Whitney Tilson’s email to investors discussing Tesla Inc (NASDAQ:TSLA)’s 82k estimated deliveries; could Straubel leave?; More Audi eTron units sold than Tesla Model X and Model S in April/May; The Penalty of Leadership; German reviewer.
1) One of my best sources estimates that Tesla will deliver 82,000 cars in Q2 – a far cry from the 90-100k guidance and the 90,000+ hype from the bulls that’s been driving the stock in the last couple of weeks. If this is close to correct, I think the stock declines moderately on the announcement of this number – and even more when the company releases its three financial statements, which will show another big loss.
2) This is consistent with some smart commentary by Miko Tam of MYST Advisors:
“The stock is kind of in “No man’s Land” since we’re through the Shareholder event, back to Musk’s shenanigans like the “China reshuffling” and the next data point is June deliveries released the first week of July. Our checks are showing an improvement in from low 70’s in April / May to mid-80’s in June which is where the mosaic points and is in line with Consensus. However, Mix Shift will be negative though so Profits will be hurt.
One thing I don’t think people are paying attention to is the possibility CTO JB Straubel leaves the company. Straubel is THE man behind TSLA’s Technology and I think he’s as important, if not more important than Musk. I found it very odd that he barely even spoke at the Investor Day (an associate did) and he’s been a Net Seller of stock so it would not surprise me if he’s on his way out. That would not be good.
I think the shares can continue to trade higher into the Delivery Number, but the June improvement is NOT sustainable. The SRM3 launched in 2Q which is the bulk of the June Delivery pop, but that’s 1x and 3Q Deliveries will be horrible. Steady State Demand is more like 10k Model 3s per month and with the EV Tax Credit going away that is another 3.5k units.
2Q also benefitted from BMW M3 deliveries that were in transit in the EU as the M3 launched in the EU late 1Q and the Competition is only intensifying. TSLA began lapping the M3 rollout in the US a year ago and it’s just an impossible comp. Now with Audi, Jaguar, Porsche. Mercedes, Volvo and everyone else finally launching their EV SUV’s I expect TSLA Revenue to turn negative.
Lastly, China's been taking a much closer look at the Battery Fires over there. That's likely a partial function of the Trade War, but with the heightened scrutiny there’s the risk a negative TSLA Headline could hurt Demand / Deliveries. Worst Case, China could even force a recall if they wanted. I also think we’re probably 1 more Autonomous Crash away from the program getting a lot more scrutiny from Washington if it’s not already.”
Pay particular attention to paragraph 2, re. Straubel possibly leaving. Tesla engineers WORSHIP him – if he leaves, the stock’s down 5% that day…and that would be an UNDER-reaction…
3) Anton Wahlman’s latest: The verdict is in: More Audi eTron units sold than Tesla Model X and Model S in April/May
- Audi eTron has been on sale for approximately two full months and I analyze its sales numbers - thus far from Europe and the U.S.
- I then compare those sales numbers against its three sole competitors in the market: Tesla Model X, Tesla Model S, and Jaguar i-Pace.
- The Audi was the best seller in Europe in April and increasingly so in May. When adding the U.S. numbers, it essentially matched the Model S and X.
- In May, the Audi eTron broke out and became the segment best seller in these geographies combined.
- The competitive impact on Tesla’s global sales (and margin) opportunity will only worsen for each year as approximately 200 electric cars make it to market by the end of 2022.
4) Pivoting from the bearish case to the bullish one, this is a really smart column, which perfectly captures the scenario under which shorts get crushed: The Penalty of Leadership: From Cadillac To Tesla. Excerpt:
People often ask why Elon Musk doesn't pay a penalty for being such an insufferable jerk. The big question. As I enter my third month of Tesla ownership, I too have been struggling to reconcile my bottomless love for my Model 3 with my contempt for Elon's broken promises, exaggerations and pettiness. If only genius and power were linked to good judgment and superior temperament, but that notion is contradicted by virtually all of human history. If you think the men and women in the big chairs are kind, decent and patient, you've been fooled by the kind of publicists Musk gnaws on like a honey badger does a cobra.
