The latest from Stanphyl Capital on Tesla Inc. (NASDAQ:TSLA) short case – also make sure to check out Oceansquare thesis on the company – see below for an excerpt from their April letter – more can be found on ValueWalkPremium – see below for the excerpt on Tesla
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.
The month of April got off to a terrific start for Tesla, beginning with a “hilarious” (if you’re short) April Fool’s “joke”…
…and continuing the very next day with even more hilarity when (in addition to his multiple jobs at multiple other companies) Musk appointed himself Model 3 production head…
And remember that when Tesla’s worldwide head of sales & service quit a few months ago, Musk appointed himself to that job too! Next I expect him to impress Gisele by joining the New England Patriots and replacing both Brady and Gronkowski!
Next in April the Wall Street Journal ran a story with a great chart showing what has happened recently to the price of cobalt (approximately 50 pounds of which is in a Tesla battery)…
…thereby helping to ensure that Model 3 gross margin will remain negative while Model S/X gross margin—if Tesla accounted for it properly—would remain in the low single digits.
Next in April Tesla released disastrous Q1 automobile sales & delivery results, with 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. And keep in mind that this decline in S&X sales is occurring 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 and then next year by the Mercedes EQC 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. For a great summary of just how bad Q1 deliveries were for Tesla, read this terrific article from Seeking Alpha.
Next in April, the NTSB booted Tesla off the panel investigating last month’s horrific fatal Autopilot crash (at least the third fatal Autopilot crash to have occurred), while Tesla hilariously tried to get ahead of the story by lying and saying it voluntarily quit. Upon receiving notice of its dismissal by the NTSB, Tesla then released a statement consisting of the following pure comedy gold:
Meanwhile, as the number of Autopilot-related crashes accumulates, it seems increasingly clear that this reckless system should be banned from public roads and deactivated, with appropriate refunds given to any purchaser who wants one.
Next in April, Musk admitted that Tesla’s “automate everything” approach to manufacturing (“the machine that builds the machine”) was wrong, and that the company will now scrap tens (or perhaps hundreds or billions) of dollars in robots and other mechanical devices previously used to justify claims of “a manufacturing edge” over the rest of the industry. Why? Because as someone with a lifetime of auto factory expertise wrote in Forbes: “Tesla is the worst car manufacturer in the developed world. Bar none.” Translation: yet another leg of the Tesla hype story has been chopped off and tossed into the fireplace. What’s particularly hilarious about this is that Tesla’s “solution” to the problem is to hire still more people, yet prior to this announcement Bloomberg published a great piece pointing out how incredibly inefficient Tesla’s factory is using the massive number of people it already has!
Next in April it was learned that due to its own inadequate testing (i.e., Musk rushing to pump the stock price), Tesla is stuck with a massive number of flawed Model 3 parts requiring re-machining. That same day, a bombshell securities fraud lawsuit appeared containing extensive documentation from former Tesla employees about how Elon Musk continually lied to shareholders about the progress of Model 3 production. And then just a day later, a story broke that Tesla under-counted worker injuries to make its safety record appear better. And keep in mind that in March the company’s Chief Accounting Officer and Treasurer/V.P. of Finance both quit on no notice. Now why would that happen? Could Tesla be the world’s largest fraudulent penny-stock?
Next in April, word leaked of a surprise multi-day shutdown of the FUBAR (if you don’t know that acronym, look it up!) Model 3 assembly line, along with a major OSHA safety inspection. Coincidence? I think not! Nevertheless, Tesla quickly claimed this shutdown was “planned” despite a long factory tour it gave to the CBS Morning Show just three days earlier in which it was never mentioned and the release of an 8-K just 13 days earlier which claimed everything at the factory was going great and production would “climb rapidly through Q2.” In other words, nothing Tesla says can be accepted at face value.
