Although he is known as Elon Musk’s number one enemy, Mr. Spiegel makes most of his money from killer small cap picks. His under the radar small caps were profiled in ValueWalk’s 2nd edition of our quarterly premium newsletter, where readers can also find his latest updates on those positions. Mark Spiegel’s Stanphyl Capital had some killer small cap picks which are up several hundred percent in just a few months –More on the small caps can be found on ValueWalk’s HiddenValueStocks small cap website. Readers can see below for an excerpt on Tesla Inc (NASDAQ:TSLA) from their Stanphyl’s January 2018 letter.
We remain short shares of Tesla, Inc. (TSLA), which I consider to be the biggest single stock bubble in this whole bubble market—a company so landmine-filled that I think it can implode at any moment regardless of what the broad market does. To reiterate the three core points of our Tesla short position:
1) Tesla has no “moat” of any kind; i.e., nothing meaningfully or sustainably proprietary.
2) Tesla loses a huge (and increasing) amount of money despite relatively light competition but will soon be confronted with massive competition in every aspect of its business.
3) Elon Musk is extremely untrustworthy.
Early in January Tesla released a disastrous Q4 sales report, delivering only 1550 Model 3s and reducing production guidance to 5000 a week by late Q2 2018 vs original guidance of up to 200,000 in the second half of 2017, later reduced to 5000 a week by late Q4 2017 and still later reduced to 5000 a week by late Q1 2018. Seeing as that last guidance was provided just 62 days before the disastrous Q4 report/guidance revision, it raises an interesting question: is Elon Musk—widely acclaimed as “a genius”—actually an idiot, or just a stock-pumping pathological liar? Before you answer that, please allow me to provide exhibits “B” and “C”:
Meanwhile, Model S&X sales were up a bit in Q4 vs. Q3 (28,320 vs. 25,930) but nearly 3900 of those Q4 sales were net liquidated inventory, undoubtedly heavily discounted and thus most likely resulting in a record low gross margin for the quarter. (We’ll know when Tesla releases the financial results in February.) Also, those sales were almost certainly artificially juiced by fears of tax credits being eliminated both in Norway (by far Tesla’s largest European market) and here in the U.S. As it turned out however, those credits were preserved in both places and thus Tesla will see a large S/X delivery drop in Q1 2018, and keep in mind that this seventh consecutive quarter of roughly flat S/X sales is occurring before the arrival later this year and next of superior luxury EV competition from Jaguar, Audi, Mercedes and Porsche. As those cars filter into the market, S/X sales will undoubtedly head into significant decline.
Also in January, the annual Consumer Electronics Show provided a cornucopia of autonomous driving technology from many of the world’s largest and most deep-pocketed automotive and tech companies, while outside the show, GM announced plans for 2019 to produce the world’s first fleet of driverless taxis without any human controls. Then at the Detroit auto show Ford—heretofore a bit of an EV laggard—announced plans to spend $11 billion bringing 16 pure electric models to market by 2022. (Tesla was a no-show at both events.)
Also in January, Navigant Research published a new “Leaderboard Report” for autonomous driving, in which Tesla tied for dead last among 19 contenders. Here’s Navigant’s assessment: “Tesla is the outlier, with big plans and lots of public announcements, but technology that is at best dubious and some serious financial and manufacturing quality issues to mitigate.” And while we’re on the topic of Tesla now being a technology laggard, remember that in December its battery supplier Panasonic announced a partnership with Toyota (and possibly other Japanese automakers) that casts a spotlight on how technologically behind Tesla’s cylindrical battery format now is. I urge you to read this excellent summary of the event from The Daily Kanban.
Next for Tesla in January, CEO Elon Musk (or just “Elon”, as the cash-burning cult leader is referenced in the official SEC filing) signed on for a new pay deal that, when analyzed, is indicative of just how unprofitable this company will always be.
