Paul Krugman says Elon Musk’s Tesla can never become a “profit machine” like Apple because there is no place for it in the auto industry.

  • According to Paul Krugman, Tesla will never be able to compete with Apple or Microsoft as a “profit machine.”
  • It is impossible to establish an unquestioning monopoly in the automotive industry, said the Nobel Prize-winning economist.
  • Tesla CEO Elon Musk has also ruined his “cool image” in recent months, Krugman added.

According to chief economist Paul Krugman, Tesla will never become a “profit machine” like Apple and Microsoft because it doesn’t have the ability to establish an undisputed monopoly in the auto industry.

The Nobel laureate said Tesla cars are unlikely to ever benefit from the network effect that has helped products like Apple’s iPhone and Microsoft’s PCs gain dominant market share. A network effect means that people buy a product because they feel that others are benefiting exceptionally from its use.

“This is not a company that you can expect the trailblazer, which clearly was Tesla, to establish an undeniable monopoly position,” Krugman told Yahoo Finance on Friday.

“Tesla will not become Microsoft, even if everything goes as it should. It won’t be Apple,” he added.

“It’s not network externalities where basically people are using something because everyone else is using it and it’s very hard to break out of it and that’s why you’re making extremely high profits for decades.”

Tesla’s share price has fallen 65% over the past year. Rising interest rates have taken their toll on all tech stocks, but some Tesla shareholders say CEO Elon Musk’s antics around Twitter also contributed to the selloff.

Musk completed a chaotic $44 billion takeover of Twitter, fired more than half of its employees and encouraged his supporters to vote Republican last year. He has also repeatedly voiced his support for right-wing conspiracy theories, including calling for the arrest of President Joe Biden’s top medical adviser, Anthony Fauci.

Bill Miller is another high-profile marketer who raised the alarm about Tesla’s shrinking market share. The legendary value investor said he was selling Musk’s company last week because he believes it is starting to lose ground compared to other major automakers that are moving to electric vehicles.

Krugman said Musk’s behavior showed that he was nothing like Apple co-founder and former CEO Steve Jobs, who was known for his high level of discipline and focus on Apple products.

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

“I don’t think that even if Musk was as disciplined as Steve Jobs, Tesla would ever be a profitable machine like Apple,” he added. “It’s just… it’s not his fault. It’s just not the right industry.”

“But then, you know, I don’t know anyone who has done so much to hurt their image of coolness in such a short time as Musk did.”

Read more: Paul Krugman says the Fed’s pessimistic view of inflation seems a little desperate now that price pressures are rapidly easing.

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