Tesla: The Great Short

[McLovin]

Don’t forget that Tesla currently enjoys essentially a monopoly while the big boys are ramping up.

But starting next year they (VW, BMW, Mercedes and every major manufacturer) are going to start launching their full electrics. The numbers will be in the hundreds of thousands very quickly.

The market is going to be absolutely flooded with electric cars. Tesla’s sales are going to take a huge hit, and their margins on the cars they do sell will take a likewise hit.

With short selling, though, it’s all about the timing.

[sammyg2]

Originally Posted by Zeke

@sammyg2, look I get your point and no one is kidding anyone about MLM sales structures. And yet, there they and many others are, still in business and still selling product. I've never participated selling or buying. I have a cousin who sells some nutrient product and he makes a living whereas beforehand he couldn't keep a steady job because of some mental issues like undue stress and not being able to focus. Let's not diagnose him, just approve of the fact that he can do MLM and no one has taken a shot at him after 10 years. Go figure.

I'm known here as sometimes a devil's advocate. The truth of the matter is that I do not regard anyone's opinion about anything as useful unless this person is my doctor and I will question him. I take every piece of information at face value and don'tfollow trends. Avoid them if I can just so I'm not ever recognized as a part of a trend.

Bill Ackman lost his ass and Herbalife is still there in the big building on the 405. That's fact. Fines? Common as flies in the business world. How many fines has your oil industry paid out?

The wooden stake may now have been taken out towards MLM operatives because of the new tax laws. Being in a MLM offered a nice tax write off if the money wasn't great. I mean how easy is it to keep a driving log and happen to have an appointment at the far end of any day's errands. All you need is a PO box in a shopping center nearby and after you pick up your mail, you've left the office and mileage is (was) deductible. As is your phone, etc.

Look at the real world and turn Fox news off along with a comedian who mocks news stories. BTW, I hated Jon Stewart. Nothing funny about that guy. Stephen Colbert, just a clone idiot.

MLMs are pyramid schemes with victims. Over 99% of all people who get involved lose money (according to the federal trade commission). Good for your cousin for getting into the pyramid early

Yes, Herbalife is still around, so if the mafia.
Herbalife does more damage and rips more people off.

A $200 million fine by the FTC is not common. It is extraordinary.
When lifelock was caught lying to customers, the FTC fined them $12 million

How about tiktok? $5.7 million, a record.

FTC Fines Owners of TikTok App $5.7 Million for Illegal Collection of Children's Data
The fine is the largest ever in the U.S. for violations of children's privacy

Google got fined $22.5 million for stealing and selling everyone's personal information.

If you add up all the fines levied against all the robocallers in history, the total is just over $200 million. Or about the same as they fined Herbalife.

And the oil industry does not belong to me. I wish it did. I'd be really rich.
I don't even work in the oil industry, haven't for a few years.
I'm getting paid to do research on biomass renewables, with your tax money. Thanks
But since you brought it up: Exxon was fined $25 million, plus costs and restitution for the exxon valdez spill.

BTW that Ackman guy on off the 405 who lost his ass?

William Ackman · Net worth
$1.12 billion USD
(2019)

[Zeke]

Originally Posted by sammyg2

MLMs are pyramid schemes with victims. Over 99% of all people who get involved lose money (according to the federal trade commission). Good for your cousin for getting into the pyramid early

Yes, Herbalife is still around, so if the mafia.
Herbalife does more damage and rips more people off.

A $200 million fine by the FTC is not common. It is extraordinary.
When lifelock was caught lying to customers, the FTC fined them $12 million

How about tiktok? $5.7 million, a record.

Google got fined $22.5 million for stealing and selling everyone's personal information.

If you add up all the fines levied against all the robocallers in history, the total is just over $200 million. Or about the same as they fined Herbalife.

