(Tesla Motors unveils the new lower-priced Model 3 sedan in 2016.AP Photo/Justin Pritchard)
Last week, Tesla officially changed its corporate name from "Tesla Motors" to "Tesla, Inc." Last year, Tesla had already dropped the "Motors" from its website address, and ahead of reporting fourth-quarter and full-year 2016 earnings, the company had to alert the Securities and Exchange Commission of the new identity.
Tesla's financial reporting in 2017 is about to become more complicated: beyond the car business, there's also a burgeoning Tesla Energy business and a new solar business, through last year's acquisition of SolarCity.
So the company wants to present itself as an integrated sustainable-lifestyle-solutions conglomerate, with a current market cap of $40 billion.
But to think of Tesla this way would be premature. In fact, thinking of Tesla as anything other than a car company is harmful to the long-term health of the enterprise.
No value added
Morgan Stanley lead auto analyst Adam Jonas, in a note last year to accompany a target-price cut (since reversed), put his finger on this problem when he outlined his model for Tesla:
"Given SCTY's financial condition and recent reduction in guidance, we have assumed zero value for SCTY equity to TSLA shareholders of $0," he wrote.
"This dilution to equity with zero value compensation removed $20 from our price target, resulting in a net negative adjustment to our Tesla price target of $3, or a 1% cut from our prior target. Our price target also assumes $0 value from Tesla Energy (stationary storage)."
That's blunt, and Jonas hasn't much altered his view — Solar City equals zero investor value, and so does Tesla Energy. And Jonas is correct. Tesla Energy is an incipient enterprise at this juncture, and SolarCity has added billions in debt to Tesla's balance sheet.
(A Tesla solar roof.Tesla)
I would go farther than Jonas and argue that Tesla, Inc.'s various non-auto lines of business could degrade the company's value, as they represent a tax on CEO Elon Musk's time, which is already strained due to also being the CEO of SpaceX.
Bear in mind that Musk's companies fit together, as critical pieces in a master plan that's intended to accelerate humanity's departure from the fossil-fuel era and provide us a backup home on Mars, in the event of a global catastrophe.
Vision meets reality
But there's Musk's vision, and there's the day-to-day plug-and-chug of executing on Tesla's core business, which is the cars. Ultimately, there is no Tesla Inc. without Tesla vehicles. I'm not saying that both SolarCity and Tesla Energy won't someday become bigger and more important than Tesla-the-automaker, but that's a distant transition. For now, Tesla makes its bones where the rubber meets the road.