Finally in January, CNBC published an investigative report indicating that Model 3 production problems are apparently far worse than Tesla has been acknowledging, while a terrific article on Seeking Alpha reiterated the same thing using alternative data points. But eventually the Model 3 production and quality problems will be fixed, right? Perhaps, but based on the mediocre bids when current owners try to resell their brand-new Model 3s on eBay, as well as the fact that Tesla is already filling reservations from days 2 and 3 despite claiming to have had 180,000 reservations on day 1, it seems the primary demand for that car will be for the $35,000 base model rather than the ones starting at $49,000 that Tesla now sells. The problem with that is that I (and others) estimate that Tesla will lose at least $10,000 on a $35,000 car and thus won’t produce more than a token handful of them. Thus, watch for Model 3 reservations to dry up when potential buyers realize they can’t get a “mass-market affordable car” from Tesla (and instead switch to the new Leaf or Bolt), then watch those reservations really vanish when the $7500 tax credit goes away later this year. (More on that below.) And another big Model 3 headwind is that almost nothing can be done in the car without a multi-step process on the touchscreen—not even changing the windshield-wiper speed, adjusting the air vents or opening the glovebox. Thus, operating a Tesla Model 3 may potentially be as dangerous as texting while driving.
I previously mentioned that the Q4 Tesla sales bump was partially due to the feared cancellation of U.S. tax credits. Although the subsequent preservation of those credits might seem to be favorable to Tesla it actually isn’t, as U.S. Tesla buyers will only be able to apply a $7500 credit to approximately 100,000 more cars (including the phase-out period). After that Tesla will have a major price disadvantage vs. over 100 new EV models entering the market over the next few years, as its credits will have expired (after first being cut to $3750 and then $1875 during the extended phase-out) while much of the competition will just be getting started with a full $7500 credit. Additionally, pricing for much of that new competition will be cross-subsidized by highly profitable conventionally powered trucks and SUVs, so if you think Tesla loses a lot of money now trying to sell cars (and it sure does!), wait until you see what happens beginning late this year.
As for the heavily promoted “$180,000, 500-mile” Tesla electric truck, I (and many others) estimate that a 500-mile electric truck will require a 1000/kWh battery pack and—with its fancy carbon fiber cab and chassis– will thus cost at least $250,000 to build. Additionally, Tesla is guaranteeing to cap electricity rates at .07/kWh for the first million miles of the truck’s usage; as national rates average around .12/kWh, I estimate this will cost Tesla—on average—an additional $100,000 for each truck it sells, meaning it will supposedly charge $180,000 for a product that will cost around $350,000 to build and subsidize– a typical Musk “business proposition” if I’ve ever seen one! In other words, the Tesla semi-truck will either never be built and sold (hey by the way—where’s the factory and assembly line for that “2019 product”?) or the real price (with the lifetime .07/kWh electricity subsidy) will be around $400,000 (vs. $120,000 for a conventional truck) and all those big-name “reservations” will disappear even faster than the proceeds from a Tesla financing. And oh, by the way, Tesla is actually behind much of the industry in developing an electric truck.
Meanwhile, Tesla is increasingly besieged by a wide variety of lawsuits, for labor discrimination, union-busting, autopilot fraud, sudden acceleration, lemon law violations, investor fraud and, undoubtedly, many others of which I’m not yet aware. And that’s even before it brings in the (inevitable) bankruptcy lawyers!
