Stanphyl Capital update on the short bet against Elon Musk . Readers can see below for an excerpt on Tesla Inc (NASDAQ:TSLA) from their Stanphyl’s May 2018 letter.
We remain short shares of Tesla, Inc. (TSLA), which I consider to be the biggest single stock bubble in this whole bubble market—a company so landmine-filled that I think it can implode at any moment regardless of what the broad market does. To reiterate the three core points of our Tesla short position:
Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital
1) Tesla has no “moat” of any kind; i.e., nothing meaningfully or sustainably proprietary.
2) Tesla loses a huge (and increasing) amount of money despite relatively light competition but will soon be confronted with massive competition in every aspect of its business.
3) Elon Musk is extremely untrustworthy.
Early in May Tesla released a disastrous Q1 earnings report, with a record GAAP loss of $710 million ($760 million excluding the sale of ZEV credits-- an average of over $25,000 per car sold!), negative free cash flow of $1.1 billion, Model S&X combined deliveries down a double-digit percentage both sequentially and year-over-year, and Model 3 production falling far short of (already drastically reduced) previous guidance. Here’s a terrific series of charts from Twitter user @TeslaCharts clearly explaining just how horrible the financial trends for this company are; in fact Tesla’s situation is so dire that it’s slashing capex (and thus killing the growth story) by apparently putting development of its much-hyped (but economically unviable) semi-truck on hold, as well as delaying its “Model Y” crossover. In fact even Tesla battery supplier Panasonic now has serious doubts about the viability of the company. And for those who continue to insist that as Tesla grows revenue, profits will “scale” proportionately… How’s this for “scale”?
Tesla’s interest expense alone is now at a run-rate of nearly $600 million a year, which in Q1 amounted to $4985 per car sold; in other words, roughly one-third of Tesla’s (artificially inflated) gross profit (and a much higher percentage of its *real* gross profit) went towards servicing its debt!
Keep in mind that Q1’s decline in S&X sales occurred even before Tesla’s first real luxury EV competition rolls into showrooms this summer in the form of the Jaguar I-Pace, followed this winter by the Audi E-Tron Quattro (to be unveiled in August) and then early next year by the Mercedes EQC (to be unveiled this September) and Porsche Mission E. And all those cars [except perhaps the Porsche] will be priced significantly less expensively than the comparable Tesla even before their U.S. buyers enjoy a $7500 tax credit that expires for Tesla later this year. (The base Porsche price is rumored to be the same $75,000 as the base Model S. Hmmm… tough choice!)
Following the release of that atrocious earnings report, Tesla hosted what may be the most hilarious conference call in American corporate history. (I know I’ve said that about previous calls but let’s face it: Musk is a conference call superstar who somehow manages to “top” his previous performance with each new one!) Here are just a few of the “highlights” as he tries to duck, shuck and jive his way out of having to explain away Tesla’s looming destiny with bankruptcy, which is where its > $30 billion in combined long-term debt and battery purchase & other obligations—accompanied by its negative cash flow and massive encroaching competition—will eventually place it.
The weekend after the disastrous conference call, Musk posted a series of bizarre tweets threatening to “burn the shorts.” Apparently, this previewed his buying TSLA shares the following Monday equal to approximately 1/1000th of his existing holdings, a chunk of which was done in the illiquid pre-market in a blatant attempt to jam up the price. Hello, SEC! A CEO’s obsession with “the shorts” should be a terrifying red flag for any long investor—just ask holders of Lehman about Dick Fuld’s comments shortly before it went bankrupt.
Next in May, Seeking Alpha published a great new overview of why the Model 3 will be a financial disaster for Tesla. Also, keep in mind that Bernstein Research estimates that fewer than 30% of current Tesla owners decided to exercise their Model 3 reservations, and based on anecdotal evidence from on-line Tesla forums it appears that the reservation uptake among non-Tesla owners may be as low as 15%. And watch those reservations really vanish when Tesla’s $7500 tax credits expire later this year while over 100 competing new EV models entering the market over the next few years will still enjoy them, and potential buyers realize that the $35,000 model may never appear.
In fact, in May Musk admitted that the $35,000 Model 3 is a long way off because “building one now would cause Tesla to lose money and die.” And have a look at this Musk Tweet from late-May, in which he references the all-wheel drive “Performance” version of the Model 3 (a tiny niche market car at best) which will cost $78,000 without Autopilot:
Think about that! The “Performance” Model 3 will be in production at a time Tesla adamantly states it will be making at least 5000 Model 3s a week, and yet Musk still says they’d be losing money selling the “regular” AWD version which, in the only available format (extended battery + premium package) will start at $55,000!
