Tesla Price Cuts Are Needed To Resume Unit Delivery Growth -...| MENAFN.COM

Wednesday, 30 November 2022 12:46 GMT

Tesla Price Cuts Are Needed To Resume Unit Delivery Growth - Shortseller

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Stanphyl Capital's commentary for the month ended September 30, 2022, discussing their short position in Tesla Inc (NASDAQ:TSLA).

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

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Want another example of what a fraudster Musk is?“Honest discovery” is a cornerstone of the American legal system. Here's how Musk's behaving in his ongoing Twitter trial:

I've said it before and I'll say it again: If you think any financial statement emanating from this guy is honest, you're among the dumbest f*cks on planet Earth. If you're an institutional investor and long a Musk-run company, you should be FIRED.

Meanwhile, the Tesla“hypergrowth” story is over. Here are the company's most recent quarterly deliveries:

Q4 '21: 309,000

Q1 '22: 310,000

Q2 2022 & Q3's estimate averaged (to account for 70,000 Q2 cars built & delivered in Q3 due to Q2's China factory closing): 309,000

Table of Contents
Production Capacity Outstrips Incoming Orders

Tesla delivery wait times worldwide are now declining substantially ( where ). Tesla's production capacity is now outstripping its rate of incoming orders despite the new German and factories producing at only around 10% of their capacity!

This means one thing and one thing only: big, margin-slashing Tesla price cuts are needed to resume meaningful unit delivery growth, and I expect we'll see them within weeks.

Sure, if Tesla slashes prices enough it will undoubtedly be able to use its excess capacity, but so can any other car company. Welcome to the auto business, which currently sells for around 5x earnings!

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 only around 1.5%, yet a market cap greater than the next despite selling only around 2% of the cars they do.
  • It has no“moat” of any kind; i.e., nothing meaningfully proprietary in terms of its electric car technology (which has now been ) and its previously proprietary Superchargers are being ), 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.

I estimate that Tesla's 2022 GAAP earnings will be only around $3/share after adjusting for emission credit sales that will soon go away when other auto manufacturers enough EVs of their own. Thus, slow-growth Tesla has a PE ratio of around 88 in an industry with an average current multiple of around 5.

No More Product Edge

Meanwhile, Tesla has objectively lost its“product edge,” with many competing cars now offering comparable or better , better interiors, similar or faster charging speeds and much better quality. (Tesla ranks second-to-last in while British consumer organization 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 faces current (or imminent) competition from the much better made (and often just better) electric , , , , , , , , Recharge, & and .

And Tesla's Model 3 now has terrific direct“sedan competition” from Volvo's , the , the upcoming and , and multiple local competitors in China.

And in the high-end electric car segment worldwide the (the base model of which is now than Tesla's Model S) outsells the Model S, while the , and make it look like a fast Yugo, and the new and (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: .

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 95% 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 current run-rate of around 1.3 million); in fact in May .

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 million cars a year of sold-out existing claimed production capacity (once the German and Texas factories are fully operational) vs. the current stalled-out rate of 1.3 million.

Tesla would have to add 36 more brand new 500,000 car/year factories with sold out production; i.e., a new factory nearly every single quarter for the next ten years! Only a Teslemming could be dumb enough to believe this!

Meanwhile, in July the head of Tesla's“” program , while in June the NHTSA that its investigation of Tesla's deadly Autopilot has expanded into“an engineering analysis,” the last required step before (finally!) demanding a full recall.

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 just trailing-edge garbage.

As of July the NHTA was investigating involving autonomous driving systems, 39 of which—and all the deaths but one—involve Tesla. (For all Tesla deaths cited in the media—which is likely only a small fraction of those that have occurred—see .)

And Tesla has sold this trashy software for six years now:

…and still via a !

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 , and , and regarding the real-world range of its cars.

And if new-format 4680 cells enter the market some time in 2024 ( ), even if Tesla makes some of its own, , and BMW has already it will buy them from CATL and EVE.

And oh, the Tesla previewed in 2019 (and still hasn't shown in production-ready form) won't be much of“growth engine” either, as it will enter ; in fact, Ford's terrific 2022 now has (plus many more fleet reservations), GM has introduced its fantastic 2023 which already has , Rivian's pick-up has gotten , and .

Regarding safety, as noted earlier in this letter, Tesla continues to its so-called“Autopilot” system, which Consumer Reports has ; God only knows how many this will kill despite

Elsewhere in safety, the Chinese government of tens of thousands of Teslas for a dangerous suspension defect the company , and Tesla for the same defect.

Tesla also and , and after initially refusing to do so voluntarily, it was forced to .

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 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...
  • (making deals with multiple automakers)
Here's Tesla's Competition In Charging Networks...

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


Mark Spiegel


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