Following word of the factory shutdown, one of the most insane CEO memos in modern history (written by Subsidy Fraud-Boy—sorry, I mean “Elon Musk”—himself) was “leaked” (deliberately, no doubt, in yet another desperate attempt to pump TSLA stock). It threatens Tesla’s suppliers (perhaps creating an excuse for the cash-strapped company to not pay them), urges employees to walk out of meetings or hang up on calls (even ones arranged by their bosses!) if they don’t feel they’re productive, and vows to start running the Model 3 assembly line 24/7. (And here’s a great summary of the negative implications of THAT.)
Speaking of the Model 3, 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.) In February Tesla quietly announced that the “$35,000 Model 3” (which I’ve been saying since 2014 would never be offered in quantity because Tesla would lose at least $10,000 on each one) will be delayed for at least a year, and I believe even then it will only be produced in token amounts (if at all), yet meaningful demand for this car clearly exists only at that lower price point. Meanwhile, extensive forum posts indicate that despite initially favorable reviews based on the short-term driving experience, over time the Model 3 is revealing itself to be a complete and total lemon. And finally regarding the Model 3, here’s my monthly reminder 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.
Next in April, Tesla lost yet another head of autopilot, a renowned guy in tech circles who was supposedly designing some kind of brilliant, proprietary chip. And recall that the Autopilot head before him quit reportedly because Musk was a dick (okay, I’m paraphrasing) and the one before him quit reportedly because Musk was lying to the public about Autopilot’s safety. In fact, Jim Chanos recently said on CNBC that the only two companies in which he’s seen Tesla’s level of executive departures were Valiant and Enron– now there’s some exclusive company! Here (courtesy of Chanos) are the departures just since May 2016:
Tesla’s Q4 “earnings” report showed (using the total net loss ex ZEV credits) that it lost over $28,000 on each car it sold, and I expect the Q1 2018 numbers (to be released in early May) will be worse. At some point Tesla’s $31.4 billion in combined long-term debt and battery purchase obligations—accompanied by its negative cash flow and massive encroaching competition—will drive it into bankruptcy. In fact, Tesla’s interest expense is now at a run-rate of nearly $600 million a year, which in Q4 amounted to $4884 per car sold—fully one-third of Tesla’s gross profit went towards servicing its debt!
Finally in April, Bloomberg—normally one of the most Musk-loving outlets in financial journalism (perhaps because owner Mike Bloomberg is a keen user of his private air fleet to “fight global warming”)—published a terrific “Cliff’s Notes” version of what a financial disaster Tesla is; the story, “Tesla Doesn’t Burn Fuel, It Burns Cash” is well worth reading.
Meanwhile, Tesla is increasingly besieged by a wide variety of lawsuits, for labor discrimination, worker safety, union-busting, autopilot fraud, sudden acceleration, lemon law violations, investor fraud and, undoubtedly, many others of which I’m not yet aware.
And yet with all that, I don’t expect Tesla’s path to $0.00 will be straight down; as Twitter user @TeslaCharts points out, it never is:
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 RELEASES IMAGE OF 2019 EQC FULLY ELECTRIC CROSSOVER
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 Plans $12 Billion Electric-Car Blitz 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 to launch three electric vehicles in China in 2018
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
Cadillac Super Cruise™ Sets the Standard for Hands-Free Highway Driving
GM ride-hailing fleet would ditch steering wheel, pedals in 2019
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 and Waymo Reach Deal to Collaborate on Self-Driving Cars
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
Hitachi Chemical
ABB
Saft
EnerSys
SOLARWATT
Sharp
Kreisel
Leclanche
Lockheed Martin
UniEnergy Technologies
ENGIE
Blue Planet
Clean Energy Storage Inc.
Younicos
Orison
Powervault
Schmid
24M
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 nearly as large as GM’s despite a $2.5 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 approximately $60 billion fully-diluted enterprise value and—thanks to its roughly $31 billion in debt and purchase obligations—may eventually be worth “zero.”