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?
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.
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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 The Radar
Skoda electric car range to grow
And in China…
Daimler strengthens dedication to emission-free mobility with new DENZA 400km EV for China
Daimler to produce electric cars for EQ subbrand in China
Daimler, BAIC agree to make electric cars in China
Volkswagen To Launch 8 New Energy Vehicles In China
Volkswagen Eyes Third China Joint Venture in Continued Push Into Electric Vehicles
GM plans to launch 10 electric cars in China by 2020
Audi and FAW sign China electric car cooperation deal
Ford to Make Electric Cars in China Amid Green Drive
Ford, China's Zotye Auto plan JV to build electric vehicles
China's BYD has overtaken Tesla in the battery and electric car business
SAIC to spend $2.2 billion on EVs, connectivity, aftersales services
Toyota may mass produce electric cars in China in 2019
Renault, Nissan, Dongfeng Motor partner to develop electric cars in China
Renault-Nissan Alliance To Electrify China's Trucks And Vans
Volvo’s first all electric car will be made in China
Chery Breaks Ground on $240M EV Factory in China
Chery's second EV plant to open in May in Dezhou
NextEV NIO ES8 Is A Surprisingly Normal Electric SUV
New Chinese Car Brand: WM Motors To Bring EVs To The Masses
GAC Begins Construction of $6.5 Billion Industrial Park to Boost EV Business
China e-car newcomer Future Mobility to launch electric SUV in 2019
Honda to debut electric vehicle in China next year
The Singulato iS6 From China Is Aimed At The Tesla Model 3
Quianu Motor aims to grab share of US electric vehicle market
NEVS receives approval for electric car factory with capacity of 200,000 units per year
Karma Owner Building 50,000 Cars/Year Electric Car Factory in China
Here’s Tesla’s competition in autonomous driving…
Audi takes pole position in race for fully autonomous cars
Updated 2017 Mercedes-Benz S-Class - first ride with autonomous technology
Cadillac Super Cruise™ Sets the Standard for Hands-Free Highway Driving
GM Produces First Round of Self-Driving Chevrolet Bolt EV Test Vehicles
GM’s Cruise Automation does a 90-minute urban drive with no intervention
GM’s Cruise Automation Wades Into HD Mapping to Aid Autonomous-Car Efforts
Nvidia and Mercedes-Benz to bring an AI car to market within a year
NVIDIA and Toyota Collaborate to Accelerate Market Introduction of Autonomous Cars
Audi and NVIDIA team up to bring fully automated driving accelerated with artificial intelligence
Volvo and Autoliv team up with Nvidia for self-driving cars
NVIDIA Partners with Bosch for System Based on Next-Generation DRIVE PX Xavier Platform
Bosch and Daimler join forces to market fully automated, driverless taxis by 2020
Volkswagen and Mobileye sign agreement to develop autonomous driving
Toyota, Intel and others form big data group for autonomous tech
Autonomous Nissan Leaf Video
Nissan and Mobileye to generate, share, and utilize vision data for crowdsourced mapping
Subaru, Nissan hit highway with affordable self-driving
BMW, Intel, Mobileye & Delphi Developing Autonomous Driving For Multiple OEMs
Fiat Chrysler to Join BMW, Intel and Mobileye in Developing Autonomous Driving Platform
Continental Joins Autonomous Driving Platform from BMW, Intel & Mobileye as System Integrator
Ford expands fleet of self-driving test cars
Hyundai Presents Autonomous IONIQ Electric Prototype at 2017 CES
Waymo to supply autonomous hardware & software to any car maker
Lyft and Waymo Reach Deal to Collaborate on Self-Driving Cars
Lyft teams up with NuTonomy to put ‘thousands’ of self-driving cars on the road
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 Steers Into Self-Driving Car Venture With Partner
Lucid Chooses Mobileye as Partner for Autonomous Vehicle Technology
Cook Says Apple Is Focusing on Making an Autonomous Car System
Samsung Gets Green Light to Test Self-Driving Cars
BlackBerry to open autonomous vehicle hub
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
Here’s Tesla’s competition in car batteries…
LG Chem targets electric car battery sales of $6.3 billion in 2020
Samsung Presents Innovative Fast Charging Battery with 600km Range
Samsung SDI to build $358 million car battery plant in Hungary by 2018
SK Innovation Focusing on Becoming the Top Global Company for EV Batteries
Daimler's battery gigafactory begins Europe challenge to Tesla
Daimler builds battery factory in Beijing
General Motors China To Open Battery Factory In Shanghai
Panasonic Opens New Automotive Lithium-Ion Battery Factory in Dalian, China
China's BYD takes aim at Tesla in battery factory race
Contemporary Amperex’s Chinese battery factory will be bigger than Tesla’s Gigafactory
Contemporary Amperex building an EV battery/drivetrain facility in Europe
Energy Absolute Plots Asian Project Rivaling Musk's Gigafactory
BMW Shows Off Its Battery And Electric Motor Production Facility
FORD ACCELERATES ELECTRIFIED VEHICLE BATTERY RESEARCH AND DEVELOPMENT
Volkswagen will invest $3.7 billion in battery cell & electric drive plant
Hyundai Motor developing solid-state EV batteries
Jaguar holds talks with Ford and BMW over building a giant battery factory
Ultrafast-Charging Solid-State EV Batteries Around The Corner, Toyota Confirms
Kreisel Seeks to Overtake Tesla With Souped-Up Plug-In Cars
Wanxiang is playing to win, even if it takes generations
UK provides millions to help build more electric vehicle batteries
Former Tesla executives plan to build $4bn Nordic battery plant
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
Here’s Tesla’s competition in storage batteries…
Panasonic
LG
GE
AES + Siemens (Fluence)
Mitsubishi
Saft
EnerSys
SOLARWATT
Sharp
Tesvolt
Kreisel
Leclanche
Lockheed Martin
UniEnergy Technologies
electrIQ
Green Charge Networks
Imergy Power
Blue Planet
Clean Energy Storage Inc.
Younicos
Orison
Powervault
ViZn Energy
Schmid
And here’s Tesla’s competition in charging networks…
ELECTRIFY AMERICA UNVEILS FIRST $300M OF $2B INVESTMENT IN ZEV INFRASTRUCTURE
EVgo Installing First 350 kW Ultra Fast Public Charging Station In The US
BMW and Volkswagen Take on Tesla Motors With a New U.S. Fast-Charging Network
Nissan and EVgo to build i-95 Fast-Charge ARC connecting Boston and Washington D.C.
BMW, Daimler, Ford, VW, Audi & Porsche JV for 350kw Charging On Major Highways in Europe
Porsche's latest electric car chargers put Tesla to shame
Chargepoint Europe Gets $82 million in new funding from Daimler
ChargePoint - InstaVolt partnership; more than 200 UK rapid charge systems
ChargePoint Express Plus Debuts: Offers Industry High 400 kW DC Fast Charging
Fastned building 150kw-350kw chargers in Europe
DBT unveils the 1st 150 kW universal ultra-fast charging station
5 European fast charging networks form Open Fast Charging Alliance
Shell starts equipping petrol stations with electric chargers
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???
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 fully diluted market cap now exceeds those of Ford and GM despite a billion-dollar annualized operating loss selling just 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 approximately $70 billion fully-diluted enterprise value and—thanks to its roughly $10 billion in debt—may eventually be worth “zero.”
