Whitney Tilson’s email to investors discussing Tesla Inc (NASDAQ:TSLA) gamed a subsidy program in Canada; his friend’s comments.
1) I just learned of this and added it to my daily email going out shortly:
ADW Capital’s 2020 letter: Long CDON, the future Amazon of the Nordics
ADW Capital Partners was up 119.2% for 2020, compared to a 13.77% gain for the S&P 500, an 11.17% increase for the Russell 2000, and an 8.62% return for the Russell 2000 Value Index. The fund reports an annualized return of 24.63% since its inception in 2005. Q4 2020 hedge fund letters, conferences and more Read More
I believe Tesla gamed a subsidy program in Canada to sell an extra ~4,000 cars. It was designed to exclude Tesla, as this article notes, by being available only for cars with a price limit below even the cheapest Model 3. But Tesla was not to be deterred. It introduced a car priced $1 below the subsidy cap – with software set to limit the range to only 100 miles. Of course nobody would buy such a car, but now that the Model 3 “qualified” for the subsidy, Tesla then sold thousands of cars at full price. What a scam! I wonder what the Canadian government thinks of this???
2) Another friend with some smart comments:
I very much appreciate receiving your email blasts. The substance is valuable, and I commend both the balance & the tone.
This is Tesla, of course, so particularly on the long side, it's as much or more religion as it is investing. Trying to guess the share price trajectory is always dangerous, especially given the heavy shorting, even heavier delta hedging, and relatively small float.
That said, in Q2, despite surpassing the Q4 delivery record:
- automobile revenues will be materially lower than Q4;
- total revenues will be materially lower than Q4; and
- profits, promised earlier this year as forever after, will be nowhere to be found, in Q2 or in the second half of 2019.
So, it's difficult for me to see how Tesla keeps the growth narrative alive.
The Model Y is too far in the future, and the competition by then will be much more compelling.
The Shanghai factory will take a bit longer to get up and running that longs hope. (Phoennix10 & Motorhead are great Twitter follows on this.) But even once running, and assuming away any trade war difficulties, it's difficult to imagine Shanghai will ever be even modestly profitable.
Regarding Shanghai, Tesla is evidently leaning on Panasonic to manufacture in Asia the 2170 cells used in the Model 3. That would require $1B+ of new equipment, and Panasonic is telling Tesla that if it wants a 2170 line in Asia, it will have to pay for it. For now, Tesla will be trucking massive battery packs from Nevada to California and then shipping them to Shanghai. And hoping that every one of its dozens of new parts vendors in China comes through on time and within spec.
So, I think your 20% case is a generously high percentage, and your trading range on the mid-case is on the high side. But, of course, as earlier noted, this is Tesla.