Chevy Volt a Failure - GM to Layoff 1,300

Jim Chanos today, quoted by Reuters (I can't find a web link): "Don't let Musk's conference call theatrics fool you. He did not want investors to focus on his rapidly deteriorating finances."

Chanos was short Enron's stock and helped expose the company's fraud during it's frenzy.

 

His carnival barker act has been so relentless that people no longer look back and point out the distraction he was trying to create at the time to try to change the conversation from how he wasn't living up to some bullshit he had previously hyped or promised.

That "semi" event was him throwing out a shiny new object, because early Model 3 production quickly turned into a shit show, and sell side analysts were starting to ask more and more questions.

His tweet announcing his event, "Tesla Semi Truck unveil to be webcast live on Thursday at 8pm! This will blow your mind clear out of your skull and into an alternate dimension. Just need to find my portal gun ..." Oh, and production slated to begin early next year.

On the conference call a few days ago, "I mean, we haven't really tried to sell the Semi. It's not like there's like an ongoing sales effort, so sales – orders for Semi are like opportunistic, really companies approaching us. Yeah, it's not something we really think about much."

Also, this got little attention this week, but Panasonic execs (they make the batteries for Tesla) have been making public comments about their trepidations about Tesla. They made about a $5 billion commitment on the gigafactory that was supposed to be revolutionizing the world by now (more promises and missed targets) and are really regretting it. This week there were quotes out of Asia, in which they were saying they aren't interested in something similar in China with Tesla and that they are cautious about making new battery manufacturing commitments with Tesla.

On the Model 3. ... When he first announced it and people were giving him $1,000 non-interest bearing loans for their "$35,000 electric car," I pointed out that the economics weren't there for him to produce anything near what he was describing and sell it for that little. I suggested that just like with the Model S, people would pay way more than that if they took delivery of one. ... and Tesla would still lose a lot of money on everyone sold, because all this company does is burn through cash.

On the Model 3's they have sold (no way near as many as the bullshit artist promised by now), the average cost has been closer to $55,000. And in a research report that Gordon Johnson of the Vertical Report did this week, he did some rough math to show that with their ridiculous cash burn rate (they burned through another $1.1 billion this past quarter alone), when you average it out across the various cars they actually sold, each of those $55,000 Model 3s lost Tesla $14,000.

The company incinerates cash and has crummy margins. Without people out there to fund the thing, there is no viable business. Between government subsidies, and distorted credit markets, Musk's con game has kept this thing going a long time. It's going to mean a lot of money lost for a lot of people. Regardless, he has been able to raise an eye popping amount of cash between accessing the credit markets and diluting the float of the company's stock with additional offerings. The bubble world of finance we have been in, has been perfect for his brand of charlatanism. At the current cash burn rate (unless he dramatically slows it down), he's out of money by the end of the year. So the only questions are: 1) Can he go to the well again and find more funding? I can't imagine there are lenders that dumb left (the bonds that expire next year are trading well below par). 2) If those lenders do exist, because we still have one last gasp left in this credit-induced bubble, what kind of Shylock rates is the company going to have to pay, and how long can the company even continue to service the billions of dollars of debt it is on the hook for before it drowns in interest payments? And if we get a normalized rate environment (people have been lulled to sleep over the last decade with lending rates being administered to create a massive credit bubble), just what is the level that the defaults (not just his) begin and there is a credit crisis? 3) If he can't borrow or dilute his stock again, then what? Maybe he can start cutting things to cut the cash burn rate. But that will just buy months, maybe a year.

At some point, people will look back on the nonsense that was this company and wonder what the people who got caught up in the bullshit were thinking. In the mean time, every luxury auto maker in the world is about to roll out competitors. You have EVs coming from Jaguar, Audi, Porsche, Mercedes later this year or in 2019. Those companies don't need to blow through other people's cash trying to figure out if they can sell them profitably. They can leverage businesses that actually make money.

 

Another deadly Model S car crash in Cali, today.