The secret to the resumption of Tesla’s growth: China?

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Stanphyl Capital’s letter to investors for the month of January, 2020 regarding Tesla Inc. (NASDAQ:TSLA).

Friends and Fellow Investors:

For December 2019 the fund was down 11.4% net of all fees and expenses. By way of comparison, the S&P 500 was up 3.0% while the Russell 2000 was up 2.9%. For all of 2019 the fund was down 6.5% while the S&P 500 was up 31.5% and the Russell 2000 was up 25.5%. Since inception on June 1, 2011 the fund is up 53.7% net while the S&P 500 is up 187.5% and the Russell 2000 is up 121.8%. Since inception the fund has compounded at 5.1% net annually vs. 13.1% for the S&P 500 and 9.7% for the Russell 2000. (The S&P and Russell performances are based on their “Total Returns” indices which include reinvested dividends. The fund’s performance results are approximate; investors will receive exact figures from the outside administrator within a week or two. Please note that individual partners’ returns will vary in accordance with their high-water marks.)

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Q3 2019 hedge fund letters, conferences and more

As those of you in the fund know via previous correspondence, faced with yet another down year (our unacceptable third in a row!), in late December I decided to take the fund back to its successful roots and focus primarily on finding deep-value microcap/nanocap long positions and (as I won’t alter our definition of “value” to suit a worldwide asset bubble) holding more cash if necessary. (I say “successful roots” because our cumulative performance from inception at mid-2011 through the end of 2016 was +128%, an annual net compounding rate of 15.9% vs 11.9% for the S&P 500.) So here’s what I’ve specifically done with the fund:

1) Eliminated all "macro" positions except our short position in BNDX, which is non-volatile, extremely one-sided valuation-wise (i.e., ex-U.S. long-term sovereign debt yielding near zero is the biggest bubble I've ever seen) and positive-carry. As for our other macro ..

Regarding our long-term yen short, as the U.S. is now printing money faster than Japan I'm increasingly less comfortable being long the dollar against anything (even the yen), so I took it off. It's a position we'd had on since late 2012 (!) and was mildly profitable, although the IRR was modest considering the length of time involved.

As for our 30-year U.S. treasury short, my thought is that as I’ve killed most of our equity shorts (see #3 below), if the currently euphoric stock market does tank (even temporarily), the initial reaction may be into Treasuries (even if they're doomed eventually), and thus without those equity shorts I don't want to be short Treasuries right now, so I took that off at a small profit.

As for our long position in agricultural products (DBA), it had a nice little pop this month on news of the "Phase One trade deal" but we then learned that China's purchase commitment is both vague and exaggerated so I sold it. (It's a position on which we made a little this month and lost a moderate amount since inception.)

That covers "the macro." As for the rest of the portfolio...

2) I cut the Tesla equity short position down to approximately 10% of the fund (it had most recently been 20% and was often higher in the past) and—barring unexpected positive developments for the company— will maintain it at around 10% going forward. Unlike our other equity shorts which were "just bubbles," there's major league fraud involved here and all the Fed printing in the world won't ameliorate that; I thus want to have some meaningful equity participation in addition to our short call position, which we’re also maintaining.

3) I've eliminated our other equity shorts for as long as the Fed is printing money. When the money- printing stops we'll start shorting again, but until then it's like playing poker against a guy with a chip- making machine on his lap—he can call every bet a short-seller makes and I'm tired of "playing against the house." I’ve actually done this with some regret, as collectively our recent non-TSLA shorts were profitable, as NFLX, SQ, W, NVTA and ROKU were all down since we shorted them; only CVNA wasn’t, so I suppose if anyone wants to hire me to run a short portfolio excluding auto-related businesses connected with securities fraudsters, I’m your man!

The above actions will combine to free up time (and, as importantly, "mental focus") to seek out more of the deep-value long positions which have worked so well for us in the past. Meanwhile, if you have any doubt whatsoever that this stock market is being driven entirely by renewed Fed money-printing, here are a couple of charts (courtesy of @ZeroHedge) that lay it out perfectly:

…as the Fed’s balance sheet rapidly adds back everything removed during its short-lived “quantitative tightening”:

And if you have any doubt that the Fed has blown yet another stock bubble (its third in 20 years), Shiller’s CAPE ratio has risen above 30 only three times in history, and (courtesy of this is one of them:

…while the S&P 500’s price-to-sales and EV-to-EBITDA ratios match or exceed record highs:

Meanwhile, the real-world physical economy remains weak. Have a look at the latest Cass Freight Index

Stanphyl Capital

…and 2019 rail traffic was just as bad, down 4.9% overall vs. 2018, with intermodal down 5.1%.

