Wednesday 20, June 2018 by William Mullally

Why Lombard Odier won’t invest in Tesla

 

Reports have continued to come in that have troubled many, scaring off investors from the buzzed-over brand

Tesla, and its founder Elon Musk, have no shortage of fans across the world. When the cars debuted in the UAE last year, they were the talk of the country, with many motoring enthusiasts rushing out to purchase one immediately, feeling that the luxury electric cars produced by the company are the future of the automotive industry.

But all is not as positive as it seems in the land of Tesla. Reports have continued to come in that have troubled many, scaring off investors from the buzzed-over brand.

Lombard Odier, one of the world’s oldest private banks founded 222 years ago, has made a big push on in its investment management divisions towards sustainable investment.

This week, I sat down in Geneva at their headquarters to celebrate the 222nd anniversary with Hubert Keller, CEO of its Investment Management division and Managing Partner of Lombard Odier, who laid out that he plans to have the asset management division diversified in nearly 100 per cent sustainable investments by the end of 2018.

Is Tesla on that list? For Keller, it’s a strong no. Lombard Odier does not believe that Tesla is a good investment.

Why?

“When we look at companies, we want to know how companies are transitioning. When we talk about the automotive industry, people always ask, what about Tesla?” said Keller.

“What’s interesting is, in a three dimensional approach, we do not select Tesla. Why? The third dimension of the business model is fantastic. They have completely pioneered electric vehicles, they made it cool, and they made it accessible to a large number of people. They developed solar panels, batteries, all of these things. From a business model, they really tick the sustainability box in a big way,” Keller continued.

But not all is well in Tesla land. The way that the company reportedly is run has scared off Lombard.

“We will not invest in it, because the second dimensions, their business practices, are extremely poor. We don’t think that’s a sustainable way of running a company. That will have an impact on financial performance. The first dimension, the fact that they are losing money and burning cash, is not sustainable from our perspective,” said Keller.

“You can have a great business model, but if you treat your employees extremely poorly, and you burn cash to the level that they do, it’s going to be, in our view, not a great investment,” he told us.

Indeed, Musk and his company Tesla have been plagued with headlines about their poor treatment of workers, with some reportedly complaining about injuries, unsafe conditions, and pressure not to unionise.

Musk may have, in this writer's opinion, fostered the greatest personality cult of the 21st century, but, according to Lombard Odier, one of the most sustainably successful financial institutions in the world—don’t believe the Tesla hype.