But then I get back into my Tesla, and I just don't care.
I don't care because I know I let myself get caught up in $TSLA debate rather than the Tesla debate. Investors care about $TSLA. Consumers? Tesla. Two markets. Two products. Is $TSLA a steaming pile? I'm not an investor, so I don't care. Does Tesla make the most innovative cars on the planet?
The question answers itself. That's leadership.
I stare at the clean lines of its dash — as close to a concept as has ever gone from sheet to street. I pinch, point and drag the map on the large central display — as fast as my iPhone, which is all that matters to me in the current age. Every time I get in my car, Musk's wretched character evaporates. Every time I sit in traffic using Autopilot — flaws and all — I laugh at everyone agonizing over Tesla's stock price.
Even if Elon Musk were guilty of everything suggested by critics — and you can count me among them — he has delivered something legacy automakers have largely forgotten: The Dream, and not just the electric dream. Clean sheet design? Byah! Ground up infotainment? Byah! Smartphone UI? Fast navigation? Byahbyah! Great voice commands? Fast charging infrastructure? Direct sales? Wireless software updates?
Tesla's dream isn't a single spec. It's innovation for innovations sake, by whatever means. You don't have to love Tesla's solutions. They don't even have to work perfectly. Some of them may never work. That Tesla is even trying is the innovation, and a miracle for which we should be grateful. Hardly anyone else is. Almost every "innovation" from legacy car makers is the result of Tesla forcing their hands, and showing up years later with bits and pieces. How many years did they sit on seat belts? Airbags? Wireless updates? Google Maps integration? Smartphone integration?
…every time Musk tweets, he's saying the same thing Cadillac did 104 years ago. Screw you. Bring it. Keep talking about me, bitches. All of Musk's bulls**t, exaggerations and pettiness don't matter because once you get in a Tesla, there really is nothing else like it. Mine isn't perfect, and I don't care. I want what it does, and don't care about what it doesn't. I want to live the dream. I want to drive the future. If someone else offered it today, I'd buy that.
But no one does. At least not yet. (Porsche, please nail this. I've got my eye on you, Rivian.)
Until then, Musk will be forgiven almost anything he does, for better, or for worse. And like a honeybadger, he certainly don't give s**t. Elon is the leader we deserve, and the one the industry needed. And boy, is Elon paying its penalty every day. Cadillac and everyone else should be so lucky as to pay it, but they forgot about the leadership part, and no volume of "storytelling" and consulting fees can get it back.
5) This German auto reviewer was unimpressed with the build of the Model 3, but was a huge fan once he drove it: Tesla destroys German critic’s electric car prejudice after Model 3 test drive. Excerpt:
It took 50 kilometers (31 miles) before his prejudices against electric cars started to fade. Even with the electric revolution underway today, there is still a persistent belief that EVs don’t drive as well as the best gas-powered vehicles on the market. “What nonsense. The Model 3 drives terrific,” Sommerfeldt declared. German industry expert Ferdinand Dudenhöffer from Center Automotive Research (CAR) highlighted Sommerfeldt’s observations. “The car is much better than all models of electric competition. The technical lead is easily four to five years. Range and driving pleasure are unmatched,” he said.
Elaborating on his experience, Sommerfeldt noted that the Model 3 feels like a sports car, an “extremely fast sports car.” This is quite notable considering that the vehicle is a family car at its core. But it’s not just the vehicle’s driving dynamics that impressed the EV critic. In terms of bleeding-edge technology inside the car, the Model 3 does not disappoint either. Industry expert Stefan Bratzel of the Center of Automotive Management (CAM) noted that the migration of car buyers from traditional vehicles to electric cars like Tesla is due to veterans being unable to offer similar innovations. “The future is offered here (at Tesla), which the Germans have not been able to do so far,” Bratzel said.