Now for the fund’s positions…

We continue to own Aviat Networks, Inc. (ticker: AVNW), a designer and manufacturer of point-to-point microwave systems for telecom companies (here’s a great Seeking Alpha article describing the company), which in November reported a solid FY 2020 Q1. Although revenue was down slightly year-over-year there were significant improvements in both operating income and gross margin and the company’s guidance promised similar improvements for the full year. Additionally, Aviat has over $400 million of U.S. NOLs,

$8 million of U.S. tax credit carryforwards, $212 million of foreign NOLs and $2 million of foreign tax credit carryforwards; thus its income will be tax-free for many years so GAAP EBITDA less capex essentially equals “earnings.” Valuation-wise, if we assume $14 million in FY 2020 adjusted EBITDA (first-half guidance is $7.5 million) and remove $1.7 million in stock comp and $6.1 million in capex we get $6.2 million in earnings multiplied by, say, 14 = approximately $87 million; if we then add in approximately $32 million of expected year-end net cash we get $119 million, and if we divide that by 5.4 million shares we get an earnings-based valuation of around $22/share. Alternatively, if we look at Aviat as a buyout candidate its closest pure-play competitor, Ceragon (CRNT) sells at an EV of approximately 0.5x revenue, which for AVNW (assuming $240 million in 2020 revenue) would be 0.5 x $240 million = $120 million + $32 million expected year-end net cash = $152 million. If we value Aviat’s $400+ million in NOLs at a modest $10 million (due to change-in-control diminution in their value), the company would be worth $162 million divided by 5.4 million shares = $30/share.

We continue to own Communications Systems, Inc. (ticker: JCS), which we accumulated over the summer at an average price of $3.05/share. (We sold a chunk of shares at around $8 to control the position size, then in December bought back some of them in the $6s during a correction.) JCS is an IOT (“Internet of Things”) and internet connectivity & services company (the company’s multiple divisions are best explained by its investor presentation) which in October reported fantastic Q3 earnings of .19/share with a 42% gross margin and $2.20/share in net cash. JCS is now making an annualized .68/share (based on the first nine months of the year, so as not to overemphasize one great quarter), however we should tax- adjust that to .48 as it’s been minimizing taxes by utilizing its NOL carryforwards. A 14x multiple on that plus the cash plus a $4.5 million valuation on $15 million of NOLs would value the stock at around $9.40/share. Additionally, the company is in contract to sell its headquarters building for $10 million; if that closes it generates $1/share in additional cash, making the stock worth $10.40. (The company then plans to rent a smaller facility and save approximately $200,000/year vs. the P&L impact of its current facility.)

We continue to own Westell Technologies Inc. (WSTL), which in November reported a horror-show of a quarter, with a 25% year-over-year revenue decline and a large GAAP loss driven only in part by a one- time inventory write-down. About the only good news from Westell was that it ended the quarter with $21.7 million in cash and no debt, and as burn going forward should be “only” around $1.2 million/quarter, the company still has at least 18 quarters of cash runway to return to break-even (it’s projecting to do so in five), and obviously many more than that if it can cut the burn along the way. Following the report the CEO and several board members stepped up and bought stock in the open market (at least they’re putting their money where their mouths are) and the company simultaneously posted a new investor presentation. We continue to own Westell because it’s a $30 million/year, 38% gross margin business with over $1.25/share in cash that currently sells for a significantly negative enterprise value. Assuming 15.8 million shares, an acquisition price (by a cost-eliminating strategic buyer) of just 5x revenue would (on an EV basis) be around $2.20/share. Preventing such an acquisition is that Westell suffers from a dual share class, with voting control held by moronic descendants of the founder who refuse to sell company despite the stock’s horrible performance. However, I’m hopeful that someone will knock enough sense into their small brains to inspire them to salvage what’s left here, and thus walk away with at least something from what they’ve squandered. If they do the stock should be at least a double from here, and possibly more. In other words, it’s too cheap for me to sell but the board is too incompetent for me to buy more.