So here is Tesla’s competition in cars (note: these links are continually updated)…
CHEVROLET BOLT EV: THE 2017 MOTOR TREND CAR OF THE YEAR
GM to introduce 3 more electric cars before 2020, battery cells at <$100/kWh
2018 Nissan Leaf debuts: 150 miles for $30,875, 200-plus mile model by late 2018
Nissan IMx Electric Crossover Coming in 2019
Jaguar I-Pace electric SUV debuts March 2018; on sale in June
Jaguar XJ to transform into Tesla Model S rival
New 2018 Audi e-tron: all-electric SUV nearing autumn release
Audi Launching Three Pure Electric Cars Beginning 2018
Volkswagen To Speed Up EV Development With Big Investments
Volkswagen I.D. Crozz 311-Mile Electric CUV For $30,000-ish Before Incentives
Target Tesla: Porsche Mission E to come in three power levels
2018 Hyundai Kona Electric SUV Will Have 220 Mile Range
14 new EV models by Hyundai-Kia by 2025
Mercedes Wheels Out Electric Car Roadmap, Car And Battery Factories Everywhere
Daimler Trucks launches E-FUSO and all-electric heavy-duty truck Vision One
Ford plans $11 billion investment, 40 electric vehicles by 2022
Electric Land Rover “Road Rover” to launch in 2019
First electric Volvo to be an all-new hatchback due in 2019
Volvo’s Polestar reveals its vision to be the new electric performance brand
Volvo To Start Selling Electric Trucks In 2019, Some Will Hit The Road This Year
Toyota, Mazda, Denso create company to roll out electric cars beginning 2019
Infiniti will go mostly electric by 2021
PSA will launch full-electric Peugeot 208 and DS 3 Crossback in 2019
PSA will electrify global product lineup by 2025
Seat to launch first electric car in 2019
Opel bets on electric power in bid for profitability
Skoda Vision E revealed for 2020 production
MG E-Motion confirms new EV sports car on the way by 2020
Dyson looks to launch first electric car by 2020
BMW iNext Electric SUV arrives in 2021 with a 435-mile range
BMW to have 25 electrified models by 2025
Toyota to market over 10 battery EV models in early 2020s
235mph Lucid Air due in 2019 as electric BMW 7 Series rival
Renault to have 8 pure electric models by 2022
Rolls-Royce is preparing electric Phantom for 2022
Citroen preparing EV push with 80 per cent electrified range by 2023
Honda will offer full-EV or hybrid tech on every European model by 2025
Kia Unveils Plan for 16 New Electric or Hybrid Vehicles by 2025
Bentley plan for electric and hybrid car roll-out is well advanced
Maserati executive confirms electric Alfieri
Subaru to introduce all-electric vehicles by 2021
Faraday Future raises £747 million for 2018 Production
Borgward BXi7 Electric SUV Flies Under The Radar
Detroit Electric promises 3 cars in 3 years
Two new electric cars from Mahindra in India by 2019; Global Tesla rival e-car soon
Saab asset owner NEVS plans electric car production
And in China…
BYD Plans to Expand Daimler Partnership With New EVs for China
Daimler to invest $755 million in China EV, battery output
Daimler, BAIC agree to make electric cars in China
Volkswagen Plans $12 Billion Electric-Car Blitz in China
GM plans to launch 10 new energy models in China by 2020
Audi and FAW sign China electric car cooperation deal
Ford ramps up electric vehicle push in China
China’s BYD has overtaken Tesla in the battery and electric car business
SAIC to spend $2.2 billion on EVs, connectivity, aftersales services
Honda to launch three electric vehicles in China in 2018
Toyota to re-enter EV sector starting in China from 2020
Renault, Nissan, Dongfeng Motor partner to develop electric cars in China
Renault-Nissan Alliance To Electrify China’s Trucks And Vans
Mazda and Changan Auto join hands on electric vehicles
NIO’s ES8 is China’s answer to the Tesla Model X – at about half the price
Geely’s Volvo gears up to make electric cars in China
