Technology

Tesla (TSLA) Stock Short Thesis – Many New Catalysts

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 were profiled in ValueWalk’s 2nd edition of our quarterly premium newsletter, where readers can also find his latest updates on those positions. Mark Spiegel’s Stanphyl Capital had some killer small cap picks which  are up several hundred percent in just a few months –More on the small caps can be found on ValueWalk’s HiddenValueStocks small cap website. Readers can see below for an excerpt on Tesla Inc (NASDAQ:TSLA) from their Stanphyl’s January 2018 letter.

Tesla
Blomst / Pixabay

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:

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 January Tesla released a disastrous Q4 sales report, delivering only 1550 Model 3s and reducing production guidance to 5000 a week by late Q2 2018 vs original guidance of up to 200,000 in the second half of 2017, later reduced to 5000 a week by late Q4 2017 and still later reduced to 5000 a week by late Q1 2018. Seeing as that last guidance was provided just 62 days before the disastrous Q4 report/guidance revision, it raises an interesting question: is Elon Musk—widely acclaimed as “a genius”—actually an idiot, or just a stock-pumping pathological liar? Before you answer that, please allow me to provide exhibits “B” and “C”:

Meanwhile, Model S&X sales were up a bit in Q4 vs. Q3 (28,320 vs. 25,930) but nearly 3900 of those Q4 sales were net liquidated inventory, undoubtedly heavily discounted and thus most likely resulting in a record low gross margin for the quarter. (We’ll know when Tesla releases the financial results in February.) Also, those sales were almost certainly artificially juiced by fears of tax credits being eliminated both in Norway (by far Tesla’s largest European market) and here in the U.S. As it turned out however, those credits were preserved in both places and thus Tesla will see a large S/X delivery drop in Q1 2018, and keep in mind that this seventh consecutive quarter of roughly flat S/X sales is occurring before the arrival later this year and next of superior luxury EV competition from Jaguar, Audi, Mercedes and Porsche. As those cars filter into the market, S/X sales will undoubtedly head into significant decline.

Also in January, the annual Consumer Electronics Show provided a cornucopia of autonomous driving technology from many of the world’s largest and most deep-pocketed automotive and tech companies, while outside the show, GM announced plans for 2019 to produce the world’s first fleet of driverless taxis without any human controls. Then at the Detroit auto show Ford—heretofore a bit of an EV laggard—announced plans to spend $11 billion bringing 16 pure electric models to market by 2022. (Tesla was a no-show at both events.)

Also in January, Navigant Research published a new “Leaderboard Report” for autonomous driving, in which Tesla tied for dead last among 19 contenders. Here’s Navigant’s assessment: “Tesla is the outlier, with big plans and lots of public announcements, but technology that is at best dubious and some serious financial and manufacturing quality issues to mitigate.” And while we’re on the topic of Tesla now being a technology laggard, remember that in December its battery supplier Panasonic announced a partnership with Toyota (and possibly other Japanese automakers) that casts a spotlight on how technologically behind Tesla’s cylindrical battery format now is. I urge you to read this excellent summary of the event from The Daily Kanban.

Next for Tesla in January, CEO Elon Musk (or just “Elon”, as the cash-burning cult leader is referenced in the official SEC filing) signed on for a new pay deal that, when analyzed, is indicative of just how unprofitable this company will always be.

Finally in January, CNBC published an investigative report indicating that Model 3 production problems are apparently far worse than Tesla has been acknowledging, while a terrific article on Seeking Alpha reiterated the same thing using alternative data points. But eventually the Model 3 production and quality problems will be fixed, right? Perhaps, but based on the mediocre bids when current owners try to resell their brand-new Model 3s on eBay, as well as the fact that Tesla is already filling reservations from days 2 and 3 despite claiming to have had 180,000 reservations on day 1, it seems the primary demand for that car will be for the $35,000 base model rather than the ones starting at $49,000 that Tesla now sells. The problem with that is that I (and others) estimate that Tesla will lose at least $10,000 on a $35,000 car and thus won’t produce more than a token handful of them. Thus, watch for Model 3 reservations to dry up when potential buyers realize they can’t get a “mass-market affordable car” from Tesla (and instead switch to the new Leaf or Bolt), then watch those reservations really vanish when the $7500 tax credit goes away later this year. (More on that below.) And another big Model 3 headwind is that 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. Thus, operating a Tesla Model 3 may potentially be as dangerous as texting while driving.