Finally for the longs, we recently accumulated a moderately sized position in a small software company that roughly breaks even on a 65% gross margin and sells for less than 0.5x revenue. I’m not revealing the name yet as it’s fairly illiquid and I’m evaluating whether to buy more.

On the short side we remain short stock and call options in Tesla Inc. (TSLA), which I still consider to be the biggest single stock bubble in this whole bubble market. The core points of our Tesla short thesis are:

  • Tesla has no “moat” of any kind; e., nothing meaningfully proprietary in terms of electric car technology, 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, as well as the ability to subsidize losses on electric cars with profits from their conventional cars.
  • By mid-to-late 2020 Tesla and its awful balance sheet will return to losing
  • Tesla is now a “busted growth story”; revenue was roughly flat sequentially and declined year- over-year while unit demand for its cars is only being maintained via continual price reductions and expiring tax
  • Elon Musk is a securities fraud-committing pathological

When Tesla reported Q3 earnings in October, revenue for this alleged “growth company” was hundreds of millions of dollars lower than the year-ago quarter, and due to much lower ASPs Q4 2019 revenue vs. Q4 2018 will be roughly flat despite higher unit sales, while—thanks to the January reduction of subsidies in the U.S. and Netherlands—Q1 2020 revenue will be down sequentially. In other words, the Tesla “hypergrowth” story is over.

Tesla did unexpectedly print a tiny $153 million profit in Q3 (vs. our expectation of a $300 million loss), but in October’s letter I laid out multiple reasons why Q3 would, in fact, have shown a multi-hundred- million-dollar loss without various unsustainable expense cuts and accounting games (one of which was warranty fraud—here’s a great new article about that) and in November fund manager Jim Chanos laid out a concise case on Twitter why even if one accepts Tesla’s numbers its equity is worth “zero.”

We may also see a similar low level of temporary Tesla profitability in Q4 (the one we’re in now) or Q1 of 2020, when in one or (divided between) both of those quarters Tesla recognizes approximately $500 million of non-cash (it’s already on the balance sheet) deferred revenue from its fraudulently named “Full Self-Driving” (the capabilities of which offer nothing of the kind). By rolling out various useless and dangerous features of this homicidal software suite, Tesla may claim that prior buyers of this nonsense received what they paid for, and thus may run those non-cash profits through its financial statement, thereby again perhaps providing this money-losing company with a fleeting moment of minor profitability. As with Q3, these will be non-repeatable one-time gains (or, if you prefer, “games”), and later in 2020 the losses will resume.

For those of you looking for a resumption of growth from Tesla’s upcoming Model Y, when it’s available in Q2 2020 it will both massively cannibalize sales of the Model 3 sedan and (by late 2020) face superior competition from the much nicer electric Audi Q4 e-tron, BMW iX3, Mercedes EQB, Volvo XC40 and Volkswagen ID Crozz, while less expensive and available now are the excellent new all-electric Hyundai Kona and Kia Niro, extremely well reviewed small crossovers with an EPA range of 258 miles for the Hyundai and 238 miles for the Kia, at prices of under $30,000 inclusive of the $7500 U.S. tax credit. Meanwhile, the Model 3 will have terrific direct “sedan competition” in 2020 from Volvo’s beautiful new Polestar 2, the BMW i4 and the premium version of Volkswagen’s ID.3.

And if you think China is the secret to the resumption of Tesla’s growth, let’s put that market in perspective: prior to a recent 10% VAT exemption Tesla was selling around 30,000 Model 3s a year there and “the story” is that avoiding the 15% tariff and 10% VAT, plus a $3600 EV incentive that expires at the end of 2020 will allow it to sell a lot more. However, the rule of thumb for the elasticity of auto pricing is that every 1% price cut results in a sales increase of up to 2.4%. If we assume a 2.4x “elasticity multiplier,” domestically produced Model 3s that are 33% cheaper would result in annual sales of just 54,000 (33% x 2.4 = 79% more than the previous 30,000), meaning Tesla’s new Chinese factory would be a massive money-loser by running at just slightly over 1/3 of its initial 150,000-unit annual capacity and 1/10th of the capacity it will have in 18 months. This guarantees hugely missed growth targets and it’s “growth” (or more accurately, the fantasy of growth) that drives Tesla’s stock price. Also, here’s a great overview of what a dogfight the Chinese EV market has become.