And the oil industry does not belong to me. I wish it did. I'd be really rich.
I don't even work in the oil industry, haven't for a few years.
I'm getting paid to do research on biomass renewables, with your tax money. Thanks
But since you brought it up: Exxon was fined $25 million, plus costs and restitution for the exxon valdez spill.

BTW that Ackman guy on off the 405 who lost his ass?

Your points are valid but you circumvent the issues. Yeah, Ackman ain't broke but by "lost his ass" I was referring to how he had to back away. So he bought put options to sell his stocks and limit his loss. Unless Herbalife bits the dust within the put time limit, his 1.2 billion will take a hit.

In the meantime, the FTC has mailed out 1000's of checks to so called 'victims'. What happened next actually helped out Herballife and put some more nails in Ackman's financial coffin. You can read about that here. Also, Herballife seems to have a lot of cash on hand and seem to be stable rather than burning through a stack like Tesla.

I'm not debating whether MLM's are good or bad. Bad if you believe that you are going to get rich while on the couch, yes. But of the folks that buy into the synthetic oil MLM advertised in Autoweek or a health shake company many are simply getting the product for self consumption at a discount. IDK what that oil costs but the Motul I buy is just plain expensive.

And don't forget the tax break.

[RedBaron]

If you're really concerned about getting margin called on a short like tesla, just go long some PUTS. They are $$$ though.

[sc_rufctr]

Originally Posted by McLovin

Don’t forget that Tesla currently enjoys essentially a monopoly while the big boys are ramping up.

But starting next year they (VW, BMW, Mercedes and every major manufacturer) are going to start launching their full electrics. The numbers will be in the hundreds of thousands very quickly.

The market is going to be absolutely flooded with electric cars. Tesla’s sales are going to take a huge hit, and their margins on the cars they do sell will take a likewise hit.

With short selling, though, it’s all about the timing.

This... Unfortunately I think you're right. Not good news for Tesla.

[Starless]

Originally Posted by McLovin

Don’t forget that Tesla currently enjoys essentially a monopoly while the big boys are ramping up.

But starting next year they (VW, BMW, Mercedes and every major manufacturer) are going to start launching their full electrics. The numbers will be in the hundreds of thousands very quickly.

The market is going to be absolutely flooded with electric cars. Tesla’s sales are going to take a huge hit, and their margins on the cars they do sell will take a likewise hit.

With short selling, though, it’s all about the timing.

Yup, been saying this for a while now, but the Tesla Boys keep telling me that Tesla has years of experience, better charging network, whatever. I think Tesla is in for some bad days ahead.

[kach22i]

Originally Posted by Zeke

Not according to the SEC and the 51% increase in the stock's value while he held short.

Telsa may have the last laugh. If they bring out a decent PU with their technology they might punch small hole in the biggest market in the US. The fact that they have ignored this segment other than talk surprises me. A mid size Ranger/Colorado unit would be killer. Ford just resurrected the Ranger.

Tesla would have competition in that segment, not something they are used to.

Nov. 26, 2018
Plymouth Township startup to unveil electric pickup concept in LA
https://www.freep.com/story/money/cars/2018/11/26/rivian-truck-automotive/2070315002/

Rivian, an automotive startup with an engineering base outside Detroit in Plymouth Township, plans to unveil its five-passenger R1T electric pickup concept in conjunction with the LA Auto Show on Monday, Nov. 26, 2018. (Photo: Ben Moon)

[GG Allin]

It'll be fun to come back and visit this thread in 10 years.

[GH85Carrera]

I am often amazed how popular pickups are locally. I was behind a Suzuki pickup just yesterday. I had no idea they made pickups. I parked next to a Ford F550 pickup recently. That thing was the size of a dump truck. A 100 pound woman climbed up like a monkey climbing a tree to get in. It had the logo of a local horse farm on the door, so I presume she normally hauls a heavy load.

It is easy for folks to spend 80 grand on a pickup now days. Just amazing to me. An electric pickup may have a niche market. For most folks that need a real pickup not so much. For the folks that just like pickups like so many others, they will sell. Not to me, but someone will buy them.