I previously mentioned that the Q4 Tesla sales bump was partially due to the feared cancellation of U.S. tax credits. Although the subsequent preservation of those credits might seem to be favorable to Tesla it actually isn’t, as U.S. Tesla buyers will only be able to apply a $7500 credit to approximately 100,000 more cars (including the phase-out period). After that Tesla will have a major price disadvantage vs. over 100 new EV models entering the market over the next few years, as its credits will have expired (after first being cut to $3750 and then $1875 during the extended phase-out) while much of the competition will just be getting started with a full $7500 credit. Additionally, pricing for much of that new competition will be cross-subsidized by highly profitable conventionally powered trucks and SUVs, so if you think Tesla loses a lot of money now trying to sell cars (and it sure does!), wait until you see what happens beginning late this year.

As for the heavily promoted “$180,000, 500-mile” Tesla electric truck, I (and many others) estimate that a 500-mile electric truck will require a 1000/kWh battery pack and—with its fancy carbon fiber cab and chassis– will thus cost at least $250,000 to build. Additionally, Tesla is guaranteeing to cap electricity rates at .07/kWh for the first million miles of the truck’s usage; as national rates average around .12/kWh, I estimate this will cost Tesla—on average—an additional $100,000 for each truck it sells, meaning it will supposedly charge $180,000 for a product that will cost around $350,000 to build and subsidize– a typical Musk “business proposition” if I’ve ever seen one! In other words, the Tesla semi-truck will either never be built and sold (hey by the way—where’s the factory and assembly line for that “2019 product”?) or the real price (with the lifetime .07/kWh electricity subsidy) will be around $400,000 (vs. $120,000 for a conventional truck) and all those big-name “reservations” will disappear even faster than the proceeds from a Tesla financing. And oh, by the way, Tesla is actually behind much of the industry in developing an electric truck.

Meanwhile, Tesla is increasingly besieged by a wide variety of lawsuits, for labor discrimination, union-busting, autopilot fraud, sudden acceleration, lemon law violations, investor fraud and, undoubtedly, many others of which I’m not yet aware. And that’s even before it brings in the (inevitable) bankruptcy lawyers!

So here is Tesla’s competition in cars (note: these links are continually updated)…

CHEVROLET BOLT EV: THE 2017 MOTOR TREND CAR OF THE YEAR

GM to introduce 3 more electric cars before 2020, battery cells at <$100/kWh

2018 Nissan Leaf debuts: 150 miles for $30,875, 200-plus mile model by late 2018

Nissan IMx Electric Crossover Coming in 2019

Jaguar I-Pace electric SUV debuts March 2018; on sale in June

Jaguar XJ to transform into Tesla Model S rival

New 2018 Audi e-tron: all-electric SUV nearing autumn release

Audi Launching Three Pure Electric Cars Beginning 2018

Volkswagen To Speed Up EV Development With Big Investments

Volkswagen I.D. Crozz 311-Mile Electric CUV For $30,000-ish Before Incentives

Target Tesla: Porsche Mission E to come in three power levels

2018 Hyundai Kona Electric SUV Will Have 220 Mile Range

14 new EV models by Hyundai-Kia by 2025

Mercedes Wheels Out Electric Car Roadmap, Car And Battery Factories Everywhere

Daimler Trucks launches E-FUSO and all-electric heavy-duty truck Vision One

Ford plans $11 billion investment, 40 electric vehicles by 2022

Electric Land Rover “Road Rover” to launch in 2019

First electric Volvo to be an all-new hatchback due in 2019

Volvo’s Polestar reveals its vision to be the new electric performance brand

Volvo To Start Selling Electric Trucks In 2019, Some Will Hit The Road This Year

Toyota, Mazda, Denso create company to roll out electric cars beginning 2019

Infiniti will go mostly electric by 2021

PSA will launch full-electric Peugeot 208 and DS 3 Crossback in 2019

PSA will electrify global product lineup by 2025

Seat to launch first electric car in 2019

Opel bets on electric power in bid for profitability

Skoda Vision E revealed for 2020 production

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

Dyson looks to launch first electric car by 2020

BMW iNext Electric SUV arrives in 2021 with a 435-mile range

BMW to have 25 electrified models by 2025

Toyota to market over 10 battery EV models in early 2020s

235mph Lucid Air due in 2019 as electric BMW 7 Series rival

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

Kia Unveils Plan for 16 New Electric or Hybrid Vehicles by 2025

Bentley plan for electric and hybrid car roll-out is well advanced

Maserati executive confirms electric Alfieri

Subaru to introduce all-electric vehicles by 2021

Faraday Future raises £747 million for 2018 Production

Borgward BXi7 Electric SUV Flies Under The Radar

Detroit Electric promises 3 cars in 3 years

Two new electric cars from Mahindra in India by 2019; Global Tesla rival e-car soon