Meanwhile, sales of Tesla’s highest-margin cars (the Models S&X) are down by over 30% worldwide this year thanks to cannibalization from the Model 3 and the recently introduced Audi e-tron and Jaguar I- Pace, and this sales drop is before January 2020’s European arrival of the Mercedes EQC (it comes to the U.S. in 2021) and the Porsche Taycan (available on both continents next month), with multiple additional electric Audis, Mercedes and Porsches to follow, many at starting prices considerably below those of the high-end Teslas. (See the links below for more details.)

And oh, the joke of a “pickup truck” Tesla introduced in November won’t be any kind of “growth engine” either, especially as if it’s ever built it will enter a dogfight of a market.

Meanwhile, Tesla has the most executive departures I’ve ever seen from any company (including in December its head of manufacturing and third Chief Corporate Counsel this year!); here’s the astounding full list of escapees. These people aren’t leaving because things are going great (or even passably) at Tesla; rather, they’re likely leaving because Musk is either an outright crook or the world’s biggest jerk to work for (or both). Could the business (if not the stock price) be saved in its present form if he left? Nope, it’s too late. Even if Musk steps down in favor of someone who knows what he’s doing, emerging competitive factors (outlined in great detail below) and Tesla’s balance sheet and massive additional liabilities make the company too late to “fix” without major financial and operational restructuring.

In May Consumer Reports completely eviscerated the safety of Tesla’s so-called “Autopilot” system; in fact, Teslas have far more pro rata (i.e., relative to the number sold) deadly incidents than other comparable new luxury cars; here’s a link to those that have been made public. Meanwhile Consumer Report’s annual auto reliability survey ranks Tesla 23rd out of 30 brands (and that’s with many stockholder/owners undoubtedly underreporting their problems—the real number is almost certainly much worse), and the number of lawsuits of all types against the company continues to escalate-- there are now over 800 including one proving blatant fraud by Musk in the SolarCity buyout (if you want to be really entertained, read his deposition!), an allegation that unsafe door handles caused a Tesla driver to burn to death in his car, and evidence that the company secretly rolled back battery performance without compensating owners. And watch out for a major problem with sudden acceleration.

So here is Tesla’s competition in cars (note: these links are regularly updated)…

Porsche Taycan

Porsche Taycan Cross Turismo

Porsche Macan EV to get Taycan platform and tech Audi e-tron: Electric Has Gone Audi

2020 Audi E-Tron Sportback debuts slick new roofline, a bit more range


Audi's Q4 e-tron previews entry-level EV for 2021

Audi e-tron compact hatch to lead brand’s electrification plans

Audi TT set to morph into all-electric crossover


Jaguar Land Rover readies electric XJ and Range Rover

Mercedes EQC Electric SUV Available Late 2019

Mercedes EQV Electric Minivan Revealed – Available Early 2020

Mercedes EQB Small SUV to boost brand's electric line-up

Mercedes EQS will be built in addition to the S-Class on a new dedicated electric platform

Mercedes to launch more than 10 all-electric models by 2022

Volvo Polestar 2 Arrives early 2020

Volvo XC40 Recharge, a 408-HP Electric SUV comes in 2020 Volvo XC-90 EV coming in 2022

Volkswagen unveils the ID.3, its first ‘electric car for the masses’

VW's EV crossover for U.S. will be called ID4

VW Group to launch 70 pure electric cars over the next decade

258-Mile Hyundai Kona electric is available now for under $40,000

239-Mile Kia Niro EV is Available Now For Under $40,000

Kia Soul (available mid-2019) EV’s Range Jumps to 243 Miles

Kia Europe to have six pure electric models by 2022

All-Electric Ford Mustang Mach-E Delivers Power, Style and Freedom for New Generation

