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ifeelstock / Deposit Photos Stanphyl Capital letter to investors for the month ended November 30, 2022, discussing their short thesis for Tesla Inc (NASDAQ:TSLA).
Despite big, margin-slashing price cuts in both china and europe , Tesla delivery wait times worldwide have declined substantially, down to just one week in china while in the U.S. (where Musk's Twitter boondoggle is rapidly destroying the brand ) Tesla is choking on model 3 inventory and offers December Model Y delivery.
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While Europe's backlog is expected to be completely gone by year-end. This means Tesla's production capacity now outstrips its rate of incoming orders despite the new German and Texas factories producing at only around 10% of capacity!
Table of Contents show
1.
expectations for q4 deliveries
2.
tesla's q3 earnings
3.
tesla is netflix
4.
an engineering analysis
5.
nothing proprietary
6.
so here is tesla's competition in cars...
7.
and in china, where tesla's ev market share is now declining...
8.
here's tesla's competition in autonomous driving; the independents all have deals with major oems...
9.
here's where tesla's competition will get its battery cells...
10.
here's tesla's competition in charging networks...
11.
and here's tesla's competition in storage batteries...
Expectations For Q4 Deliveries
Meanwhile, combined deliveries for the last two quarters (Q2 & Q3 2022) were lower than those for the previous two quarters (Q4 2021 & Q1 2022). As Tesla slashes prices it will undoubtedly sell more cars (I expect Q4 deliveries to be in the range of around 400,000 vs. previous quarters in the 300,000s.
Thanks to the cuts plus a rush to beat year-end expiring EV incentives in China, Germany and France), but any other car company can slash prices and do the same thing. (Welcome to the auto business, which currently sells for around 5x earnings!)
Tesla's apparent market saturation rate of around 1.6 million cars/year worldwide (at least until it slashes prices yet again!) is massively below its current factories' production capacity, much less the bulls' absurd expectations of adding a new factory every six months for the next ten years!
For some valuation perspective, BMW sells around 2 million cars a year with very high margins (including the best electric SUV now on the market (the new ix ), the best luxury EV( the new i7 ), and among the best small luxury EVs (the new i4 ), and has a market cap of around $59 billion.
If Tesla grew annual deliveries to the size of BMW's and had BMW-level margins, at BMW's current market cap it would sell for less than $19/share vs. this month's closing price in the $194s! (Remember: Tesla now has 3.16 billion shares outstanding!)
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 less than 2%, yet a market cap almost as big the next 6 largest automakers (by market cap) combined . It has no“moat” of any kind; i.e., nothing meaningfully proprietary in terms of its electric car technology (which has now been equaled or surpassed by numerous competitors ) and its previously proprietary Superchargers are being opened to everyone ), 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. elon musk is a pathological liar.
Tesla's Q3 Earnings
In October Tesla claimed that it had Q3 GAAP earnings of around .87/share excluding sunsetting emission credit sales. If you believe that after viewing this chart (courtesy of Twitter user @keubiko ), I have a bridge to sell you in Brooklyn:
Furthermore, Tesla's minimal depreciation of its new factories appears fraudulently low , as does its warranty reserve .
Even if you believe Tesla's clearly nonsensical earnings number, it annualizes to only $3.48/share, which based on November's closing price of $194.70 = a run-rate PE ratio of around 56 for a now slow-growing (or growing-but-margin-slashing) car company in an industry with a current average PE of around 5.
Meanwhile, Tesla has objectively lost its“product edge,” with many competing cars now offering comparable or better real-world range , better interiors, similar or faster charging speeds and much better quality. (Tesla ranks near the bottom of consumer reports' reliability survey while British consumer organization which? 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 poorly-built model y faces current (or imminent) competition from the much better made (and often just better) electric hyundai ioniq 5 , kia ev6 , ford mustang mach e , cadillac lyriq , nissan ariya , audi q4 e-tron , bmw ix3 , mercedes eqb , volvo xc40 Recharge, chevrolet blazer ev & $30,000 equinox ev and polestar 3 .
And Tesla's Model 3 now has terrific direct“sedan competition” from Volvo's beautiful polestar 2 , the great new bmw i4 , the upcoming hyundai ioniq 6 and volkswagen aero , and multiple local competitors in China.
And in the high-end electric car segment worldwide the porsche taycan (the base model of which is now considerably less expensive than Tesla's Model S) outsells the Model S, while the spectacular new bmw i7 , mercedes eqs , audi e-tron gt and lucid air make it look like a fast Yugo.
