Tesla Cybertruck is 'one of the most misunderstood' releases from EV maker: Analyst

Tasha Keeney, ARK Invest Director of Investment Analysis & Institutional Strategies, joins Yahoo Finance Live to discuss the performance of Tesla shares, Tesla's delivery of Cybertrucks, and key takeaways from Tesla CEO Elon Musk's speech at Tesla's 2023 shareholders meeting.

Video Transcript

ELON MUSK: We're finally going to start delivering production Cybertrucks later this year. And I think the product, if anything, is better than expectations. Cybertruck is the car I will be driving on a day-to-day basis.

JULIE HYMAN: Musk touching on a number of subjects in his speech from batteries, factories, to new products, to his time at Twitter. Tesla shares have been pushing higher this morning. For more, let's get to Tasha Keeney, ARK Invest director of investment analysis, institutional strategies. Tasha, thanks for being here. So I want to start on the--

TASHA KEENEY: Thanks for having me.

JULIE HYMAN: --almost throwaway comment on advertising that Musk made. That seems to be one of the things that the market is seizing on, that he said, oh, yeah, maybe we'll look at doing a little advertising. Is that really going to provide that much upside for Tesla? It seems to have done OK with the core of sort of word-of-mouth strategy.

TASHA KEENEY: Yes. Yes, I agree that that's what people seem to be seizing on. And, you know, as we saw, it was a relatively off-the-cuff answer. He said, you know, I want to listen to shareholders. So we're going to give it a try.

I do think there's something to this strategy, where the research that we've done at ARK Invest suggests that thanks to rights law, battery costs have declined at such a rate that already the total cost of ownership of an electric vehicle is cheaper than its gas-powered equivalent. Now sticker prices are also becoming cheaper. Tesla's actually cheaper than the average car in the US.

So this kind of suggests that the incremental person that is not buying an electric vehicle maybe just hasn't been reached by messaging and, you know, needs to sort of be informed of all the benefits. So I don't think that advertising is a bad idea.

I do think that what didn't get enough focus after the event is this focus on autonomy. I feel like there's a lot of doubt that Tesla can create a fully autonomous car. But, you know, the research that we've done suggests that, as Elon Musk said, this will be the greatest asset unlock in history. We think this will be over 2/3 of the enterprise value of the company in the next five years, because this is so, so valuable. And really, it's becoming possible in the next year or so.

JULIE HYMAN: And, Tasha, I think part of the skepticism is not just that Tesla can achieve it, but it's the timeline, right, like that it's going to do it in the next year? I think that's where a lot of the skepticism comes from. This is an enormously difficult puzzle to unlock. And it's really sort of the last little bit that is the toughest part, because you're talking about real-world driving situations, you know? So what makes you so confident that Tesla is going to be able to achieve that in a shorter timeline?

TASHA KEENEY: Yeah, I love this question. There's a lot of things that give us confidence. So first, I'll say that I think this might be one of those situations where Elon mentioned this ChatGPT-like moment that he expects Tesla to have. And I think that, you know, belief might be suspended until it's actually here.

But if you're paying close attention and you've watched the updates that they've made to the full self-driving beta program-- and actually, anecdotally, the user videos that have been generated online show people in San Francisco using a Tesla for a ride-hail ride, an actual Uber ride on their phone. And they essentially don't touch the wheel at all during the drive. At the very beginning and the very end, they do.

But, you know, so I think that we have evidence already that it's basically possible now in select areas, right? It's not perfect. Other-- other items that give us increased confidence are, one, just, you know, the plethora of AI progress that we've seen over the past year or so, from large language models like ChatGPT to diffusion models. So we already know that Tesla has incorporated, for instance, transformers, which were popularized by large language models. So I think that this overall progress in AI gives us confidence for the autonomous driving industry as a whole.

Now, what makes Tesla so special? Well, Tesla has a different approach to full autonomy than the rest of the players, than Cruise and Waymo. They're going after, you know, this nationwide, possible everywhere approach, as opposed to using high-definition maps and doing a geofenced rollout in select cities.

The reason that they can do this is because they have an unmatched data advantage. So Tesla vehicles travel over 100 million miles a day. We know that in FSD Beta alone, they have cumulative miles of about 200 million so far driven. You know, if you compare that to Cruise and Waymo, which isn't quite apples to apples, I'll note, but what we have from them is that Cruise and Waymo have both passed roughly a million miles driven fully autonomously.

So, you know, they have orders of magnitude more information about how to solve this problem. And that's what really gives us confidence in their strategy.

BRAD SMITH: Did you hear anything from Elon Musk that would suggest that he has confidence that they're going to resolve their 4680 battery issue with Panasonic?

TASHA KEENEY: You know, I think that Tesla is really a leader in batteries. And they're at least three to four years ahead of the competition. So I think that, you know, any fears here are really short-term oriented. We know that they're riding down a battery, electronics cost decline curve that really no one else in the industry is. And they're working in-house on, you know, components of the battery production itself and a new chemistry, which actually looks very promising.