Ford, GM rev up electric pickup trucks to head off Tesla

Chevrolet Bolt Now Offers 259 Miles of Range

GM's Detroit-Hamtramck plant expected to build electric Escalade, Sierra

GM is transforming Cadillac into an electric brand

Ford to build two European EVs based on VW’s MEB platform

Nissan LEAF e+ with 226-mile range is available now

Nissan Ariya Electric SUV Concept Is Destined for Production

BMW 1 Series Electric Coming As Early As 2021

BMW iX3 electric crossover goes on sale in 2020

2021 BMW i4 details revealed: 80-kWh battery, 530 hp, 373-mile range

BMW’s 2021 iNEXT Returns In New Teasers Showing Prototypes Production

Rivian electric pickup truck- funded by Amazon, Ford, Cox & others- is on the way

Renault upgrades Zoe electric car as competition intensifies

Peugeot 208 to electrify Europe's small-car market

Peugeot to offer EV version of new 2008 small crossover

Electric Mini Arrives 2020

Toyota and Subaru Agree to Jointly Develop BEV-dedicated Platform and BEV SUV

Mazda extends MX name to new MX-30 electric crossover

SEAT will launch 6 electric and hybrid models and develop a new platform for electric vehicles

Opel sees electric Corsa as key EV entry

Opel/Vauxhall will launch electric SUV and van in 2020

Skoda accepting deposits for electric cars

New Citroen C4 Cactus to be first electrified Citroen in 2020

FCA to invest $788M to build new 500 EV in Italy

Maserati to launch electric sports car

Bentley Will Offer Hybrid Versions of Every Car It Makes and Add an EV by 2025

Lucid Motors closes $1 billion deal with Saudi Arabia to fund electric car production

Meet the Canoo, a Subscription-Only EV Pod Coming in 2021

Two new electric cars from Mahindra in India by 2019; Global Tesla rival e-car soon

Former Saab factory gets new life building solar-powered Sono Sion electric cars

And in China…

VW ramps up China electric car factories, taking aim at Tesla

SAIC Volkswagen to roll out 3 MEB-based EV models in 2020/2021

JAC-Volkswagen Launch SOL E20X, The 1st EV from the Joint Venture

Audi Q2L e-tron debuts at Auto Shanghai

Audi will build Q4 e-tron in China

FAW-Volkswagen’s Foshan plant said to produce e-tron Sportback

FAW Hongqi starts selling electric SUV with 400km range for $32,000

FAW (Hongqi) to roll out 15 electric models by 2025

China’s BYD launches six new electrified vehicles

Daimler & BYD launch new DENZA electric vehicle for the Chinese market

Mercedes styled Denza X 7-seat electric SUV to hit market

BAIC Goes Electric, & Establishes Itself as a Force in China’s New Energy Vehicle Future

BAIC BJEV, Magna ready to pour RMB2 bln in all-electric PV manufacturing JV

Daimler to Start EQC Electric SUV Production in China in 2019

Daimler and BMW to cooperate on affordable electric car in China

BMW, Great Wall to build new China plant for electric cars

Toyota, BYD will jointly develop electric vehicles for China

Lexus to launch EV in China taking on VW and Tesla

GAC Toyota to ramp up annual capacity by 400,000 NEVs GAC Aion

GAC unveils new NEV offshoot dubbed HYCAN

Chevrolet's new China-only EV is called the Menlo and it looks good

Buick Rolls Out First Electric Car for China

General Motors’ Chinese Venture to Sink $4.3 Billion Into Electric Vehicles by 2024

Nissan & Dongfeng to invest $9.5 billion in China to boost electric vehicles

PSA to accelerate rollout of electrified vehicles in China

Hyundai Motor Transforming Chongqing Factory into Electric Vehicle Plant


Jaguar Land Rover's Chinese arm invests £800m in EV production

Renault reveals series urban e-SUV K-ZE for China

Renault & Brilliance detail electric van lineup for China

Renault forms China electric vehicle venture with JMCG

Honda Debuts New Everus VE-1 All-Electric SUV, But Only For China

Honda to roll out over 20 electric models in China by 2025

Geely launches new electric car brand 'Geometry' – will launch 10 EVs by 2025

Mazda to roll out China-only electric vehicles by 2020

Xpeng Motors sells multiple EV models

Changan New Energy

WM Motors/Weltmeister





China's cute Ora R1 electric hatch offers a huge range for less than US$9,000


JAC Motors releases new product planning, including many NEVs

Seat to make purely electric cars with JAC VW in China

Iconiq Motors Hozon

EV maker Bordrin skips flash, keeps real-car focus


NEVS launches electric-car output with Saab 9-3 platform in China


CHJ Automotive begins to accept orders of Leading Ideal ONE

Infiniti to launch Chinese-built EV in 2022

Zotye Auto to roll out 10 plus NEV models by 2020

Skywell makes inroads into China’s NEV domain

Thunder Power


Continental, Didi sign deal on developing EVs for China

Mine Mobility (Thailand)