And the extremely well reviewed new bmw ix , mercedes eqs suv and audi q8 etron (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: tesla is netflix .
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 90% 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 anticipated Q4 annualized run-rate of around 1.6 million); in fact in May musk himself even raised this as a possibility .
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 2.4 million cars a year of sold-out existing claimed production capacity (once the German and Texas factories are fully operational).
Tesla would have to add 35 more brand new 500,000 car/year factories with sold out production; i.e., a new factory approximately every single quarter for the next ten years! Only a Teslemming could be dumb enough to believe this!
An Engineering Analysis
Meanwhile, in June the NHTSA announced that its investigation of Tesla's deadly Autopilot has expanded into“an engineering analysis,” the last required step before (finally!) demanding a full recall, and in October it was reported that this deadly scam is being investigated by both the SEC and the DOJ.
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 deadly, trailing-edge garbage . In fact, the NHTSA has reported a slew of Autopilot-related deaths just since last year.
For all Tesla deaths cited in the media—which is likely only a small fraction of those that have occurred—see tesladeaths.com . And Tesla has sold this trashy software for over six years now:
…and still promotes it on its website via a completely fraudulent video !
Want to see another Elon Musk/Tesla fraud summarized in a simple bar graph ? In this recent Consumer Reports test, note which of these cars never comes close—in any environmental conditions—to meeting its claimed EPA range:
Nothing Proprietary
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 panasonic , catl and lg , and it's the biggest liar in the industry regarding the real-world range of its cars.
And if new-format 4680 cells enter the market some time in 2024 (as is now expected ), even if Tesla makes some of its own,
other manufacturers will gladly sell them to anyone , and BMW has already announced it will buy them from CATL and EVE.
And oh, the joke of a“pickup truck” Tesla previewed in 2019 (and still hasn't shown in production-ready form) won't be much of“growth engine” either, as by the time it's in mass-production in 2024 it will enter a dogfight of a market .
In fact, Ford's terrific 2022 all-electric f-150 lightning now has over 200,000 retail reservations (plus many more fleet reservations), GM has introduced its fantastic 2023 electric silverado which already has nearly 200,000 reservations , Rivian's pick-up has gotten excellent early reviews , and ram will also be out with a great truck in 2024 .
Regarding safety, as noted earlier in this letter, Tesla continues to deceptively sell its hugely dangerous so-called“Autopilot” system, which Consumer Reports has completely eviscerated ; God only knows how many more people this monstrosity unleashed on public roads will kill despite the ntsb condemning it.
Elsewhere in safety, the Chinese government forced the recall of tens of thousands of Teslas for a dangerous suspension defect the company spent years trying to cover up , and Tesla has been hit by a class-action lawsuit in the u.s. for the same defect.
Tesla also knowingly sold cars that it knew were a fire hazard and did the same with solar systems , and after initially refusing to do so voluntarily, it was forced to recall a dangerously defective touchscreen .
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 the massive number of lawsuits of all types against the company continues to escalate.
So Here Is Tesla's Competition In Cars...
