Whitney Tilson’s email to investors discussing Tesla Inc (NASDAQ:TSLA) stats; You cold; Elon Musk’s big tech bubble ride isn’t forever; Tesla continues to gain market share in China and around the world.
1) Another day, another 10%+ jump in Tesla’s stock. Truly unbelievable. I’ve only seen a run-up like this a few times in my investing career… Some stats (hat tip to Daniel W.):
Seth Klarman: Investors Can No Longer Rely On Mean Reversion
"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More
- TSLA is now bigger than Ford + GM + BMW + Daimler + Volkswagen combined
- TESLA vs EUROPE: Market cap: TESLA = $325bn vs EU BANKS (SX7E) = $310bn; Primary turnover today: TESLA = ~$24bn vs ESTOXX50 constituents = $4bn (SX5EVAL Index )
2) Even though I long ago (under $300) said it was a bad short (and still do), by expressing and sharing even the tiniest bit of skepticism about Musk, the company and/or the stock, I’m getting a handful of hateful and/or mocking emails like this: “Tesla is 1740. Sometimes it really is time to hang it up. Even Ricky Henderson had to… You cold”
I can say that getting emails like this has historically been a GREAT indicator that a bubble was about to burst…
3) Bloomberg’s John Authers calls it a bubble (full text below): Elon Musk's Big Tech Bubble Ride Isn't Forever.
Tesla continues to gain market share in China and around the world
4) Leading TSLA bulls Ark Invest just sent this around in their weekly newsletter:
Tesla Continues to Gain Market Share in China and Around the World
During the first half of 2020, Tesla’s market share of battery electric vehicles in China reached 21%, up from 6% for the year in 2019 and 2% in 2018, as shown below. It appears that concerns about Tesla’s ability to sell lower-end cars in China have been misplaced.
On a global basis during the first half of the year through May, Tesla’s market share increased roughly 300 basis points from 23% on average in 2019 to 26%, as shown below. While many investors used to ask what will happen to Tesla when traditional automakers start making and selling electric vehicles, ARK now wonders how high Tesla’s market share will go, a remarkable turn given that our base case assumption is in the opposite direction, 19%, for 2024.
5) In response, one of my friends wrote:
Tesla’s EV market share globally is not expanding, at least not globally, and at least not depending on the time period chosen. Slicing out the BEV portion of the EV market (EV = BEV+PHEV) would of course generate a different result, but how relevant would it be? Most consumers look at BEV and PHEV very holistically. In any case, here are the global EV numbers, because those are the ones we have consistently from all geographies:
|Global||Tesla Model 3||Tesla total||Total EV sales||Tesla M3 %||Tesla total %|
As you can see in the table above, it looks very similar in 2020 as it did in the same time period in 2019. Once final June numbers are in from all geographies in the next week or two, Tesla’s share should be up -- it typically is, in the 3rd month of every quarter. However, it will then fall again in July and August (just look at the daily European numbers thus far in July; it’s essentially a zero). All in all, likely a wash over the rolling 3-month period.
So yes, Tesla’s sales and market share are going up right now in China for these two reasons:
- Tesla opened its China factory around January 1, 2020. You mean that Tesla opening a factory in China means selling more cars in China, at least in the short run? Shocker. But read the agreement between China (Shanghai) and Tesla and see who has dibs to the economics of this plant: It’s not Tesla. And look at the absolute numbers: It’s just material to the market overall. Tesla sells 10K-15K cars per quarter in China. It’s a drop in the bucket in both relative and absolute terms.
- The EV market in China is not doing well. It was down 32% in May 2020, 29% in April 2020, 51% in March 2020, 65% in February 2020, and 50% in January 2020: http://ev-sales.blogspot.com/search/label/China Yes, this is the shrinking market in which Tesla has gained market share for the first six months of 2020.
So yes, Tesla is gaining share in a shrinking Chinese EV market, from a factory in which any real or would-be profits will first go to the Chinese banks and government entities for a long time. I can’t believe this passes for bullish analysis by serious analysts.
Look at a market which isn’t Tesla’s home market, and in which there is the greatest amount of competition -- that would be Europe -- and you can see what has happened to Tesla’s Model 3 market share as we left 2019 and moved into 2020:
|Europe||Tesla Model 3||Total EV sales||Tesla M3 %|
As you can see in the table above, Tesla’s Model 3 market share in Europe peaked in the last month of each of the four quarters of 2019. In 2020, it’s been all down. One can’t blame the “virus” either because, guess what, that impacted all automakers with similar-length shutdowns.
And since you might be asking: Why “only” the Model 3 for the European numbers? The Model X and S have almost completely disappeared from the European sales charts, so there aren’t any continent-wide numbers available. Tesla sells a few hundred units of X+S per month at the most, usually not in the top-20 EV sales chart in all but the fewest countries in Europe. You can see the European sales numbers here: