Mark Spiegel’s Stanphyl Capital is famous for its questioning of Tesla but its biggest alpha comes from his picks in small caps – see below for an excerpt on Tesla Inc (TSLA) from their August  2017 letter. But first… although he is known as Elon Musk’s number one enemy, Mr. Spiegel makes most of his money from killer small cap picks. His under the radar small caps which could pop just based on this piece (if we discussed it publicly) were profiled in ValueWalk’s 2nd edition of our quarterly premium newsletter. Below is an excerpt on Tesla short thesis and the role of electric cars in china in that regard.

Also see:  Tesla Tax Incentives: When Will The Federal Credit Start To Wind Down?

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As noted in previous letters, this year’s terrible performance has been primarily due to our short position in Tesla, whereby despite having an overwhelming number of facts on our side (detailed, as usual, below) the stock is up 67% this year.

electric cars in china Ronald Stephen Baron, Ron Baron, Tesla Inc, TSLA, growth stocks, American mutual fund manager, investor, Baron Funds, Baron Capital Management, Elon Musk

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And then of course we’re short Tesla, which I still 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.

A number of smart people have reached out to me to express their belief that Tesla is among the most obvious shorts they’ve ever seen (yes, I know—“crowdedness” on the short side is temporarily propping it up) and that I’ve thus been writing about it to the point of overkill. There may be something to that, and thus going forward I’ll somewhat reduce the amount of space I allocate to the company in this letter, focusing just on a few key developments in the current month followed by updated links to its massive competition. I shall also always reiterate the following three core points:

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 is every aspect of its business.

3) Elon Musk is extremely untrustworthy.

In August Tesla released a disastrous Q2 2017 earnings report with record cash burn and—excluding the one-time injection of Zero Emission Vehicle credit revenue—a record loss. Rather than rehashing how bad things were, you can read this perfect summary of the quarter from Zero Hedge supplemented by this one from Seeking Alpha as well as this one showing what a disaster the battery storage division remains. Meanwhile, the Model 3 will be a huge sales disappointment when reservation holders realize that fewer than 100,000 of them will qualify for the $7500 tax credit and almost nothing can be done in the car without a multi-step process on the touchscreen-- not even changing the windshield-wiper speed, adjusting the air vents or opening the glovebox! In other words, in some circumstances operating a Tesla Model 3 may be as dangerous as texting while driving! And of course Tesla will make little (if any) money on the car, as it currently loses a fortune on models starting at twice the price.

Importantly in late August, the Wall Street Journal published a terrific exposé of something I’ve written about in these letters for a very long time: Tesla’s dangerous and deceptive deployment of its so-called “Autopilot.” Upon this article’s publication I considerably re-upsized our short position (with a fairly tight stop!) as Tesla—due to its awful fundamentals—survives only on Musk’s reputation among his Kool-Aid drinking acolytes, and the feedback I’m now seeing in multiple forums (both in reaction to that story and a number of other deceptive practices from the company) is that those cult members (and their lazy media enablers) are finally starting to regurgitate some of that Kool-Aid.

Also in August came this great new analysis destroying the cost-saving myth of Tesla’s “Gigafactory.” And then I present you with the following two August headlines-- the first relates to a comically priced (and in this case, comically headlined) unsecured junk debt offering (subsequently upsized to $1.8 billion, and nearly instantly selling below par) as a perfect metaphor for this entire bubble market, and

he second is an educational jolt for anyone out there naïve enough to think Tesla’s “secret sauce” is that “it’s really a battery company”…

 

So here’s Tesla’s competition in cars…

The All-Electric 2017 Chevrolet Bolt EV

GM CEO: Chevrolet Bolt Is Our Platform For A Huge Range Of Vehicles

All New 200-mile Nissan Leaf Coming September 2017

Jaguar I-Pace: 2018 production car set for September 2017 debut

Jaguar Land Rover says half of its new cars will have electric option by 2020

Audi Launching Three Electric Cars Beginning 2018

Daimler to invest $11 billion in electric vehicles

Daimler brings forward electric-car goal

New Mercedes EQ Concept ride review

Porsche Mission E electric car to have wide range of variants

BMW to introduce electric 3-series in September 2017

BMW Flexible vehicle architecture to enable electrification of every model series

Upcoming Hyundai Kona Electric SUV With 50 kWh Battery, 220 Mile Range

Hyundai plans long-range premium electric car in strategic shift

Honda to launch two new electric cars in 2018

Volvo Plans to Go Electric, to Abandon Conventional Car Engine by 2019

Volvo’s Polestar brand to build its own electric sports cars

Volkswagen plans to ‘leapfrog’ Tesla in electric car race

Ford to launch fully electric SUV with range of at least 300 miles & two electrified police vehicles

Ford, German Postal Service Form EV Joint Venture

Toyota, in about-face, may mass-produce long-range electric cars

New Mazda electric car due in 2019 

Electric Kia Stinger GT to rival Tesla Model 3

Infiniti to launch performance EV with Nissan tech by 2020

Nissan, Renault, Mitsubishi to share electric car platform

MG E-Motion confirms new EV sports car on the way by 2020

All electric Lucid Air to Start At $52,000 After Tax Credit

Maserati executive confirms electric Alfieri

Peugeot and Citroen Promise 450 km (280 Miles) Electric Vehicle in 2019

New 2017 Renault ZOE ZE 40: 400 km Range*, 41 kWh Battery

Seat to launch first electric car in 2019

Mitsubishi To Launch New All-Electric and PHEV Compact SUV Between 2017-2020

Subaru Considers Electric Versions of Its Cars to Leverage Brand

2017 Karma Revero (nee Fisker) launches with updates

Borgward BXi7 Electric SUV Flies Under

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