Streetwise Professor

April 24, 2019

Elon the Stakhanovite

Filed under: Economics,Energy,Tesla — cpirrong @ 7:02 pm

Our Elon is all about exceeding expectations. Analysts predicted a $1.30/share loss in Q1. Elon scoffed. Piddling! He showed ’em–the actual loss was $2.90.

Overexceeding norms by 123 percent! Stakhanov would be proud.

Joking aside, the Q1 numbers were a bloodbath. A loss of over $700 million. In a quarter, mind. Cash flow was negative $920 million. The company said this is an improvement! A year ago it was -$1.05 billion!

Well, the cash flow numbers would have been worse–and worse than last year–had Tesla spent the anticipated $509 million in capex, instead of the actual $279 million.

Remember what I said about Tesla bleeds cash like a Game of Thrones battle scene hemorrhages blood? That hasn’t changed.

Tell me again why Tesla is a growth company. What other growth company is, or has ever been, on a capex starvation diet? Especially one that claims to have all sorts of new products just on the verge of production.

Revenues also cratered–$4.5 billion v. estimated $5.2 billion, and down from $7.2 billion a mere quarter ago.

A few days before the Q1 earnings release, Tesla held “Autonomy Investors Day” in which attempted to distract attention from its dismal present with Futurama visions of a magical future, with zillions of autonomous robotaxis prowling the world’s thoroughfares. Yeah. Robotaxis. That’s the ticket!

This is just the Musk MO–always try to keep the suckers focused on a brilliant future. The next big thing is around the corner. The problem is, it is always around the corner, and the autonomous vehicles–and Tesla the company–haven’t learned how to turn the corner.

Elon also claimed (based on highly dubious assertions that NVIDIA hotly disputes) that Tesla would create a better chip than one of the world’s leading, and most innovative, chipmakers. Sure! And the problem with production is with the world’s leading battery manufacturer, not the car manufacturing tyro. Sure!

It appears, however, that Elon’s con is less convincing than it used to be. People are figuring it out. Finally. The Autonomy Day was widely panned, and his claims regarding chips widely mocked.

Elon also said “The only criticism and it’s a fair one, sometimes I’m not on time. But I get it done and the Tesla team gets it done.” Sometimes? Try always. And gets it done? Like the rooftop panels? The factory in Buffalo? The $35K Model 3 that is virtually impossible to actually, you know, buy? The innovative vertically integrated clean energy company that would result from the merger of SolarCity and Tesla? (Tesla is basically winding up SolarCity. It is disappearing like the Cheshire Cat. Except there won’t be a smile left when it’s done.)

I will just note in passing that a SpaceX test capsule had an “anomaly” on testing. Pictures show smoke billowing from the test area. I guess “anomaly” is how you spell “fire” now.

Remember that Elon promised no new capital raises. Given that losses are anticipated again in Q2, and that promises of profit in Q3 are dubious given Elon’s track record, how this is possible is beyond me. And again, how that promise can be squared with his promises regarding autonomous vehicles and the Model Y and the semi etc., etc., etc. is even more fantastical.

As I have been saying for a while, this will not end well. And it is looking like that bad end is nigh.

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March 11, 2019

Meet the New CEO of Tesla: Emily Litella

Filed under: Climate Change,Energy,Tesla — cpirrong @ 7:17 pm

So, remember that stuff about closing all sales outlets, selling exclusively on-line, and cutting prices? Tesla’s new CEO has an announcement:

So what’s “very different”? Here’s what the company says officially:

Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months.

So what you are saying then is prior to making the announcement that you were closing all retail locations you HADN’T evaluated every single location. Got it!

The company also reversed field on the price cuts.

To quote Casey Stengel: Can anybody play this game?

I mean really. A major, and arguably unprecedented in the industry, change in selling strategy and a major change in pricing policy are things that are not to be entered into lightly. Presumably they were the result of serious and sober consideration by serious and sober people. Right?

Serious and sober. Elon. Heh. Sometimes I crack myself up.

The initial decision was insanity. And the reversal validates that judgment. But too late to overcome the obvious implication of the initial decision: that the company is in dire straits. Further, the utterly botched process of pushing the panic button and then trying to un-push it answers Casey’s question quite definitively: No!

That is, the initial decision betrayed desperation. The decision plus the reversal betray the utter incompetence of the company’s management, and hence its incapacity to deal with its daunting challenges. And given that Tesla is a micromanaged company, that incompetence has a name: Elon.

