Whitney Tilson’s email to investors discussing Chamath Palihapitiya interviewed on CNBC today.
From a friend:
Q1 hedge fund letters, conference, scoops etc
This guy -- @Chamath -- is on CNBC right now:
https://twitter.com/chamath/with_replies
A trip down memory lane – it reminds me of this article he published almost exactly three years ago:
https://medium.com/@chamath/hey-jerkwater-do-your-math-on-tsla-a29a6435f515
He's clearly one of those who needs to read up on the facts. He doesn't seem to have read a Tesla 10-Q or doesn't seem to understand that Audi eTron and Jaguar i-Pace are outselling Tesla Model S and X right now to the tune of 6:1. Speaking of "tune" -- he said that Apple outsold Zune, and that Tesla is Apple.
Well, clearly not, seeing as Tesla's sales are going down and that the EV competitors are increasing their sales. Yes, I know that's primarily in Europe, but that's where the competitive market is right now (outside of China, that is). In the U.S., half of all Teslas sold are in the two major coastal California metropolitan clusters. The other 99% of America has very little of Tesla, by almost any measure. Tesla is clearly going to defend its brand and market share better on its home turf in California, than in the rest of the U.S., in Europe and in Asia/China.
He clearly not driven any of those competitors, or looked at the latest sales data.
In any case, he also said that Apple or Alphabet would buy Tesla if Tesla ever got into trouble, making it a futile exercise to short Tesla. But why? Those companies -- Apple and Alphabet -- have shown every sign of wanting to crush Tesla, not help it. Both of those companies -- Alphabet and Apple -- are cooperating with all the other automakers. Pretty much the only company they have ruled out from a cooperation standpoint, is Tesla.
And hey -- it's pretty well-known that Alphabet and Apple *did* conduct due diligence on Tesla and ended up rejecting the idea, perhaps more than once (2013, 2014 and 2016). And that was *before* it became evident that the Model 3 was a money-loser and Elon Musk went haywire on a number of fronts, including saying on 60 Minutes that he doesn't respect the SEC. Musk and Tesla have become a giant liability that no sane company would ever want to acquire, especially those who know its warts the best -- Alphabet and Apple.
He is blinded by the fact that he just bought a Tesla, views Elon Musk as a peer, and that he's never met the other automakers, driven their latest products, or visited their factories. He thinks that people want their cars to look and feel like computers. That may be true to a small portion of the population who indeed happen to live in Silicon Valley and Southern California -- but it’s not true for very broad layers of the population.
He’s also blinded by false statistical analogies. For example, he sees that the Model 3 has reached an annual global run-rate of 250,000 units. That’s true. He also sees that those 250,000 units came from some other automakers. That’s also true, sort of per definition.
But so what? You get a new entrant into the car business, which is selling its cars at a loss. That’s like a new burger chain coming in to sell the equivalent of a Big Mac for $1.99 instead of $2.99 or $3.99. Yes, that means that the other burger chains are going to lose some share. It’ll impact their economics.
But to what end, for the new entrant? Is losing money in perpetuity some sort of “new finance” or “new economics” goal? Is it different this time?
On a global basis, BMW, Audi, Volvo, Cadillac and other premium auto brands have not seen their sales fall when the Model 3 came onto the market. Yes, some models are down -- but others are up. Look at the overall global quarterly numbers. The Model 3 has made such a small impact, that the dents are spread over so many automakers and so thinly that they are hard to detect.
In the meantime, Tesla has indeed awakened over a dozen sleeping giants. There will be over 200 pure EVs on the market by the end of 2022. Even if by some measure one surrenders to the argument that “Tesla is the best” -- the margin pressure will ensure that it will be profitless prosperity.
I like a lot about what Chamath says about other companies and other investment theories. Not everything, but a lot. However, on Tesla he's blinded by biases and has simply not done his homework -- other than the fact that he's driving a Model 3.
