Friday, August 17, 2018

The Failure That Is Tesla

In my honest opinion it is all but inevitable that Tesla will go down as one of the largest financial scandals of all time. Is it reallythat far fetched that an insolvent company that is taking $250,000 deposits on a flying car is run by a conman? I am being blunt on
purpose, but hear me out I'll include some primary source links and your readers can form their own opinions. I came across this by accident (a Facebook ad for "solar bonds" peaked my curiosity). I later found out that the Musk run industry leading solar company was on the verge of bankruptcy thus the sucker bonds. In order to prevent the bankruptcy Musk used Tesla to bail out the company. Many Tesla shareholders have sued arguing that this was an insider self dealing bailout.

Tesla incinerates cash, it's simple really the more cars they make the more money they lose. The chart from the article you referenced shows the trend quite nicely. It doesn't show 2018, but if it did the trend would continue with the biggest quarterly loses yet (-720 million dollars Q2 2018). Many would like to believe that Tesla is just investing for the future and that the loses are not on a path to infinity. They point to the last time Tesla made a profit (22 million dollars Q3 2016). My counter argument would be that they used a bunch of accounting shenanigans to accomplish this. One of the more widely publicized ones was the 154 million in green zev credits they took that quarter. Basically they hoarded several quarters of them and sold them all in Q3, without this gimmick Tesla would have been well in the red column.

Another point that gets brought up is that Tesla has some of the best margins in the industry over 20% in fact, (According to their most recent earnings they hope to have a 15% margin for the model 3 soon). This is often attributed to some of Tesla's more unique attributes like there no dealership business model. There is a kernel of truth to this in that Tesla uses the sales price from their in house dealership, but doesn't use any of the costs in running the dealership against their margin. The unfairly maligned Montana Skeptic delves into this topic in excruciating detail here Basically take Tesla's "20% margin", subtract 10% for the dealership network it doesn't include, subtract R&D, supercharger costs, and various accounting tricks for leases and warranty's and that margin disappears. It is no wonder Elon Musk called Montana's boss to try and silence him.

What about all those deposit pre-orders (ignoring the fact they lose money on every car). I think he is simply lying like he has many times in the past. Just a few weeks ago the company announced 420,000 net Tesla Model 3 reservations at the end of the second quarter. The key word here is reservation, on all of Tesla's official documents they recently changed the word deposit to reservation. Hrm... wonder what the difference could be, perhaps a large amount of people have received refunds, but have been left in the Que as zombie reservations.

Last talk about Elon's character, is it possible that he is lying to investors? This lawsuit with multiple quotes from insiders alleges just that. For example Elon Musk stood in front of the world and said Tesla would make 100,000-200,000 cars in a fully automated "alien dreadnought" factory in 2017. The truth was the company was making cars by hand at that point. (He was sleeping at the factory so presumably he should have noticed)

The strange tale of Martin Tripp A Tesla insider alleges that Tesla has sold 1,000 cars with faulty unsafe batteries to consumers. In addition that insider believes that Tesla has been fraudulently reclassifying hundreds of millions of dollars of wasted materials as test materials so that they will not count against Tesla's margin. Tesla has hurled a lot at this guy, but he has stuck to his guns filing an SEC complaint and a defamation counter suit. I would encourage you to read the very serious allegations directly from that suit.

In short in my opinion Elon Musk is a conman on the verge of bankruptcy. I'll leave you with this Bloomberg opinion piece that discusses the circular logic that keeps the company afloat.

Today's inappropriate tweets by him about a $420 a share buyout only cement my resolve. Watch as no buyers come forward and the tweets fade into oblivion, like the Solar Roof, Truck and Flying car.

Written by
Montana Skeptic Fan
“I Like To Play With Toys” Productions®