I called Emily Litella the new CEO of Tesla in jest. But come to think of it, she could almost certainly do a better job. As could Rosanne Rosannadanna as head of investor relations and corporate affairs.

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March 6, 2019

Fists of Fury Fly Over Tesla’s Price Cuts

Filed under: Climate Change,Economics,Energy,Tesla — cpirrong @ 8:29 pm

According to this Seeking Alpha post, Chinese buyers are furious at the Tesla price cuts. The WSJ concurs.

And with good reason. In my post yesterday, I wrote that Tesla cut prices by 6 percent–which was another of the company’s half-truths. Or maybe fifth-truths, because for the pricier models the price cuts are on the order of 30 percent. The Model 3 Performance version price cut is 8 percent in China, and the pricier the car, the bigger the percentage discount. So no wonder buyers are furious. They look like suckers because if they’d waited, they would have saved as much as $50K.

A 6 percent price cut by an ostensibly demand constrained growth company is bad enough. 8-30 percent price cuts is Armageddon time.

As I noted in yesterday’s post, this is a sign of a truly desperate company. Or maybe a completely delusional one. Because anyone in their right mind would know that price cuts–especially of this magnitude, and especially on what should be the most profitable vehicles–vaporize customer goodwill. Especially the goodwill of the type of customers who are vital to making the company profitable by buying the high margin vehicles.

You only do that if you are so desperate for cash today that you say f-the-future, it will have to take care of itself: if I don’t get cash today, I won’t have to worry about the future.

But they’re not done with incinerating their credibility faster than a flaming Model S that lost a wheel and hit a tree! The company also cut prices on its “Autopilot” function–and won’t refund those who pre-ordered and pre-paid. And oh, it just said that what it had previously said about self-driving capability was, what’s that old phrase?–no longer operative.

Suckas.

But hey. Why listen to me? Elon’s got some really, really cool stuff coming . Trust him! What could go wrong?

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March 4, 2019

More Muskapades

Filed under: Economics,Energy,Tesla — cpirrong @ 7:48 pm

It’s been an eventful few weeks for our Elon. His new corporate counsel departed after barely enough time to warm his seat, because Elon (whose Twitter free associations the GC was charged with monitoring) tweeted a forward looking statement (“clarified” after a few hours) about 2019 output without the GC’s approval. The SEC then moved post haste to get a judge to rule Elon in contempt of his previous settlement agreement. Then, apparently believing he hadn’t twitted the SEC enough, held an invitation only call with select analysts–a facial (in the Marv Albert use of the term) violation of the SEC’s Regulation FD (“Fair Disclosure”) .

But we’re not done. Tesla announced–at long last!–that the long-promised $35K Model 3 would soon be available.

Yay!

Not so fast. In typical Elon fashion, this was just a garnish on a crap sandwich: in addition to the Model 3 announcement Tesla said, oh-by-the-way-we’re-closing-all-our-sales-outlets-and-laying-off-thousands-and-cutting-prices-6-percent-bye.

This is hardly what you would expect to see from a demand constrained growth company. In typically weasely Tesla fashion, the company said that the closing of sales outlets cut costs and allowed it to cut prices. Uhm, that’s not the way it works.

The price cut is particularly telling. This wreaks of a company that needs to generate cash in a hurry (and is hence willing to burn some goodwill), and has an overhang of inventory on its hands. This price cut has also infuriated recent buyers. And the future effects may be quite damaging: people may well hold off buying, in anticipation of buying cheaper later.

The Wall Street Journal said that Tesla is going into “uncharted territory” by closing its showrooms. Not really: bankruptcy is pretty well-charted.

And of course, desperate times call for desperate measures. So right on cue, Elon/Tesla said that an announcement regarding the launch of the long-awaited crossover Model Y was only weeks away.

Just where is the cash for the capex necessary to build a new vehicle going to come from? How to reconcile this with the capex diet that Tesla has been on in recent quarters?

Methinks that this is really another financing ploy intended to keep the balloon aloft a little longer. With the announcement, the company will be able to take deposits, use the cash for other purposes, and then dawdle on actually, you know, building and delivering cars. (Check out the lag between deposit and delivery on Model 3s, and the difficulty those trying to get back their deposits face.)

This act is getting a little old, but it still works to some degree. So expect Elon to continue his muskapades until reality inevitably rears its ugly head.

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