(note: these links are regularly updated)
porsche taycan porsche taycan cross turismo porsche macan electric suv officially coming in 2023 volkswagen id.3 volkswagen id.4 electric suv volkswagen unveils id.6 suv ev in china volkswagen id.buzz electric van volkswagen unveils the id. aero sedan with 385 miles of range new sketch of 2025 volkswagen id.1 unveiled vw's cupra born volkswagen unveils $7.1b commitment to boost product line-up, r&d, mfg in n. america audi q8 e-tron electric suv audi e-tron gt audi q4 e-tron audi q6 e-tron electric suv audi a6 e-tron: 2023's new electric tesla fighter spied audi will expand ev lineup with electric a6 wagon audi tt to be axed in 2023 for 'emotional', electric replacement hyundai ioniq 5 hyundai ioniq 6 hyundai kona electric genesis reveals their first ev on the e-gmp platform, the electric gv60 crossover genesis electrified gv70 revealed with 483 horsepower and awd kia niro electric: 239-mile range & $39,000 before subsidies kia ev6: charging towards the future kia ev9 to land in us in 2023 with 300-miles range, $50,000 price kia ev4 on course to grow electric suv range jaguar's all-electric i-pace jaguar to become all-electric brand; land rover to get 6 electric models daimler will invest more than $47b in evs and be all-electric ready by 2030 mercedes eqs: the first electric vehicle in the luxury class 2023 mercedes eqs suv is a seven-seat ev flagship with up to 536 hp 2023 mercedes eqe electric sedan mercedes eqe suv to rival bmw ix and tesla model x mercedes eqc electric suv available now in europe & china mercedes-benz launches the eqv, its first fully-electric passenger van mercedes-benz eqb makes its european debut, us sales confirmed mercedes-benz unveils eqa electric suv with 265 miles of range and ~$46,000 price ford mustang mach-e ford f-150 lightning ford set to launch 'mini mustang mach-e' electric suv in 2023 ford to launch 7 evs in europe in big electric push ford unveils lincoln star electric suv concept as it readies to add four new evs by 2026 chevrolet blazer ev chevrolet equinox ev chevrolet bolt sedan, 259-mile range starting at $31,000 chevrolet bolt euv electric crossover cadillac all-electric lyriq gmc electric hummer pick-up and suv gm electric silverado pickup truck gmc sierra ev denali gm launches brightdrop to electrify the delivery of goods and services gm & honda will codevelop affordable evs targeting most popular vehicle segments two jeep evs to make u.s. debuts in 2024 bmw leads off ev offensive with ix3 bmw expands ev offerings with ix tech flagship and i4 sedan bmw i7 ev, with 600 hp, will be most powerful variant of new 7 series flagship bmw ix1 revealed with 313 hp, 272 miles wltp range renault-nissan alliance plows $26b into ev blitz- will jointly launch 35 new evs nissan ariya: all-electric crossover suv nissan leaf e+ with 226-mile range is available now nissan unveils $18 billion electric-vehicle strategy polestar 2 sedan polestar 3 electric suv volvo xc40 recharge electric suv volvo c40 recharge electric crossover volvo ex90 electric suv renault upgrades zoe electric car as competition intensifies renault dacia spring electric suv renault to boost low-volume alpine brand with 3 evs renault's electric megane will debut new digital cockpit stellantis promises 'heart-of-the-market suv' from new, 8-vehicle ev platform chrysler to go all-ev by 2028 honda, sony to start premium ev deliveries in 2026 honda pours $40 billion into electrification, targets 2 million ev production by 2030 alfa romeo's first electric car will arrive in 2024 peugeot
e-208 peugeot e-2008: the electric and versatile suv peugeot 308 will get full-electric version subaru shows off its first electric vehicle, the solterra suv citroen compact ev challenges vw id3 on price rivian electric pickup trucks & suvs maserati granturismo debuts as brand's first ev with three motors, awd mini cooper se electric toyota's electric bz4x goes on sale in spring 2022 toyota will have lineup of 30 full evs by 2030; lexus will be all-electric brand opel corsa-e opel expands ev lineup with battery-electric astra vauxhall mokka electric skoda enyaq iv electric suv skoda enyaq electric coupe skoda plans small ev, cheaper variants to take on french, korean rivals byd presents three bevs for european market nio expands into europe and beyond lucid motors: electric luxury cars rolls-royce electric spectre, available 2023 bentley will start output of first full ev in 2025 aston martin will build electric vehicles in uk from 2025 two new electric cars from mahindra in india; global tesla rival e-car soon sono sion foxconn aims for 10% of electric car platform market by 2025
And In China, Where Tesla's EV Market Share Is Now Declining... byd is #1 in chinese evs, selling far more than tesla volkswagen to boost chinese ev capacity to 1m by 2023 audi-faw's $3.3 billion electric vehicle venture nio xpeng motors hozon/neta li auto gac aion leap motors gm plans to launch over 15 ev models in china by 2025 ford mustang mach-e rolls off assembly line in china cheaper than tesla: honda takes aim at china's middle class bmw i3 debuts as all-electric 3 series only for china hongqi geely zeekr premium evs by geely baidu and geely put nearly $400 million more into their electric car venture china-made mercedes-benz eqe hits market baic hyundai, baic motor to inject $942 mn in china jv for evs toyota partners with byd to build affordable $30,000 electric car lexus rz 450e steers for china dongfeng saic renault launches sales of first ev in china nissan expects 40% of sales in china to be electrified by 2026 changan forms subsidiary avatar technology to develop smart evs with huawei, catl wm motors/weimar chery seres enovate singulato jac motors iconiq motors aiways skyworth auto youxia human horizons xiaomi announces plans for four electric vehicle models