Meanwhile, extensive forum posts and reviews indicate that over time the Model 3 is revealing itself to be a complete lemon, and even after Tesla updated defective brake software that initially caused a “Not Recommended” rating, Consumer Reports rated it just a 77 on a scale of 100, tied (among electric cars) with the $14,000 cheaper Chevrolet Bolt and $25,000 cheaper Toyota Prius. (Unlike Edmunds, CR has yet to rate the Model 3’s reliability.) And remember, almost nothing can be done in the Model 3 without a multi-step process on the touchscreen—not even changing the windshield-wiper speed, adjusting the air vents or opening the glovebox. Thus, operating a Tesla Model 3 may potentially be as dangerous as texting while driving.
Also in May at least six more (!) key people left Tesla, including chief engineer Doug Field (who took an indefinite leave of absence in the middle of the crucial Model 3 rollout), Matthew Schwall, the company’s primary liaison with regulatory safety agencies (gee- I wonder why!), Arch Padmanabahn, the product director for the stationary storage unit, Bob Rudd, the head of commercial & utility sales, Sameer Qureshi, the head of Autopilot software, and Cal Lankton, the V.P. of Energy Sales & Operations. Recall that last month Jim Chanos said the only other companies where he’d seen such an accelerated rate of executive departures were Valeant and Enron (both of which, of course, collapsed in fraud). Chanos and his analysts have been updating the departure list regularly; email me if you’d like a copy.
Also in May Tesla was besieged with multiple tragic accidents—two teenagers were killed in Florida when trapped in a burning Tesla following a high speed crash, as was a German businessman traveling in Switzerland, and a man in California was killed when his Tesla left the road (perhaps due to either Autopilot or a widely-documented but not yet recalled Tesla suspension failure) and deposited him in a pond. And a woman in Utah slammed straight into a parked vehicle while on Autopilot as it accelerated into the impact (an event that has happened multiple times before to other Tesla owners—fortunately, this lady survived with only a leg fracture), while another Tesla on Autopilot ran into (and totaled) a police car. As of now there are at least 40 worldwide Tesla-related deaths, a huge number relative to the number of Teslas on the road and its luxury car peer group. WHERE IS THE NHTSA ON THIS DEATHMOBILE???
Also in May Musk went on a bizarre, multi-day, Trump-like Twitter rant blaming “the media” for all his self-inflicted problems. There were lots of great “media takes” on this-- two of the best came from the Los Angeles Times and Business Insider, while the funniest was definitely from Dealbreaker.
Tesla is also increasingly besieged by a wide variety of other lawsuits, for securities fraud, labor discrimination, worker safety, union-busting, sudden acceleration, lemon law violations and, undoubtedly, many others of which I’m not yet aware.
So here is Tesla’s competition in cars (note: these links are continually updated)…
