Steve Eisman, an investor who famously very successfully shorted subprime mortgage securities during the Great Recession, is now vocally shorting Tesla and accusing Musk of having “execution” problems.
The chaos surrounding Musk’s Twitter habits might mask an even deeper concern with the electric vehicle (“EV”) company. Over the summer, other Tesla short sellers and armchair internet sleuths started to report and document odd stockpiling of Tesla cars in parking lots across the country. Musk tweeted out an explanation in September 2018, “we’ve gone from production hell to delivery logistics hell.” However, market analysts are considering whether Tesla is actually facing softer demand than reported due to higher than expected pricing and also the potential that Tesla has serious quality control issues.
…Volkswagen (“VW”) recently announced several new initiatives which may end up having a far greater impact on the nation’s electric grid…
While Tesla is the sexier face of EV and currently holds the top US market position with its Model 3, Volkswagen (“VW”) recently announced several new initiatives which may end up having a far greater impact on the nation’s electric grid and directly impact more consumers. The first major VW announcement was the September unveiling of their modular electric drive matrix (“MEB”) which is really just a platform specifically designed for EVs as opposed to a chassis that is designed for diesel cars and then retrofitted to be an EV. VW plans to build at least 27 different EV models based off of this MEB which is staggering in comparison to Tesla’s current repertoire of just 3 models (with two more planned).
VW’s EV push stems in part from their desire to rebrand the company after their own major scandal. For nine years, VW sold a line of cars billed as “Clean Diesel” vehicles which relied upon software to fool emissions testing. These supposedly environmentally friendly vehicles actually emitted illegal levels of toxic nitrogen oxides which also act as indirect greenhouse gases. Once the fraud was exposed, US authorities punished VW with $25B in penalties and fines. As part of this punishment, VW is required to spend $2B in building EV infrastructure in the US, $800M of which is earmarked for California.
In October 2018, VW announced the next phase of its penalty-induced EV infrastructure initiative. Instead of just providing chargers and charging stations along highways, VW will expand their EV footprint to home charging, rural charging, metropolitan fast charging, electric highways, electric buses, and electric autonomous vehicles. Perhaps the most striking aspect of VW’s new plan is a software-driven, demand response capability to reduce peak load. Essentially, VW would regionally aggregate the load of consumers and then sell load shedding to local utilities during times when the local electric grid struggles with high demand or too much generation.
VW’s plan is important for many reasons. It marks the trend of utilities trying to work with EV suppliers as well as would offer an innovative solution to mitigate California’s infamous Duck Curve which has become a greater concern to other states as the amount of renewables increases. Concerned with estimated flat or decreasing demand, utilities like Con Edison and National Grid have launched programs that promote EVs directly to their current consumers. VW’s plan is also potentially a harbinger of what the future grid will look like. Car suppliers and electric grid utilities may increasingly complement each other or even overlap in service offerings. The differentiation or perhaps line blurring between the two will likely lead to serious regulatory policy discussions and legal consequences.