Tesla Delivery Wait Times Decline Substantially Worldwide – Shortseller

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Tesla Delivery Wait Times Decline Substantially Worldwide – Shortseller
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Stanphyl Capital letter to investors for the month ended November 30, 2022, discussing their short thesis for Tesla Inc (NASDAQ:TSLA).

Despite big, margin-slashing price cuts in both China and Europe, Tesla delivery wait times worldwide have declined substantially, down to just one week in China while in the U.S. (where Musk’s Twitter boondoggle is rapidly destroying the brand) Tesla is choking on Model 3 inventory and offers December Model Y delivery.

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While Europe’s backlog is expected to be completely gone by year-end. This means Tesla’s production capacity now outstrips its rate of incoming orders despite the new German and Texas factories producing at only around 10% of capacity!

Expectations For Q4 Deliveries

Meanwhile, combined deliveries for the last two quarters (Q2 & Q3 2022) were lower than those for the previous two quarters (Q4 2021 & Q1 2022). As Tesla slashes prices it will undoubtedly sell more cars (I expect Q4 deliveries to be in the range of around 400,000 vs. previous quarters in the 300,000s.

Thanks to the cuts plus a rush to beat year-end expiring EV incentives in China, Germany and France), but any other car company can slash prices and do the same thing. (Welcome to the auto business, which currently sells for around 5x earnings!)

Tesla’s apparent market saturation rate of around 1.6 million cars/year worldwide (at least until it slashes prices yet again!) is massively below its current factories’ production capacity, much less the bulls’ absurd expectations of adding a new factory every six months for the next ten years!

For some valuation perspective, BMW sells around 2 million cars a year with very high margins (including the best electric SUV now on the market (the new iX), the best luxury EV( the new i7), and among the best small luxury EVs (the new i4), and has a market cap of around $59 billion.

If Tesla grew annual deliveries to the size of BMW’s and had BMW-level margins, at BMW's current market cap it would sell for less than $19/share vs. this month's closing price in the $194s! (Remember: Tesla now has 3.16 billion shares outstanding!)

Meanwhile, Elon Musk remains the most vile person ever to head a large-cap U.S. public company, and we remain short Tesla, the biggest bubble-stock in modern market history, because:

  • It has a sliding share of the world’s EV market and a share of the overall auto market that’s less than 2%, yet a market cap almost as big the next 6 largest automakers (by market cap) combined.
  • It has no “moat” of any kind; i.e., nothing meaningfully proprietary in terms of its electric car technology (which has now been equaled or surpassed by numerous competitors) and its previously proprietary Superchargers are being opened to everyone), while existing automakers—unlike Tesla­—have a decades-long “experience moat” of knowing how to mass-produce, distribute and service high-quality cars consistently and profitably.
  • Excluding working capital benefits and sunsetting emission credit sales Tesla generates only minimal free cash flow.
  • Growth in sequential demand for Tesla’s cars is at a crawl relative to expectations.
  • Elon Musk is a pathological liar.

Tesla's Q3 Earnings

In October Tesla claimed that it had Q3 GAAP earnings of around .87/share excluding sunsetting emission credit sales. If you believe that after viewing this chart (courtesy of Twitter user @Keubiko), I have a bridge to sell you in Brooklyn:

Tesla Revenue

Furthermore, Tesla’s minimal depreciation of its new factories appears fraudulently low, as does its warranty reserve.

Even if you believe Tesla’s clearly nonsensical earnings number, it annualizes to only $3.48/share, which based on November’s closing price of $194.70 = a run-rate PE ratio of around 56 for a now slow-growing (or growing-but-margin-slashing) car company in an industry with a current average PE of around 5.

Meanwhile, Tesla has objectively lost its “product edge,” with many competing cars now offering comparable or better real-world range, better interiors, similar or faster charging speeds and much better quality. (Tesla ranks near the bottom of Consumer Reports’ reliability survey while British consumer organization Which? found it to be one of the least reliable cars in existence.)

Thus, due to competitors’ temporary production constraints, waiting times are now longer for many of Tesla’s direct EV competitors than they are for a Tesla.

In fact, Tesla is likely now the second, third or fourth choice for many EV buyers, and only maintains its volume lead though a short-lived edge in production capacity that will disappear over the next 12 to 36 months as competitors rapidly increase the ability to produce their superior EVs.

Tesla’s poorly-built Model Y faces current (or imminent) competition from the much better made (and often just better) electric Hyundai Ioniq 5, Kia EV6, Ford Mustang Mach E, Cadillac Lyriq, Nissan Ariya, Audi Q4 e-tron, BMW iX3, Mercedes EQB, Volvo XC40 Recharge, Chevrolet Blazer EV & $30,000 Equinox EV and Polestar 3.

And Tesla’s Model 3 now has terrific direct “sedan competition” from Volvo’s beautiful Polestar 2, the great new BMW i4, the upcoming Hyundai Ioniq 6 and Volkswagen Aero, and multiple local competitors in China.

And in the high-end electric car segment worldwide the Porsche Taycan (the base model of which is now considerably less expensive than Tesla’s Model S) outsells the Model S, while the spectacular new BMW i7, Mercedes EQS, Audi e-Tron GT and Lucid Air make it look like a fast Yugo.

And the extremely well reviewed new BMW iX, Mercedes EQS SUV and Audi Q8 eTron (as well as multiple new Chinese models) do the same to the Model X.