Here’s Tesla’s competition in autonomous driving…

Consumer Reports finds Tesla's Navigate on Autopilot is far less competent than a human driver

Navigant Ranks Tesla Last Among Automakers & Suppliers for Automated Driving

Tesla has a self-driving strategy other companies abandoned years ago

Waymo and Lyft partner to scale self-driving robotaxi service in Phoenix

Jaguar and Waymo announce an electric, fully autonomous car

Renault, Nissan partner with Waymo for self-driving vehicles

Fiat Chrysler partners with Aurora to develop self-driving commercial vans

Hyundai and Kia Invest in Aurora

Aptiv and Hyundai Motor Group Form Autonomous Driving Joint Venture

Cadillac Super Cruise™ Sets the Standard for Hands-Free Highway Driving

Honda Joins with Cruise and General Motors to Build New Autonomous Vehicle

SoftBank Vision Fund to Invest $2.25 Billion in GM Cruise

Ford-VW alliance with Argo could redraw self-driving sector

VW taps Baidu's Apollo platform to develop self-driving cars in China

Audi to join Daimler, BMW self-driving tech alliance

Daimler's heavy trucks start self-driving some of the way

SoftBank, Toyota's self-driving car venture adds Mazda, Suzuki, Subaru Corp, Isuzu Daihatsu

Volvo, Nvidia expand autonomous driving collaboration

Continental & NVIDIA Partner to Enable Production of Artificial Intelligence Self-Driving Cars

Intel’s Mobileye has 2 million cars (VW, BMW & Nissan) on roads building HD maps

Nissan gives Japan version of Infiniti Q50 hands-free highway driving

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

Hyundai to start autonomous ride-sharing service in Calif.

Uber unveils next-generation Volvo self-driving car

Baidu kicks off trial operation of Apollo robotaxi in Changsha

Toyota to join Baidu's open-source self-driving platform

Baidu, WM Motor announce strategic partnership for L3, L4 autonomous driving solutions

Baidu plans to mass produce Level 4 self-driving cars with BAIC by 2021

Volvo, Baidu to co-develop EVs with Level 4 autonomy for China

Didi Chuxing Teams with NVIDIA for Autonomous Driving and Cloud Computing

Geely selects Volvo, Veoneer joint venture as autonomous tech supplier

BMW and Tencent to develop self-driving car technology together

BMW, NavInfo bolster partnership in HD map service for autonomous cars in China

FAW Hongqi readies electric SUV offering Level 4 autonomous driving

Tencent, Changan Auto Announce Autonomous-Vehicle Joint Venture

Huawei looks to self-driving cars in bid to broaden AI focus

BYD partners with Huawei for autonomous driving, GAC Group launches Aion LX’s level 4 self-driving version

Lyft, Magna in Deal to Develop Hardware, Software for Self-Driving Cars

Deutsche Post to Deploy Test Fleet Of Fully Autonomous Delivery Trucks

ZF autonomous EV venture names first customer

Magna’s new MAX4 self-driving platform offers autonomy up to Level 4

Groupe PSA’s safe and intuitive autonomous car tested by the general public

Mitsubishi Electric to Exhibit Autonomous-driving Technologies in New xAUTO Test Vehicle

Apple acquires self-driving startup

Momenta – Building Autonomous Driving Brains 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

Nuro’s Robot Delivery Vans Are Arriving Before Self-Driving Cars

Here’s where Tesla’s competition will get its battery cells…

Panasonic (making deals with multiple automakers)



SK Innovation




Northvolt (backed by VW & BMW)


Akasol Cenat



Romeo Power

Toyota accelerates target for EV with solid-state battery to 2020

ProLogium Technology Will Produce First Next Generation Lithium Ceramic Battery For EVs