So I would say overall, you know, the comparison is, what are the traditional automakers doing? And Tesla has much more scale than traditional autos.

JULIE HYMAN: I want to ask about the Cybertruck as well, Tasha, because obviously, it's been sort of much delayed here. And I always struggle with sort of what the demand is going to be for this thing. [LAUGHS] I don't know. I mean, admittedly, I'm not like a car person per se. But like, it's such a goofy-looking thing. I understand it's not all-wheel drive, which is weird to me to have something with truck in the name that's not all-wheel drive. Like, how do we even measure how this thing is actually-- and I know there are preorders, right? But like, how is this thing really going to do?

TASHA KEENEY: Yeah, I think this is one of, you know, the most misunderstood vehicle releases that Tesla has had. One, you know, I'm going to comment first on the design. This is really a genius design. It's much more cost effective. It's unlike any other car that we've seen out there-- and from an aesthetic basis. But really, because they're, you know, using just one piece of material, they're not using paint, it's going to be a lot more cost effective and easier to produce for them, because we know that the paint shop is, you know, somewhat of a choke point for throughput in an automotive factory.

So, you know, we think that this vehicle will sell much more than people expect.

JULIE HYMAN: Well, wait.

TASHA KEENEY: Actually, if you look--

JULIE HYMAN: But what you just said-- Tasha, if I may, what you just said, though, has to do with cost. It doesn't have to do with demand in terms of the design. Right? Like--

TASHA KEENEY: Yeah.

JULIE HYMAN: So it's cheaper to make. That's great. But people still have to want to buy it.

TASHA KEENEY: Yeah. Well, I'm saying that there's a smart reason to choose this design. Now, on the design and the appeal of the car itself, if you look at Google Trends data, we actually see that the people that are sort of googling Cybertruck and investigating this are overlapping with the exact areas of the country where truck buying is very popular today.

So I actually disagree that this will be a car that won't sell that many units. I think that this could-- you know, that this could be rivaling any other truck out there, certainly in terms of performance, right, because again, a Tesla on a dollar-per-performance basis for batteries has, you know, a better metric than any other automaker that's out there. And we know that because of ARK's research.

So I think if you look at this versus, for instance, the Ford F-150 electric version, this is a much more attractive car. And I think consumers will realize that. You know, and by the way, I also think they'll use this design on the robotaxi because it is so cost effective. And again, I think it'll be much more popular than people expect.

JULIE HYMAN: What about the all-wheel drive issue though?

TASHA KEENEY: So, you know, I think this is all-wheel drive. Tesla's produce many models before where they, you know, have versions with all-wheel drive and without it. So I wouldn't expect that to be a stopping point at all for this vehicle. You know, it might just be that the initial versions don't have it and they add it on later. We've seen that with past models. So frankly, that's not something that I'm concerned about.

And again, I just don't think the vehicle is getting enough attention for the genius cost dynamics here, especially when people are commenting that they're worried about demand, price action for electric vehicles. You know, this is a car that allows Tesla to get great margins and to be able to charge attractive prices compared to the competition.

BRAD SMITH: On what kind of time span is it is a success or is it a missed opportunity, if Tesla is rolling out not just the Cybertruck or able to eventually put the Cybertruck in market while at the same time the Model 3 perhaps sees even more favorability among consumers that are getting into the EV landscape? On what time span-- because at the same time, you're also going to have the legacy automakers that are ramping up their direct to consumer as well as their dealer fabric and relationship that's been around for decades, a century for some of them.

TASHA KEENEY: Yeah. Well, I would say actually the dealer network is a disadvantage for the traditional automakers. I mean, when we heard Elon Musk talk about this last night with pricing, Tesla has a more direct view into pricing than competitors. But also, they have this wild-- wildly successful direct-to-consumer model.

And with dealers, you actually have to educate them on electric vehicles. And we've seen issues with this in the past, particularly for companies like GM, where the dealers themselves are actually misunderstanding how electric vehicles work. And they're actually including that in the advertising. So I think that's actually a huge advantage for Tesla.

In terms of what time frame you should look at this is a success, this is an innovation story. At ARK Invest, we have a five-year investment time horizon. So I think it should be looked at over a long year-- over a five-year time period. But I'll say with that, again, I think there's far too much focus on this vehicle, the demand for the vehicle. There's not enough focus on autonomy, because when you're talking about five years, you know, the midpoint of our estimates is that by 2024, Tesla could release a fully autonomous taxi network.

It'll compete with Uber. It'll be able to undercut today's ride hail price-- today's ride hail rides on price. And I think it'll be wildly successful. It'll bring recurring revenue streams and very attractive margins to Tesla, unlike what we've seen in the traditional vehicle business. So I would say that is what to watch-- you should watch out for over that time period.

BRAD SMITH: I don't want to be the one to make Dara Khosrowshahi say hold my beer at the end of this conversation. So we will see exactly how that competition plays out in the future, especially on the autonomous ride hailing side. ARK Invest Tasha Keeney. Tasha, great to get some of your time here, especially coming after the Elon Musk range of comments that came yesterday. We appreciate it.