Tesla Is Netflix

Indeed, for years I’ve said “Tesla is Blackberry”—the maker of a first-generation version of a product that—once the market was proven—would be supplanted into niche obscurity by newer, better versions; now I can provide a much more recent analogy: Tesla is Netflix.

For years Netflix had an absurd valuation based on its pioneering position in streaming media, but once it proved that such a market existed myriad competitors swarmed all over it, and this year the stock collapsed when we learned that not only is Netflix no longer in “hypergrowth” mode but for the first time since 2011 (when it transitioned from physical DVDs) it actually lost subscribers.

I believe Musk knows that Tesla is “the next Netflix” (hence his recent “Twitter buying distraction”), with VW, Hyundai/Kia, Ford, GM, Stellantis, BMW, Mercedes, BYD & other Chinese competitors.

And, in a few years, Toyota & Honda, being the Disney, HBO Max, Amazon Prime, Peacock, Hulu, Paramount +, etc., of the electric car market, stealing Tesla’s share and eventually pounding its stock price down 90% or so from today’s, into the valuation of “just another car company.”

Despite this obvious “writing on the wall,” many Tesla bulls sincerely believe that ten years from now the company will be twice the size of Volkswagen or Toyota, thereby selling around 20 million cars a year (up from the anticipated Q4 annualized run-rate of around 1.6 million); in fact in May Musk himself even raised this as a possibility.

Setting aside the absurdity of selling that many cars into the limited market of Tesla’s high price points, the “logistical absurdity” of selling 20 million cars/year in ten years means that in addition to 2.4 million cars a year of sold-out existing claimed production capacity (once the German and Texas factories are fully operational).

Tesla would have to add 35 more brand new 500,000 car/year factories with sold out production; i.e., a new factory approximately every single quarter for the next ten years! Only a Teslemming could be dumb enough to believe this!

An Engineering Analysis

Meanwhile, in June the NHTSA announced that its investigation of Tesla’s deadly Autopilot has expanded into “an engineering analysis,” the last required step before (finally!) demanding a full recall, and in October it was reported that this deadly scam is being investigated by both the SEC and the DOJ.

The refund liability potential for Tesla for this is in the billions of dollars, and possibly even the tens of billions if a class action lawsuit proves that the cars involved were purchased solely due to the (fallacious) promise of “full self-driving.”

And, of course, there will be a massive “valuation reappraisal” for Tesla’s stock as the world wakes up to the fact that Tesla’s so-called “autonomy technology” is deadly, trailing-edge garbage. In fact, the NHTSA has reported a slew of Autopilot-related deaths just since last year.

For all Tesla deaths cited in the media—which is likely only a small fraction of those that have occurred—see TeslaDeaths.com. And Tesla has sold this trashy software for over six years now:

Tesla Self Driving

…and still promotes it on its website via a completely fraudulent video!

Want to see another Elon Musk/Tesla fraud summarized in a simple bar graph? In this recent Consumer Reports test, note which of these cars never comes close—in any environmental conditions—to meeting its claimed EPA range:

Tesla EV Range

Nothing Proprietary

Another favorite Tesla hype story has been built around so-called “proprietary battery technology.” In fact though, Tesla has nothing proprietary there—it doesn’t make them, it buys them from Panasonic, CATL and LG, and it’s the biggest liar in the industry regarding the real-world range of its cars.

And if new-format 4680 cells enter the market some time in 2024 (as is now expected), even if Tesla makes some of its own,  other manufacturers will gladly sell them to anyone, and BMW has already announced it will buy them from CATL and EVE.

And oh, the joke of a “pickup truck” Tesla previewed in 2019 (and still hasn’t shown in production-ready form) won’t be much of “growth engine” either, as by the time it’s in mass-production in 2024 it will enter a dogfight of a market.

In fact, Ford’s terrific 2022 all-electric F-150 Lightning now has over 200,000 retail reservations (plus many more fleet reservations), GM has introduced its fantastic 2023 electric Silverado which already has nearly 200,000 reservations, Rivian’s pick-up has gotten excellent early reviews, and Ram will also be out with a great truck in 2024.

Regarding safety, as noted earlier in this letter, Tesla continues to deceptively sell its hugely dangerous so-called “Autopilot” system, which Consumer Reports has completely eviscerated; God only knows how many more people this monstrosity unleashed on public roads will kill despite the NTSB condemning it.

Elsewhere in safety, the Chinese government forced the recall of tens of thousands of Teslas for a dangerous suspension defect the company spent years trying to cover up, and Tesla has been hit by a class-action lawsuit in the U.S. for the same defect.

Tesla also knowingly sold cars that it knew were a fire hazard and did the same with solar systems, and after initially refusing to do so voluntarily, it was forced to recall a dangerously defective touchscreen.

In other words, when it comes to the safety of customers and innocent bystanders, Tesla is truly one of the most vile companies on Earth. Meanwhile the massive number of lawsuits of all types against the company continues to escalate.

So Here Is Tesla’s Competition In Cars...

(note: these links are regularly updated)

And In China, Where Tesla’s EV Market Share Is Now Declining...

Here’s Tesla’s Competition In Autonomous Driving; The Independents All Have Deals With Major OEMs...

Here’s Where Tesla’s Competition Will Get Its Battery Cells...

Here's Tesla's Competition In Charging Networks...

And Here's Tesla's Competition In Storage Batteries...

Thanks,

Mark Spiegel

Stanphyl Capital

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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