Jaguar Electric I‑Pace SUV Available Summer 2018
2019 Jaguar XJ to be reborn as high-tech electric flagship
2019 Audi E-Tron To Charge Faster Than Tesla Supercharger Network
Audi e-tron Sportback in 2019 to be its second EV
New 2019 Porsche Mission E: all-electric saloon shaping up
Porsche Mission E Cross Turismo to be its second EV
Mercedes 2019 EQC To Be Unveiled This September
Mercedes Plans Electric S-Class to Challenge Tesla’s Flagship
Mercedes Wheels Out Electric Car Roadmap, Car And Battery Factories Everywhere
2019 Hyundai Kona Electric gets 250-mile range rating in the U.S.
14 new EV models by Hyundai-Kia by 2025
Chevrolet Bolt Offers 238 Miles On A Single Charge For $37,495
GM to introduce 3 more electric cars before 2020, battery cells at <$100/kWh
2018 Nissan Leaf: 150 miles for $30,875, 200+ mile model by late 2018
Nissan Leaf-based SUV coming in 2020
Volvo Electric hatchback due in 2019
Volvo To Start Selling Electric Trucks In 2019, Some Will Hit The Road This Year
VW will build EVs in 16 factories in zero emissions push
Volkswagen I.D. Crozz 311-Mile Electric CUV For $30,000-ish Before Incentives
VW’s All-Electric I.D. Vizzion Coming With 400 Miles of Range
BMW will export iX3 electric SUV to Europe, U.S. from China
BMW to have 25 electrified models by 2025
Ford plans $11 billion investment, 40 electric vehicles by 2022
Land Rover Defender to go all-electric in 2019
Toyota, Mazda, Denso create company to roll out electric cars beginning 2019
Toyota to market over 10 battery EV models in early 2020s
Infiniti will go mostly electric by 2021
PSA will launch full-electric Peugeot 208 and DS 3 Crossback in 2019
ALL-ELECTRIC MINI COOPER COMING IN 2019
Smart Will Electrify Its Entire Line-up By 2020
SEAT's first electric car is due in 2020
Opel will launch full electric Corsa in 2020
2019 Skoda e-Citigo confirmed as brand's first all-electric model
MG E-Motion confirms new EV sports car on the way by 2020
Aston Martin to create all-electric car brand
Renault to have 8 pure electric models by 2022
Rolls-Royce is preparing electric Phantom for 2022
Citroen preparing EV push with 80 per cent electrified range by 2023
Honda will offer full-EV or hybrid tech on every European model by 2025
All-electric Bentley four-door coupe to use EV tech from Porsche Mission E
Subaru to introduce all-electric vehicles by 2021
Ssangyong e-SIV concept previews 2020 EV
Dyson plans three-car EV range
235mph Lucid Air due in 2019 as electric BMW 7 Series rival
Borgward BXi7 Electric SUV Flies Under The Radar
Detroit Electric promises 3 cars in 3 years
SF Motors reveals two electric SUVs for 2019 with 300 miles of range
Two new electric cars from Mahindra in India by 2019; Global Tesla rival e-car soon
Saab asset owner NEVS plans electric car production
EVelozcity Raises $1 billion For EV Startup
Flush with new cash, electric-car company Faraday Future hopes for a fresh start
And in China…
Daimler & BYD launch new DENZA electric vehicle for the Chinese market
BAIC and Daimler to Build $1.9 Billion China Plant
Volkswagen makes €15bn bet on electric cars in China
Audi to launch 7 new energy vehicle models in China by 2020
GM plans to launch 10 new energy models in China by 2020
Nissan & Dongfeng to invest $9.5 billion in China to boost electric vehicles
Toyota to Introduce 10 New Electrified Vehicles in China by 2020
Infiniti bringing EVs to China’s luxury car market
BMW will develop and produce electric Mini in China
Ford ramps up electric vehicle push in China
China's BYD tops global electric-car production for third year in a row
SAIC to spend $2.2 billion on EVs, connectivity, aftersales services
Honda debuts Everus electric car for China
Mazda and Changan Auto join hands on electric vehicles
WM Motors/Weltmeister EX5 Electric SUV Launched On The Chinese Car Market
NIOS ES8 Electric Crossover debuts with half the Tesla Model X’s price tag
Geely invests $5 billion into new electric car factory in China
Changan Spending $15 billion To Have 21 Pure Electric Cars By 2025
Chery Breaks Ground on $240M EV Factory in China
Chery's second EV plant open in Dezhou
Leapmotor’s electric car to hit the market in 2018
Alibaba-backed Xiaopeng Motors to raise US$2.7 billion this year
GAC Trumpchi to launch range-extended EVs
Chinese-backed electric car start-up Byton woos CES with model 40% cheaper than a Tesla
Great Wall Starts New EV Brand (ORA) In China
The Singulato iS6 From China Is Aimed At The Tesla Model 3
Singulato, BAIC partner to promote smart new energy vehicles
FAW (Hongqi) to roll out 15 electric models by 2025
JAC’s Electric Car Has A Range Of 500 Kilometers
ICONIQ to build electric cars in Zhaoqing with total investment of RMB 16 billion
Quianu Motor aims to grab share of US electric vehicle market
All-electric NEVS 9-3 sedans (nee Saab) being built in China
Youxia Motors Secures USD794 Million to Push Release of New Connected Cars
Wanxiang Gets China Electric Vehicle Permit to Make Karma Cars
Qoros Auto's new owner plans to be an EV power
JMC (Jianling Motor Corp.) Starts New EV Brand In China
Thunder Power electric cars at the Frankfurt motor show
Here’s Tesla’s competition in autonomous driving…
Tesla Ranks Last for Automated Driving
A Tesla self-driving blind spot that few are focusing on
Waymo is first to put fully self-driving cars on US roads without a safety driver
Jaguar and Waymo announce an electric, fully autonomous car