Saab asset owner NEVS plans electric car production

And in China…


BYD Plans to Expand Daimler Partnership With New EVs for China

Daimler to invest $755 million in China EV, battery output

Daimler, BAIC agree to make electric cars in China

Volkswagen Plans $12 Billion Electric-Car Blitz in China

GM plans to launch 10 new energy models in China by 2020

Audi and FAW sign China electric car cooperation deal

Ford ramps up electric vehicle push in China

China’s BYD has overtaken Tesla in the battery and electric car business

SAIC to spend $2.2 billion on EVs, connectivity, aftersales services

Honda to launch three electric vehicles in China in 2018

Toyota to re-enter EV sector starting in China from 2020

Renault, Nissan, Dongfeng Motor partner to develop electric cars in China

Renault-Nissan Alliance To Electrify China’s Trucks And Vans

Mazda and Changan Auto join hands on electric vehicles

NIO’s ES8 is China’s answer to the Tesla Model X – at about half the price

Geely’s Volvo gears up to make electric cars 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, Foxconn Invest in Electric-Vehicle Maker Xiaopeng Motors

Tesla Model 3 Watch Out: Here Is The XPeng Identity X

WM Motor Technology to put ‘Weltmeister’ electric car brand on road in 2018

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

FAW (Hongqi) to roll out 15 electric models by 2025

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

Wanxiang Gets China Electric Vehicle Permit to Make Karma Cars

Qoros Auto’s new owner plans to be an EV power

Thunder Power electric cars at the Frankfurt motor show

Here’s Tesla’s competition in autonomous driving…

An Overview of Audi Piloted Driving

Waymo is first to put fully self-driving cars on US roads without a safety driver

Cadillac Super Cruise™ Sets the Standard for Hands-Free Highway Driving

GM ride-hailing fleet would ditch steering wheel, pedals in 2019

Updated 2017 Mercedes-Benz S-Class – first ride with autonomous technology

Volvo Promises Uber Fleet of Self-Driving Taxis By 2019

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

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

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

Continental Joins Autonomous Driving Platform from BMW, Intel & Mobileye as System Integrator

Continental Sees Huge Growth in Automated Driving, Unveils Mobility Tech

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 and Waymo Reach Deal to Collaborate on Self-Driving Cars

Hyundai, Aurora to release autonomous cars by 2021

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 is reportedly testing its own autonomous driving system

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

Who Leads the Autonomous Driving Patent Race?

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 to ramp up battery production

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

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

ABB teams up with Northvolt on Europe’s biggest battery 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

Bosch May Invest 20 Billion Euros in Solid-State Battery Production for EVs

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

Samsung

LG

BYD

AES + Siemens (Fluence)

Mitsubishi

NEC

Hitachi

ABB

Saft

EnerSys

GS Yuasa

E.ON

SOLARWATT

Daimler

Schneider Electric

sonnenBatterie

Kokam

Sharp

Nissan – Eaton

Tesvolt

Kreisel

Leclanche

Lockheed Martin

EOS Energy Storage

Energy Storage Systems Inc.

UniEnergy Technologies

electrIQ

Belectric

Sunverge

Stem

Green Charge Networks

Imergy Power

Exergonix

Redflow

Renault

Fluidic Energy

Primus Power

Simpliphi Power

redT Energy Storage

Bluestorage

Adara

Blue Planet

Clean Energy Storage Inc.

Swell Energy

Tabuchi Electric

Younicos

Orison

Moixa

Powin Energy

Nidec

Powervault

ViZn Energy

Schmid

24M

Terra E

And here’s Tesla’s competition in charging networks…

Electrify America: Our Plan

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

Tritium’s First 350-kW DC Fast Chargers Coming To U.S.

Porsche is bringing its ultra-fast electric car charging stations to the US

Nissan and EVgo to build i-95 Fast-Charge ARC connecting Boston and Washington D.C.

Shell, 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

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

ABB powers e-mobility with launch of first 150-350 kW high power charger

DBT unveils the 1st 150 kW universal ultra-fast charging station 

5 European fast charging networks form Open Fast Charging Alliance

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???

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

Debunking The Tesla Mythology

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’s Financial Shenanigans

Tesla: A Failure To Communicate

Can You Really Trust Tesla?

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 (assuming 177 million shares “all-in”) exceeds that of Ford and almost equals that of GM despite a nearly two-billion-dollar 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 $64 billion fully-diluted enterprise value and—thanks to its roughly $10 billion in debt—may eventually be worth “zero.”