Changan Spending $15 billion To Have 21 Pure Electric Cars By 2025
Chery Breaks Ground on $240M EV Factory in China
Chery’s second EV plant open in Dezhou
Leapmotor’s electric car to hit the market in 2018
Alibaba, Foxconn Invest in Electric-Vehicle Maker Xiaopeng Motors
Tesla Model 3 Watch Out: Here Is The XPeng Identity X
WM Motor Technology to put ‘Weltmeister’ electric car brand on road in 2018
GAC Trumpchi to launch range-extended EVs
Chinese-backed electric car start-up Byton woos CES with model 40% cheaper than a Tesla
Great Wall Starts New EV Brand (ORA) In China
The Singulato iS6 From China Is Aimed At The Tesla Model 3
FAW (Hongqi) to roll out 15 electric models by 2025
Quianu Motor aims to grab share of US electric vehicle market
NEVS receives approval for electric car factory with capacity of 200,000 units per year
Wanxiang Gets China Electric Vehicle Permit to Make Karma Cars
Qoros Auto’s new owner plans to be an EV power
Thunder Power electric cars at the Frankfurt motor show
Here’s Tesla’s competition in autonomous driving…
An Overview of Audi Piloted Driving
Waymo is first to put fully self-driving cars on US roads without a safety driver
Cadillac Super Cruise™ Sets the Standard for Hands-Free Highway Driving
GM ride-hailing fleet would ditch steering wheel, pedals in 2019
Updated 2017 Mercedes-Benz S-Class – first ride with autonomous technology
Volvo Promises Uber Fleet of Self-Driving Taxis By 2019
NVIDIA and Toyota Collaborate to Accelerate Market Introduction of Autonomous Cars
Volkswagen and NVIDIA to Infuse AI into Future Vehicle Lineup
NVIDIA Partners with Bosch for System Based on Next-Generation DRIVE PX Xavier Platform
Bosch and Daimler join forces to market fully automated, driverless taxis by 2020
Intel’s Mobileye will have 2 million cars (VW, BMW & Nissan) on roads building HD maps in 2018
Volkswagen Group and Aurora Innovation Announce Strategic Collaboration On Self-Driving Cars
Toyota, Intel and others form big data group for autonomous tech
Nissan’s Robo-Taxis Will Hit the Road in March
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
Intel collaborates with Waymo on self-driving compute design
Fiat Chrysler to Join BMW, Intel and Mobileye in Developing Autonomous Driving Platform
Continental Joins Autonomous Driving Platform from BMW, Intel & Mobileye as System Integrator
Continental Sees Huge Growth in Automated Driving, Unveils Mobility Tech
Ford expands fleet of self-driving test cars
Ford Buys Laser System Firm as It Boosts Driverless Car Development
Lyft, Aptiv (formerly Delphi) partner on driverless ride-hailing at 2018 CES in Vegas
Lyft and Waymo Reach Deal to Collaborate on Self-Driving Cars
Hyundai, Aurora to release autonomous cars by 2021
Magna’s new MAX4 self-driving platform offers autonomy up to Level 4
Bosch Creates a Map That Uses Radar Signals for Automated Driving
Honda Targeting Level 3 Automated Driving By 2020, Level 4 by 2025
Groupe PSA’s safe and intuitive autonomous car tested by the general public
Baidu unveils autonomous driving platform backed by 90 global partners
Baidu plans to mass produce Level 4 self-driving cars with BAIC by 2021
BlackBerry and Baidu Partnering to Accelerate Connected and Autonomous Vehicle Technology
Tencent is reportedly testing its own autonomous driving system
JD.com 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
Apple Is Focusing on Making an Autonomous Car System
Samsung, Harman gear up for self-driving automobiles
Mitsubishi Electric Develops Automated Mapping For Autonomous Driving
Hitachi demonstrates vehicle with 11-function autonomous driving ECU
DENSO and NEC Collaborate on Automated Driving and Manufacturing
Nuro’s Robot Delivery Vans Are Arriving Before Self-Driving Cars
Who Leads the Autonomous Driving Patent Race?
