(Update: I guess I wasn’t done talking about Tesla. I just wrote a longer piece about the company for Seeking Alpha. You can find it here.)
If Warren Buffett is right (and he usually is) that the stock market is a short term popularity contest and a long term weighing machine, you could easily argue that the most popular stock on Wall Street over the last eighteen months has been Tesla (TSLA). Elon Musk’s battery-powered car manufacturer is barely cash flow positive, but bullish investors have lifted it to a market cap of over $25 billion. That’s more than a third of the value of a little mom and pop outfit called Ford Motors.
But this past week hasn’t been kind to Tesla. First, a report from the website The Street called the Audi A8 Diesel a “Tesla Killer.” Besides bashing Tesla’s limited range and likening its interior comfort to a “Burger King” compared to the Audi’s “Buckingham Palace,” the piece also showed that, due to battery depreciation and electricity costs, the Audi is cheaper to own and operate. Then, yesterday, another Tesla caught fire. Of course, your average Honda or Chevy is liable to go up in flames if you plow it into a light pole at 100 MPH, as the driver of the Tesla did in this case. But reports from the scene said the Tesla’s batteries were “popping like fireworks” in the middle of the street. For a car with a well-publicized history of mysterious fires, that’s the last kind of press Musk wants.
Personally, I like Teslas. I think they’re neat looking. I’ve even considered buying one, and I wish Musk the best in his attempts to revolutionize the auto industry. But I am a little weary of the hype surrounding the cars. Sure, they don’t burn gasoline, but they do suck up electricity–and in a lot of places in the United States and abroad, that’s about the dirtiest way you can power a car.
Almost 40 percent of the electricity here in the U.S. comes from coal. That’s right: big bad, disgusting coal. Another 27 percent comes from natural gas. Gas is cleaner-burning than coal, but it’s still a fossil fuel–and pulling it out of the ground generates a lot of nasty, planet warming emissions, as well as other pollutants. That means in about three-quarters of the country, when you plug your Tesla into the electric grid, you’re not powering it with solar or wind energy, you’re powering it with good old fashioned carbon-based sources. There’s no getting around that fact, and it’s not going to change anytime soon.
Over the weekend, The New York Times ran a front page story on Bay Area hedge fund manager Tom Steyer, who publicly pledged to sell off any stakes in fossil fuel companies and “vowed to spend $100 million this year to defeat candidates who oppose policies to combat climate change.” As with Tesla, Steyer’s environmental record isn’t that simple, or straightforward. It turns out investments already made by Steyer’s fund will ensure that coal continues to be mined and burned for decades to come:
Over the past 15 years, Mr. Steyer’s fund, Farallon Capital Management, has pumped hundreds of millions of dollars into companies that operate coal mines and coal-fired power plants from Indonesia to China, records and interviews show.
The expected life span of those facilities, some of which may run through 2030, could cloud Mr. Steyer’s image as an environmental savior and the credibility of his clean-energy message, which has won him access to the highest levels of American government.
The article goes on to say that, all told, these companies have consumed more coal than all of Britain since Steyer’s fund invested in them.
I’m not trying to bash Elon Musk or Tom Steyer. Their beliefs are obviously sincere, and their efforts are laudable. But let’s not kid ourselves. Buying a Tesla isn’t going to save the world. Hydrocarbons still supply huge portions of our planet’s energy, and some are more environmentally friendly than others.