[Jims5543]

As someone that works in a trade and does not need big towing capacity just the bed to put tools in, I am patiently waiting for an electric pickup. I drive around 60-100 miles a day and would love to stop buying gas.

I just broke out and am running 2 crews, I put my 07 FJ Cruiser back to work, it gets 16MPG and is eating up 2 tanks of gas a week.

[PD41]

Working in the Port of Los Angeles when the Mercedes auto ship gets unloaded I see many new Tesla's getting put on the ship going back to Germany.

[Jims5543]

I do not buy new cars, I was under the impression there was a waiting list for a Model 3, has that changed, did everyone that pre-ordered get their car and now there is surplus sitting around waiting for buyers?

I was going to wait another year or two then shop for a used Model 3. A used Model S can be purchased for 30-35K now.

I figure in another year or two a Model 3 should be down below 20K, hoping for low teens.

[legion]

Originally Posted by Jims5543

I do not buy new cars, I was under the impression there was a waiting list for a Model 3, has that changed, did everyone that pre-ordered get their car and now there is surplus sitting around waiting for buyers?

I was going to wait another year or two then shop for a used Model 3. A used Model S can be purchased for 30-35K now.

I figure in another year or two a Model 3 should be down below 20K, hoping for low teens.

Sure, you order your Model 3 and you have to wait months for it to be built.

One of the rumors is that Tesla has such severe quality issues, that many of the cars end up being returned where they just sit on a leased lot for the rest of their days. Others are rumored to be cars that were produced and the orders were cancelled before delivery. Either way they have an unusually large number of cars that sit on leased lots around the country that never seem to leave them.

One of my buddies is on this third Model S. He is a true believer in the brand. He has not been able to take any of them to the car wash (or drive them in the rain, for that matter) because the interior will be soaked if he does. All of them have inconsistent door gaps

[Clint Lando]

Pay more for truck to save less in gas
not smart

[cairns]

An opinion piece from the WSJ this morning. It follows a number of factual stories about how bad things are going at Tesla.

“I would have bought my Tesla even without the tax rebate.” So went any number of irate emails from readers over the years, nonsensically for any point I was trying to make. Elon Musk isn’t in the business of leaving money on the table. He priced his cars to make sure every penny of subsidy ended up in Tesla’s pockets and not its customers’.

Now Wall Street finds Tesla sales are not adding up as hoped this year. Morgan Stanley is forecasting 344,000, below the low end of Tesla’s last predicted range. An obvious culprit is the dwindling U.S. tax rebate to buyers. The handout, once $7,500, has been cut in half and will soon fall to $1,875. It turns out economics applies after all.

Worse for Tesla, the $7,500 rebate will continue to apply in full to a tidal wave of electric cars about to hit the U.S. market. This onslaught—coming from Mercedes, VW, BMW , Volvo, Porsche, Nissan, Kia, Hyundai, you name it—is the fruit of an estimated $300 billion in capital the industry has committed to building money-losing electric cars.

A report out last month from McKinsey tells the story: These cars cost an average of $12,000 more to produce than they can fetch in the marketplace. The role of regulation in causing this pileup “cannot be overstated,” the report adds, while proposing somewhat desperately that the industry try to save itself by “decontenting” its electric vehicles—that is, getting rid of every unnecessary frill and luxury, such as display screens, fancy seating, power windows or anything else that adds costs to what are essentially compliance vehicles.

Of course, this won’t happen. Not only would it turn off the stylish adopters who buy most EVs, it would also undermine the halo effect manufacturers hope and pray their green vehicles will shed over their conventionally powered lineups.

Unfortunately, unlike these companies, Tesla needs to make a profit from its electric cars. It doesn’t have a gasoline-car business. It can match other makers loss for loss only if investors are willing to keep throwing new capital into the company, and they no longer are. Mr. Musk might conceivably seek refuge in U.S. trade law. Domestic manufacturers are entitled to seek protection when overseas rivals sell products in the U.S. below the cost of production. Except that any such action would likely provoke a trade war and hurt Tesla’s access to the even more grossly subsidized electric-car markets in Europe.

