Tesla is in the middle of a huge debate about the future of driving
On one side is Morgan Stanley's lead auto analyst, Adam Jonas, who last week revisited his futuristic theory that individual ownership of cars is going away and that the "potential end of human driving" could be coming.
On the other side is an unlikely team of insurance analysts at Citi led by Todd Bault. They think all the futurists are missing a critical point: Individual car ownership is an incredibly convenient thing.
Tesla finds itself right in the middle. Jonas has been bullish on Tesla's prospects and thinks the company is well positioned to thrive in a world where batteries trump gas and electric cars rule the road. But Tesla CEO Elon Musk isn't bullish on car sharing, a central feature of Jonas' thesis. And that's understandable. Musk wants to sell 500,000 cars by 2020. Ultimately, he'd rather sell them to individuals.
"The No. 1 inefficiency in the current auto model is that cars are used for less than 1 hour a day, for a utilization rate of less than 4%," Jonas wrote last week. "This has not changed materially in over 100 years."
To him, this is a stunning waste and an unsustainable model. Why take out a loan to buy a $30,000 car when that investment spends almost all of its time sitting idle?
Bault and his team aren't as baffled by this. In a research report published earlier this year, they addressed the disruption that Jonas and others have embraced and tried to determine the effect, or noneffect, that it would have on the insurance business (if you don't own the car, you don't need car insurance - widespread de-ownership would obviously be bad for the Geicos of the world).
And they came to an interesting conclusion, as Bault explained to me.