Here’s Tesla’s competition in car batteries…
LG Chem targets electric car battery sales of $6.3 billion in 2020
Samsung SDI Unveils Innovative Battery Products at 2018 Detroit Motor Show
SK Innovation to produce EV batteries with 500 km range in 2018
New Toshiba EV Battery Allows 320km Charge in 6 Minutes
Daimler to ramp up battery production
General Motors China To Open Battery Factory In Shanghai
Panasonic Opens New Automotive Lithium-Ion Battery Factory in Dalian, China
Panasonic forms battery partnership with Toyota
China to build many gigafactories’ worth of electric-car battery plants
China’s BYD takes aim at Tesla in battery factory race
Contemporary Amperex’s Chinese battery factory will be bigger than Tesla’s Gigafactory
Contemporary Amperex building an EV battery/drivetrain facility in Europe
Energy Absolute Plots Asian Project Rivaling Musk’s Gigafactory
ABB teams up with Northvolt on Europe’s biggest battery plant
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
BMW announces partnership with solid-state battery company
Toyota promises auto battery ‘game-changer’
Hyundai Motor developing solid-state EV batteries
Honda considers developing all solid-state EV batteries
Continental eyes investment in solid-state batteries
Wanxiang is playing to win, even if it takes generations
UK provides millions to help build more electric vehicle batteries
Rimac is going to mass produce batteries and electric motors for OEMs
Elon Musk Has A New Battery Rival (Romeo Power) Packed With His Ex-Employees
Bosch May Invest 20 Billion Euros in Solid-State Battery Production for EVs
Bracing for EV shift, NGK Spark Plug ignites all solid-state battery quest
ProLogium Technology Will Produce First Next Generation Lithium Ceramic Battery For EVs
Here’s Tesla’s competition in storage batteries…
Panasonic
LG
AES + Siemens (Fluence)
Mitsubishi
Saft
EnerSys
SOLARWATT
Sharp
Tesvolt
Kreisel
Leclanche
Lockheed Martin
UniEnergy Technologies
electrIQ
Green Charge Networks
Imergy Power
Renault
Blue Planet
Clean Energy Storage Inc.
Younicos
Powervault
ViZn Energy
Schmid
And here’s Tesla’s competition in charging networks…
EVgo Installing First 350 kW Ultra Fast Public Charging Station In The US
BMW and Volkswagen Take on Tesla Motors With a New U.S. Fast-Charging Network
Tritium’s First 350-kW DC Fast Chargers Coming To U.S.
Porsche is bringing its ultra-fast electric car charging stations to the US
Nissan and EVgo to build i-95 Fast-Charge ARC connecting Boston and Washington D.C.
Shell, BMW, Daimler, Ford, VW, Audi & Porsche form IONITY European 350kw Charging Network
E.ON to have 10,000 150KW TO 350KW EV charging points across Europe by 2020
Chargepoint Europe Gets $82 million in new funding from Daimler
ChargePoint – InstaVolt partnership; more than 200 UK rapid charge systems
ChargePoint Express Plus Debuts: Offers Industry High 400 kW DC Fast Charging
Fastned building 150kw-350kw chargers in Europe
ABB powers e-mobility with launch of first 150-350 kW high power charger
DBT unveils the 1st 150 kW universal ultra-fast charging station
5 European fast charging networks form Open Fast Charging Alliance
Shell buys European electric vehicle charging pioneer NewMotion
BP in talks with electric carmakers on service station chargers
Total planning EV charging points at its French stations
Yet despite all that deep-pocketed competition, perhaps you want to buy shares of Tesla because you believe in its management team. Really???
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: Contrary To The Official Story, Elon Musk Is Selling To Keep Cash
Tesla: O, What A Tangled Web We Weave When First We Practice To Deceive
I Put 20 Refundable Deposits On The Tesla Model 3
Tesla: A Failure To Communicate
Elon Musk Appears To Have Misled Investors On Tesla’s Most Recent Conference Call
Understanding Tesla’s Potemkin Swap Station
Tesla’s Amazing Powerwall Reservations
So in summary, Tesla is losing a massive amount of money even before it faces a huge onslaught of competition (and things will only get worse once it does), while its fully diluted market cap (assuming 177 million shares “all-in”) exceeds that of Ford and almost equals that of GM despite a nearly two-billion-dollar annualized net loss selling a bit over 100,000 cars while Ford and GM make billions of dollars selling 6.6 million and 9 million cars respectively. Thus this cash-burning Musk vanity project is worth vastly less than its nearly $64 billion fully-diluted enterprise value and—thanks to its roughly $10 billion in debt—may eventually be worth “zero.”