BMW invests in Solid Power solid-state batteries

Ford invests in Solid Power solid-state batteries

Hyundai Motor developing solid-state EV batteries

Most car makers will use those battery cells to manufacture their own packs. Here are some examples:

Daimler starts building electric car batteries in Tuscaloosa – one of 8 battery factories

GM inaugurates battery assembly plant in Shanghai

PSA to assemble batteries for hybrid, electric cars in Slovakia

Honda Partners on General Motors' Next Gen Battery Development

France's Saft plans production of next-gen lithium ion batteries from 2020

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

Rimac is going to mass produce batteries and electric motors for OEMs

Here’s Tesla’s competition in charging networks…

Electrify America is spending $2 billion building a high-speed U.S. charging network

EVgo is building a U.S. charging network

191 U.S. Porsche dealers are installing 350kw chargers

ChargePoint to equip Daimler dealers with electric car chargers

GM and Bechtel plan to build thousands of electric car charging stations across the US

Ford introduces 12,000 station charging network, teams with Amazon on home installation

Petro-Canada Introduces Coast-to-Coast Canadian Charging Network

Volta is rolling out a free charging network

Ionity has over 150 European 350kw charging stations

E.ON and Virta launch one of the largest intelligent EV charging networks in Europe

Volkswagen plans 36,000 charging points for electric cars throughout Europe

Smatric has over 400 charging points in Austria

Allego has hundreds of chargers in Europe

PodPoint UK charging stations

BP Chargemaster/Polar is building stations across the UK

Instavolt is rolling out a UK charging network

Fastned building 150kw-350kw chargers in Europe

Deutsche Telekom launches installation of charging network for e-cars

Shell starts rollout of ultrafast electric car chargers in Europe

Total to build 1,000 high-powered charging points at 300 European service-stations

Volkswagen, FAW Group, JAC Motors, Star Charge formally announce new EV charging JV

BP, Didi Jump on Electric-Vehicle Charging Bandwagon

Evie rolls out ultrafast charging network in Australia

Evie Networks To Install 42 Ultra-Fast Charging Sites In Australia

And here’s Tesla’s competition in storage batteries…





AES + Siemens (Fluence)



Mitsubishi Hitachi





Johnson Contols



Schneider Electric










Lockheed Martin

EOS Energy Storage



electrIQ Power






Primus Power

Simpliphi Power

redT Energy Storage




Blue Planet

Tabuchi Electric




Powin Energy





Ecoult Innolith


Natron Energy

Energy Vault


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 knew SolarCity faced a ‘liquidity crisis’ at time of 2016 deal, legal documents show

Musk’s empire was in peril in 2016, and new documents reveal the desperate plan to save it

Elon Musk knew SolarCity was going broke before merger with Tesla

Elon Musk Settles SEC Fraud Charges

Elon Musk, June 2009: “Tesla will cross over into profitability next month”

More Broken Promises From Tesla

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: O, What A Tangled Web We Weave When First We Practice To Deceive

Tesla's Financial Shenanigans

Tesla: A Failure To Communicate

Can You Really Trust Tesla?

Elon Musk Appears To Have Misled Investors On Tesla's Most Recent Conference Call

Understanding Tesla’s Potemkin Swap Station

So in summary, Tesla is about to face a huge onslaught of competition with an enterprise value (excluding financial services debt) that’s larger than Ford’s and GM’s combined despite selling fewer than 400,000 cars a year while Ford and GM make billions of dollars selling 6 million and over 8 million vehicles respectively. Thus, this cash-burning Musk vanity project is worth vastly less than its approximately $85 billion enterprise value and - thanks to over $30 billion in debt, purchase and lease obligations - may eventually be worth “zero.”

Finally, we continue to hold a short position in the Vanguard Total International Bond ETF (ticker: BNDX), comprised of dollar-hedged non-US investment grade debt (over 80% government) with a ridiculously low “SEC yield” of 0.57% at an average effective maturity of 9.9 years. With Euro area core inflation at 1.3% and—due to the ECB’s money-printing ultimately headed much higher—I believe this ETF is a great way to short what may be the biggest asset bubble in history. Currently the net borrow cost for BNDX provides us with a positive rebate of approximately 0.4% a year and I think it’s a terrific place to sit and wait for the inevitable denouement of this insanity.

Thanks and regards,

Mark Spiegel

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