Waymo Expands Chrysler Self-Driving Fleet 100-Fold to 62,000
Uber, Waymo in talks about self-driving partnership
Lyft and Waymo Reach Deal to Collaborate on Self-Driving Cars
Cadillac Super Cruise™ Sets the Standard for Hands-Free Highway Driving
GM ride-hailing fleet would ditch steering wheel, pedals in 2019
SoftBank Vision Fund to Invest $2.25 Billion in GM Cruise
An Overview of Audi Piloted Driving
Updated 2017 Mercedes-Benz S-Class - first ride with autonomous technology
NVIDIA and Toyota Collaborate to Accelerate Market Introduction of Autonomous Cars
Volkswagen and NVIDIA to Infuse AI into Future Vehicle Lineup
NVIDIA Partners with Bosch for System Based on Next-Generation DRIVE PX Xavier Platform
Continental & NVIDIA Partner to Enable Production of Artificial Intelligence Self-Driving Cars
Bosch and Daimler join forces to market fully automated, driverless taxis by 2020
Intel’s Mobileye will have 2 million cars (VW, BMW & Nissan) on roads building HD maps in 2018
Volkswagen Group and Aurora Innovation Announce Strategic Collaboration On Self-Driving Cars
Toyota, Intel and others form big data group for autonomous tech
Toyota Adds $2.8 Billion to Software Push for Self-Driving Cars
Nissan’s Robo-Taxis Will Hit the Road in March
Nissan and Mobileye to generate, share, and utilize vision data for crowdsourced mapping
Magna joins the BMW Group, Intel and Mobileye platform as an Integrator for AVs
Intel collaborates with Waymo on self-driving compute design
Fiat Chrysler to Join BMW, Intel and Mobileye in Developing Autonomous Driving Platform
Ford expands fleet of self-driving test cars
Ford Buys Laser System Firm as It Boosts Driverless Car Development
Lyft, Aptiv (formerly Delphi) partner on driverless ride-hailing at 2018 CES in Vegas
Lyft, Magna in Deal to Develop Hardware, Software for Self-Driving Cars
Hyundai, Aurora to release autonomous cars by 2021
Deutsche Post to Deploy Test Fleet Of Fully Autonomous Delivery Trucks This Year
Byton cooperating with Aurora on autonomous vehicles
Magna’s new MAX4 self-driving platform offers autonomy up to Level 4
Bosch Creates a Map That Uses Radar Signals for Automated Driving
Honda Targeting Level 3 Automated Driving By 2020, Level 4 by 2025
Groupe PSA’s safe and intuitive autonomous car tested by the general public
Baidu unveils autonomous driving platform backed by 90 global partners
Baidu plans to mass produce Level 4 self-driving cars with BAIC by 2021
BlackBerry and Baidu Partnering to Accelerate Connected and Autonomous Vehicle Technology
Tencent, Changan Auto Announce Autonomous-Vehicle Joint Venture
JD.com Delivers on Self-Driving Electric Trucks
NAVYA Unveils First Fully Autonomous Taxi
Fujitsu and HERE to partner on advanced mobility services and autonomous driving
Lucid Chooses Mobileye as Partner for Autonomous Vehicle Technology
First Look Inside Zoox’s Autonomous Taxi
Apple Is Focusing on Making an Autonomous Car System
Samsung, Harman gear up for self-driving automobiles
Mitsubishi Electric Develops Automated Mapping For Autonomous Driving
Hitachi demonstrates vehicle with 11-function autonomous driving ECU
DENSO and NEC Collaborate on Automated Driving and Manufacturing
Nuro’s Robot Delivery Vans Are Arriving Before Self-Driving Cars
Here’s Tesla’s competition in car batteries…
LG Chem targets electric car battery sales of $6.3 billion in 2020
Samsung SDI Unveils Innovative Battery Products at 2018 Detroit Motor Show
SK Innovation to produce EV batteries with 500 km range in 2018
New Toshiba EV Battery Allows 320km Charge in 6 Minutes
Daimler opens its sixth battery factory
General Motors China To Open Battery Factory In Shanghai
Panasonic Opens New Automotive Lithium-Ion Battery Factory in Dalian, China
Panasonic forms battery partnership with Toyota
China to build many gigafactories' worth of electric-car battery plants
China's BYD takes aim at Tesla in battery factory race
CATL’s Chinese battery factory will be bigger than Tesla’s Gigafactory
CATL Zeroes In On a European Battery Plant
Energy Absolute Plots Asian Project Rivaling Musk's Gigafactory
European Battery Alliance (EBA) is taking shape
ABB teams up with Northvolt on Europe's biggest battery plant
Chinese Battery Maker to Open Factory Next to Swedish EV Plant
Sokon aims to be global provider of battery, electric motor, electric control systems
BMW Group invests 200 million euros in Battery Cell Competence Centre
BMW Brilliance Automotive opens battery factory in Shenyang
BMW announces partnership with solid-state battery company
Toyota promises auto battery 'game-changer'
Hyundai Motor developing solid-state EV batteries
Honda considers developing all solid-state EV batteries
Continental eyes investment in solid-state batteries
Wanxiang is playing to win, even if it takes generations
UK provides millions to help build more electric vehicle batteries
Rimac is going to mass produce batteries and electric motors for OEMs
Elon Musk Has A New Battery Rival (Romeo Power) Packed With His Ex-Employees
Bracing for EV shift, NGK Spark Plug ignites all solid-state battery quest
ProLogium Technology Will Produce First Next Generation Lithium Ceramic Battery For EVs
Here’s Tesla’s competition in storage batteries…
Panasonic
LG
BYD
AES + Siemens (Fluence)
GE
NEC
Hitachi Chemical
ABB
Saft
EnerSys
SOLARWATT
Sharp
Kreisel
Leclanche
Lockheed Martin
UniEnergy Technologies
ENGIE
Blue Planet
Clean Energy Storage Inc.