An Apple analogy has long bolstered Tesla among its faithful. Something so ineffably wonderful about Tesla cars would let them command Apple-like margins even in a market polluted by competitors willing to offer roughly comparable products at money-losing prices.

We trust this idea has now died a natural death. An electric car is not an iPhone. Everyone already has a car; that car already fulfills the basic function of a car as well or better than any car built by Tesla can. Only limited profits are on offer from selling cars, and no way was Tesla going to exempt itself in the long run from the industry’s bare-knuckle fight over who gets a share.

Let’s also acknowledge that the insanity here is partly Mr. Musk’s own doing. He promoted the myth of the electric car as a solution to climate change. This column warned nine years ago, just before Tesla’s initial public offering, that political favoritism and tax handouts were drawing into the market for electric cars companies that had long experience building cars. Importantly, these companies also had large unionized workforces and lobbyist armies that would give them influence over regulation to dwarf whatever political clout Tesla could hope to muster.

Not even our cynicism, however, was up to anticipating the fallout that would actually materialize: The world’s traditional car industry, even as it continues to churn out 79 million vehicles annually, has been incentivized everywhere to divert some of its profits to making life miserable for the one company that genuinely thirsts to make electric cars and needs to be able to make them profitably.

This outcome has many fathers, including the world media, which has been undiscerning in its cheerleading for electric cars. Bloomberg News recently celebrated the fact that one-third of new cars in Norway were electric. Unmentioned was the litany of handouts that make an electric car a no-brainer for many Norwegians, from giant tax breaks to free parking and even free charging.


The kicker is that Norway can afford its electric car habit partly because it’s one of the world’s biggest oil and gas exporters. Pretty much the same basic model now has been adopted by green regulators everywhere. The world is ruthlessly promoting an electric-car industry that is a hothouse flower and will need massive and continuing subsidies from buyers and users of gasoline-powered cars.

[Sooner or later]

That is an excellent article

[cairns]

Here's one of the news stories that preceded it (from 04/08 Market Watch):

Tesla Inc. shares fell more than 8% on Thursday as Wall Street analysts used some choice words to describe their dismay at the car maker selling fewer-than-expected vehicles in the first quarter.

“Ugly,” ”weak” and “disappointing” featured in initial notes, as the miss fueled renewed doubts about Tesla’s future profitability, growth and cash position.

At their lowest level Thursday, Tesla TSLA, +1.47% shares were off nearly 11%, the worst percentage decline since Jan. 18. They closed down 8.2% at $267.78. The shares are a distant 30% from their record high close of $385 in September 2017.

See also: Tesla delivers fewer vehicles than expected in first quarter

The car maker pinned the miss on “massive” backlogs in China and in Europe. Tesla delivered about 63,000 vehicles in the first quarter, including 50,900 Model 3s; that compared with expectations of around 76,000 vehicles, including 54,600 Model 3s, according to FactSet.

Tesla reaffirmed its 2019 sales guidance of 360,000 and 400,000 vehicles.

With the weak start to the year, “they’re going to be hard pressed” to hit that guidance, especially with federal electric-vehicle tax credits being reduced mid-year and going away at year-end, said Garrett Nelson, an analyst with CFRA.

The “massive” 31% quarter-on-quarter drop also has negative implications for Tesla’s cost of sales per vehicle and “we know they’ve been lowering prices in order to prop up sales, all of which should equate to a pretty ugly quarter from a margin perspective,” he told MarketWatch.

Related: Sheryl Crow’s Tesla malfunctions, and singer asks Twitter for help

Analysts at Bernstein, led by Toni Sacconaghi, highlighted the unexpected weakness in sales of luxury Model S and Model X vehicles, down 50% quarter on quarter. Possible explanations include seasonality, the tax credit reduction, and more competition, but “we remain perplexed by the magnitude of the decline,” they said in a note.