Here's Tesla's Competition In Autonomous Driving; The Independents All Have Deals With Major OEMs... waymo ranked top & tesla last in guidehouse leaderboard on automated driving systems tesla has a self-driving strategy other companies abandoned years ago waymo operates robotaxis now gm's cruise operates robotaxis now mobileye operates driverless test fleets in europe and the u.s. cadillac super cruise™ sets the standard for hands-free highway driving ford's hands-free“blue cruise” mercedes launches sae level 3 drive pilot system honda legend sedan with level 3 autonomy now available in japan motional (hyundai) & uber announce autonomous ride-hail and delivery services stellantis acquires aimotive, a leading autonomous driving start-up amazon's zoox will test its autonomous vehicles on seattle's rainy streets baidu apollo starts fully autonomous test in shanghai driverless demo zone alibaba-backed autox unveils first driverless robotaxi production line in china pony.ai approved for public driverless robotaxi service in beijing
Here's Where Tesla's Competition Will Get Its Battery Cells... panasonic (making deals with multiple automakers) lg samsung sk innovation toshiba catl byd northvolt volkswagen to build six electric-vehicle battery factories in europe gm's ultium gm to develop lithium-metal batteries with solidenergy systems sk on and ford form blueoval sk, an ev battery joint venture hyundai teams with sk to make batteries for u.s.-built evs hyundai motor developing solid-state ev batteries bmw & ford invest in solid power to secure all solid-state batteries for future electric vehicles stellantis affirms commitment to build battery factory in italy with mercedes, totalenergies stellantis and samsung sdi to invest over $2.5b in battery production plant in united states stellantis and lg to invest over $5 billion cad in joint venture for li-ion battery plant in canada stellantis and factorial energy to jointly develop solid-state batteries for electric vehicles mercedes-benz to build 8 battery factories in push to become electric-only automaker mercedes-benz and sila achieve breakthrough with high silicon automotive battery toyota to invest $5.3bn to make ev batteries in u.s. and japan toyota outlines solid-state battery tech, $13.6 billion investment honda motor, lg energy to build $4.4 bln u.s. ev battery plant daimler joins stellantis as partner in european battery cell venture acc renault signs ev battery deals with envision, verkor for french plants nissan to build $1.4bn ev battery plant in uk with chinese partner nissan announces proprietary solid-state batteries uk companies amte power and britishvolt plan $4.9 billion investment in battery plants foxconn breaks ground on first ev battery plant envision-aesc one eve freyr verkor farasis microvast akasol cenat wanxiang eve energy svolt romeo power prologium morrow
Here's Tesla's Competition In Charging Networks... infrastructure bill: $7.5 billion towards nationwide network of 500,000 ev chargers electrify america evgo chargepoint ionity europe shell 51 u.s. electric companies commit to build nationwide ev fast charging network by end of 2023 gm, evgo, and pilot will install 2,000 fast chargers at travel centers gm to expand access to ev charging with more than 40,000 charging stations
volkswagen powers up the grid to take on tesla volkswagen-backed cams eyes deployment of 17,000 charging points in china by 2025 circle k begins north american ev fast charger rollout, plans 200-site network by 2024 porsche to build out its own network of ev charging stations petro-canada coast-to-coast canadian charging network volta e.on bp volkswagen and bp partner to deploy up to 8,000 ev chargers across eu/uk smatric allego podpoint instavolt fastned total nio battery swap stations bmw to build 360,000 charging points in china to juice electric car sales evie tritium, dc-america join forces to provide coast-to-coast ev charging network
And Here's Tesla's Competition In Storage Batteries... panasonic samsung lg energy solutions catl byd aes + siemens (fluence) hitachi abb toshiba saft johnson contols enersys solarwatt sonnen generac gm energy canadian solar kokam eaton tesvolt leclanche lockheed martin honeywell eos energy storage ess electriq power redflow primus power simpliphi power invinity murata bollore adara blue planet aggreko orison powin energy nidec powervault kore power shanghai electric lithiumwerks natron energy energy vault ambri voltstorage cadenza innovation morrow gridtential villara elestor solaredge q-cells huawei toyota ads-tec form energy enphase sumitomo electric stryten energy freyr growatt polarium alfen quino energy
Thanks,
Mark Spiegel
Stanphyl Capital