Editor's Comments
To be short (pun intended) we are extremely nervous about the valuation of TESLA and its future prospects:
First, going to Mars is an insane project as it cannot be justified in terms of net positive energy and materials returns. There is no mathematical and physical modeling evidence that projects a positive profit of energy and material being returned to Earth, Such adventures are thus an ongoing liability to our planet and will ultimately cause an energy and material bankruptcy making this planet uninhabitable. Fix Earth first or also build underwater cities similar to what you would build on other planets is another option.
Consumer demand for autos and other big-ticket items is expected to decline rapidly as inflation takes hold in key commodities after the COVID pandemic. China is already seeing this with a reported inflation rate of 9.9% not seen in 13 years. Many industrial (copper) and agricultural (soybeans) commodities have doubled in the past 12 months. Prices are rising and long bond markets confirm investor affirmations of inflationary pressures.
Massive fiscal spending and the emergence of crypto-currencies are stealing both income and sales taxes from struggling state and federal governments and could cause the US dollar to lose its reserve currency status bringing about hyperinflation making these high-end businesses like Tesla almost impossible to viably operate. Yet, Tesla exacerbates this currency demise by unwisely buying $1.5 BILLION of these Dutch tulip bulb currencies.
Expensive EV s are particularly not sustainable and have a limited future for three key reasons. Consumers will not have the purchasing power to acquire these vehicles as hyperinflation erodes their wealth. The electrical GRID is not built to supply the huge power surge needed and ironically requires fossil fuels to do so. Green Energy is a pipe dream; at best, because we will soon run out of all key industrial materials needed to build EVs, solar panels, and wind turbines by 2050, Moreover there just is not enough space available for these devices as we cannot afford to use up more farmland needed to feed the rapidly growing populations.
China is the wild card on a number of fronts - reports are they are developing a mini EV to be priced under $5,000 - guess where the market is heading?
Putting $1.5 billion of stakeholders' capital at risk in crypto-currencies makes one wonder as it deviates from sensible and wise business strategies professed by Peter Druker et al - stick to what you know and your core business and customers - when companies deviate from this adage it tells us there is something seriously financially wrong in its core businesses and their creative powers and business opportunities have been tapped - often leading to bankruptcy. ( GM, GE, Polaroid, IBM etc.) Not good especially when management thinks an asset allocation of scarce resources to the Dutch tulip bulb speculation is much better than an investment in the core activities they know so much about. This contradictory misstep in judgment speaks volumes.
All is not well in the Executive ranks too - the company just lost one of its top auto executives. When top guns leave a prima donna money-making company you know that the house of cards may be perched on very thin threads. Imagine if Charlie Munger left Buffet - the answer in both cases is clearly that - the writing is now on the wall as the rats are first to leave a sinking ship.
We could go on and on as to the poor prospects and bad management issues, but let's get to the short (sic) of it all - the Company clearly suffers from the bankruptcy of common sense - and the only problem with common sense is -
' it is just not so common "
San Jose native Michael Burry was a former hedge-fund manager who predicted the housing market's plunge that set the stage for the Great Recession.
The San Jose native took a short position in Tesla that was worth about $534 million at the end of the first quarter.
ALSO,
Bob Lutz: Tesla Is Doomed And Here Is Why
Asked about whether Tesla will fade or be absorbed he answered: Who would want it?
Bob Lutz recently was a guest of the MotoMan Studio in an interesting episode about the automotive industry (mostly the established carmakers and their future). Only a small part of the talk (from 45:00) was about Tesla, but it was "a hell of a ride".
First of all, Bob Lutz, a former top leader of Ford, Chrysler and GM, is very skeptical and sometimes also derisive about Tesla. He's been this way for years.
Lutz's general conclusion is that Tesla is doomed, and it might happen sooner rather than later. But if Tesla is poised to fail, what will be its future? Bankruptcy or acquisition (by some other carmaker)? Bob Lutz answers "Who would want it?". Is Bob Lutz entitled to say things like that about Tesla?In Lutz's opinion, there are many problems with Tesla, including:
- they will fail, because of the "continued lack of profitability", "stocks gonna tank" and it will be difficult to raise more cash, especially if Elon Musk will undermine investor confidence
- "All they have are some good-looking electric cars that sell below cost"
- Tesla doesn't have unique technology, they are using the same lithium-ion technology as everybody else
- Every other manufacturer will introduce a 300+ mile electric car on the market (there will be no advantage)
- zero-emission credits as a source of revenues (in the U.S.) and in Europe (deal with FCA) will dry too
- Other manufacturers are forced to produce a certain amount of EVs, so they will do it, even at a loss, and then recoup the cost on conventional models (this is a major factor behind the rising prices on crossovers/SUVs and full-size pickups). For Tesla, it's a lot of EV competition.
- Another problem is too many employees at the plants (in particular at the Tesla Factory - currently closed)
- The vertical integration is wrong, as you not only spend precious capital instead of ordering stuff from suppliers, but also will be required to keep investing to stay competitive with external suppliers of the rest of the industry
Well... that is a strong, pessimistic voice. Hopefully, Tesla will survive in a good shape, improving its weaker points (as some are real), as the times ahead are very challenging.
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