CARVERSAL

In the world's Automotive sector, Tesla is at the top being the most valued carmaker with $ 532 Billion market cap, having the most expensive stock and all of this has been achieved with no advertisements about any of their product done. It seems sure that they have some how became the Apple of automobiles but, Krugman's words state something else. According to the reputed economist Paul Krugman, Tesla can never become profitable like Apple and Microsoft because there isn’t any scope for it to establish a solid monopoly in the car industry.

Why Tesla Cannot Become Apple?

Krugman explains that, Tesla vehicles can hardly ever benefit from the Network Effort strategy used by Apple and Microsoft to establish a dominant market share. For those, who do not know what Network Effort is, it's when people buy a product only because they feel like others are gaining some benefits from using it that they don’t have.

On Friday, Krugman told Yahoo News, “It’s not the kind of company where you can expect an early mover, which Tesla has clearly been, to establish an unchallengeable monopoly position”, he further added, “ Tesla is not going to be Microsoft, even if everything goes the way it should. It’s not going to be Apple. This is not a network externalities, where basically people use something because everybody is using it, and it’s tough to break out of it, so you get decades of extremely high profits”.

Tesla's Declining Stocks

Tesla’s share price lately has plunged 65% over the past year. The rising interest rates are weighing overall tech stocks, but some Tesla shareholders say that the tactics of CEO Musk around Twitter have also fueled the selloff. Musk closed off a $44 billion takeover of Twitter, laying off over half of its workforce and told his supporters to vote for Republicans. He also voiced his support for right-wing conspiracies, including calling for the arrest of the medical advisor of President Joe Biden.

Bill Miller also raised the alarm over Tesla’s send sensitive market share. A valued investor said he would short Musk’s company last week because he believes it’s starting to lose ground to other major carmakers who are pivoting to electric vehicles.

Krugman also said that Musk’s behavior had shown that he’s nothing like Apple’s cofounder and Former CEO Steve Jobs, who was known for his high discipline and focus for his company, Apple.

Krugman said, “ Jobs had a vision. And also, let me say that, at least at a certain point, it mattered that Steve Jobs was perceived as a really cool guy, as the guy in the black turtleneck and jeans with an amazing device in his hand, that was something that people wanted to buy, which helped him establish his position in the industry.”

He added, “I don’t think, even if Musk had been as disciplined as Steve Jobs was, that Tesla was ever going to be a sustained profit machine the way Apple has been. It's just that it’s not his fault. It’s just not that kind of Industry. But then, i don’t know anyone who’s done as much to hurt his image of cool in as short a time as Musk has done.”.