Tesla “is now in the uncomfortable position of likely needing to raise capital from a position of relative weakness,” the Bernstein analysts said.

“Very weak” production and delivery numbers should make Tesla bulls nervous, said a note from analysts at Cowen, led by Jeffrey Osborne. Tesla “has largely exhausted the pent-up demand for Model 3 versions priced above $37,000,” they said.

Analysts at Roth Capital highlighted “a busy day” for Tesla investors with Thursday also marking the court date for the Securities and Exchange’s contempt charges. The hearing stems from Chief Executive Elon Musk’s tweets about annual production targets for Tesla in light of last year’s settlement with the SEC over Tesla’s going-private saga.

Related: New-car loans hit highest interest rates in a decade

The analysts said they don’t expect any “draconian” measures from the court that would punish Tesla’s shareholders, but viewed the “entire process as self inflicted by Musk, reckless, and unnecessary.” Another fine would have no impact, they said.

Analysts at RBC Capital questioned Tesla’s assurances that, while first-quarter earnings will suffer from the delivery shortcomings, it ended the quarter “with ’sufficient’ cash on hand.”

“We expect a sizeable cash burn in (the first quarter.) We estimate that the vehicles in transit alone could be a ~$500mm working capital use,” said the RBC analysts, led by Joseph Spak.

Analysts at Deutsche Bank struck a somewhat more optimistic tone.

“With standard range versions being rolled out in the U.S. and bottleneck addressed overseas, we believe Model 3 deliveries will ramp up materially in the quarters ahead, but investors are unlikely to give Tesla credit for them until there is clarity on their mix and gross margin profile.”

Investors are likely to turn their focus to Tesla’s April 19 investor day, the Deutsche Bank analysts, led by Emmanuel Rosner, said in a note.

Tesla has vowed to provide a “deep dive” into its self-driving software and hardware, including its in-house self-driving computer.

Tesla shares have lost nearly 7% in the past 12 months, and are down 19% so far this year. That contrasts with gains of 9% and 15% for the S&P 500 index SPX, +0.22% in the same time periods.

The company’s bonds also took a beating. The 5.300% notes that mature in August of 2025 were last trading at 85.688 cents on the dollar, or at a yield spread of 592 basis points over Treasurys, a full 46 basis points wider on the day, according to MarketAxess.

[berettafan]

we did the math on a tesla s using a tesla websites quoted charging prices. compared it to an accord. I want to say the fuel savings was about $30/mo.

that was without accounting for the much, much cheaper accord and the cost to replace batteries. also doesn't account for residual value.

bottom line is while it's neat to get instant torque I don't see a reason to buy one.

looking at this from a broader perspective I have to think electric cars make the most sense in an urban environment. which, btw, is best served by utilizing mass transportation, not large numbers of electric cars.

further if electric cars were to prove wildly popular you've got to ask yourself where this electricity is going to come from. cheap evening time electricity? guess what-it won't be cheap if we're all plugging in at 7pm. nor will there likely be enough supply. yes, that's right---electricity is not some bottomless pit of energy. fact is we don't have enough generation capacity as it is. that is why the commodity of electricity is so expensive at peak times.

it seems to me electric cars have a real issue. they make some sense for certain users so long as not too many people partake. but for the builders to make money (many, many cars) the users will suffer as fuel prices will skyrocket.

time to move on to hydrogen?

[sc_rufctr]

What if the roof of your house is covered in solar panels like mine is?

My quarterly bill averages about $30 & on one occasion last year I got a $12 credit.
(But I spent around 20k installing them 8 years ago.)

There are options to generating electricity and IMO the greenest, best way going forward is nuclear.

Like it or not, for better or worse at some point in the future most of us will be driving electric cars.

[cairns]

They said the same thing about diesels not that long ago.....