Younicos
Powervault
Schmid
24M
Ecoult
And here’s Tesla’s competition in charging networks…
EVgo Installing First 350 kW Ultra Fast Public Charging Station In The US
Tritium’s First 350-kW DC Fast Chargers Coming To U.S.
Porsche plans network of 500 fast chargers for U.S.
BMW, Daimler, Ford, VW, Audi & Porsche form IONITY European 350kw Charging Network
E.ON to have 10,000 150KW TO 350KW EV charging points across Europe by 2020
Enel kicks off the E-VIA FLEX-E project for the installation of European ultra-fast charging stations
Europe’s Allego “Ultra E” ultra-fast charging network now operational
Allego & Fortum Launch MEGA-E High Power Charging network for Europe’s Metropolitan areas
Chargepoint Europe Gets $82 million in new funding from Daimler
ChargePoint - InstaVolt partnership; more than 200 UK rapid charge systems
UK's Podpoint installing 150kW EV rapid chargers this year; 350kW by 2020
UK National Grid plans 350kW EV charge point network
ChargePoint Express Plus Debuts: Offers Industry High 400 kW DC Fast Charging
Fastned building 150kw-350kw chargers in Europe
ABB powers e-mobility with launch of first 150-350 kW high power charger
Shell buys European electric vehicle charging pioneer NewMotion
BP in talks with electric carmakers on service station chargers
Total planning EV charging points at its French stations
Yet despite all that deep-pocketed competition, perhaps you want to buy shares of Tesla because you believe in its management team. Really???
Elon Musk, June 2009: “Tesla will cross over into profitability next month”
Tesla SEC Correspondence Shows A Pattern Of Inaccurate, Incomplete & Misleading Disclosures
Tesla: Check Your Full Self-Driving Snake Oil Expiration Date
As Musk Hyped and Happy-Talked Investors, Tesla Kept Quiet About a Year-Long SEC Probe
The Truth Is Catching Up With Tesla
With Misleading Messages And Customer NDAs, Tesla Performs Stealth Recall
Who You Gonna Believe? Elon Musk's Words Or Your Own Lying Eyes?
How Tesla and Elon Musk Exaggerated Safety Claims About Autopilot and Cars
When Is Enough Enough With Elon Musk?
Musk Talked Merger With SolarCity CEO Before Tesla Stock Sale
Tesla Continues To Mislead Consumers
Tesla Misses The Point With Fortune Autopilot Story
Tesla Timeline Shows Musk's Morality Is Highly Convenient
Tesla Scares Customers With Worthless NDAs, The Daily Kanban Talks To Lawyers
Tesla: Contrary To The Official Story, Elon Musk Is Selling To Keep Cash
Tesla: O, What A Tangled Web We Weave When First We Practice To Deceive
I Put 20 Refundable Deposits On The Tesla Model 3
Tesla: A Failure To Communicate
Elon Musk Appears To Have Misled Investors On Tesla's Most Recent Conference Call
Understanding Tesla’s Potemkin Swap Station
Tesla's Amazing Powerwall Reservations
So in summary, Tesla is losing a massive amount of money even before it faces a huge onslaught of competition (and things will only get worse once it does), while its market cap tops that of Ford and is 80% of GM’s despite a $2.8 billion+ annualized net loss selling a bit over 100,000 cars while Ford and GM make billions of dollars selling 6.6 million and 9 million cars respectively. Thus this cash-burning Musk vanity project is worth vastly less than its nearly $60 billion fully-diluted enterprise value and—thanks to its roughly $31 billion in debt and purchase obligations—may eventually be worth “zero.”
