Comment by agentcoops

Honestly, I don't think it's irrational: the car industry is just horrible from a business perspective, which is why Tesla had to be financed for so long by crypto scams and most investors wouldn't touch it. Historically (if of course briefly/crudely), it was always a debt-backed gamble on overproduction hoping you could expand forever globally without competition (Ford) or into new market segments through financing (GM).

It's paywalled unfortunately, but [1] is an illustrative Financial Times article discussing car manufacturer behavior in relation to Covid shutdowns and strikes. Many firms found the manufacturing shutdowns to be a boon: the winning strategy to accept it as a cost cut and just raise prices on existing inventory for above average financial performance.

My sense is that Tesla is now just taking that a step further by getting rid of their Fordist aspirations and applying the unarguably successful Apple model to the automotive industry. They don't want to mass produce cars and hope for X% conversion rate to software and services over time: they literally don't want customers who are not able or not going to pay for recurring software services. Software is where free cash flow comes from and free cash flow is where dividends/buybacks come from, which determines the value of an equity. That, of course, is why we get paid well.

I end with the disclaimer that obviously I don't believe the world should be meticulously and exclusively organized for the production of free cash flow, but I do think it's important to understand the logic.

[1] https://www.ft.com/content/4da6406a-c888-49c1-b07f-daa6b9797...