Listen as John Batchelor and Wall Street Journal’s Mary Kissel talks about Tesla death watch 2.0 and why BMW pays 2.5 percent import fees when coming to the United States versus General Motors paying 25 percent when selling cars exported to Europe.
Tesla – The company known for making products of the future is once again being questioned whether it will be part of the future. The short-sellers on Wall Street are betting Tesla will fall the way of other car companies while it’s cult-like shareholders buy into his vision of a future where renewable energy drives electric-powered cars.
Musk noted that Tesla has never made an annual profit — a point that’s often made by critics. “We will never achieve [our] mission unless we eventually demonstrate that we can be sustainably profitable,” he wrote in the letter.
“Tesla’s going down!” It was a male voice booming from the next table that caught my ear. It’s not the first time I’ve heard it, and it won’t be the last, it was the person saying it that caught my attention. An older gentleman, let’s call him Archie, accompanied by two women in the hotel lobby were reading a newspaper saying that Tesla was cutting about 9% of all the jobs at the company.
I was intrigued. I stopped and talked to the group. There seems to be a death watch for Tesla by some people. Most of the time I chalk it up to clickbait. Tesla is the one car you could write about every day, and people clamor to see if they have gone bankrupt yet. Archie and his friends told me that some of their friends and family had Tesla cars and loved them. Not Archie, he was sticking to his gasoline beaters that he could get for $4,000.
I’m going to come back to Tesla’s challenges below, but I’m going to go straight to the punchline – at the end of all the hyperbole about never wanting to change to electric cars Archie asked, “do you really think we’re doing that bad environmentally?” He didn’t ask because we had discussed it, but clearly, he had talked about this subject and was genuinely concerned. I told him that we could do better, that my interest is in being self-sufficient, using domestic clean energy instead of bringing barges of oil over. I told him that I was going to put solar panels on my house and buy a plug-in hybrid so that I could energize my house and car for free.
At this point, I assumed I was going to hear another round of I’m going to drive my beater gas car into the ground, but I didn’t. Instead, a giggle – a giggle – escaped his lips and he said, “that’s what we have at our co-op, a whole field of solar panels. We get money back every month.”
Blow me over with a feather. That rascal! The whole time he’s pontificating like an old curmudgeon he’s sitting on a bed of domestic energy.
California is the first State in the Nation to require solar panels on single-family homes and apartments and condominium complexes of three stories or less. This requirement opens up a new dynamic when calculating the environmental aspect of electric vehicles especially for the people that include electrification through coal producing.
Tesla’s challenges are more significant in 2018 than in 2006
The change over to plug-in hybrids (a car that uses electricity or gasoline) or fully electric vehicles will be expensive, but that is what the initial investors in Tesla said they were investing in when the car was shown at Pebble Beach, CA by then founder Martin Eberhardt.
Electric car competition is showing up in the marketplace.
About sixty electrified vehicles are coming to market in the next couple of years. Those electrified vehicles range from around $30,000 to $2,000,000.
Tesla took the electric car to the one place the car manufacturers understood – Wall Street!
Tesla is burning through cash, and yet people keep investing in the stock. People look at the stock and ask themselves why would I put money in a savings account at 1.25 percent when I could buy a Tesla bond and get five times the money?
What would happen to the Gigafactory?
Musk’s Boring Co., SpaceX, and Tesla are all separate companies, with only Tesla trading as a public stock. Tesla owns Solar City which sells solar panels in Home Depot. At about the same time as Tesla announced there would be a nine percent layoff of salaried employees there was also an announcement that Solar City would not be selling solar panels at Home Depot. Is part of that nine percent of Tesla’s salaried employees part of Solar City?
The Gigafactory is the big question that not enough people are asking. Panasonic is a partner in the gigafactory and has been silent Tesla’s financials for the most part, but one has to ask if Tesla gets into real financial trouble will bondholders see Tesla mortgaging its gigafactory to raise debt that would rank ahead of them.
Tesla is one of the most shorted, or most bet-against, stocks on Wall Street. Musk knows how to handle the shorts. If you look at a 3-month comparison Tesla is about equal to the market cap of General Motors and the stock has fallen about within a couple of percentage points – 17% to 15% – of the same as General Motors.
The question isn’t whether Tesla will survive but how does General Motors get some of the cult-like following that Tesla has.
Will a company buy Tesla?
I was at dinner the other night with some executives, and we talked about Tesla, and I asked if they thought another company would purchase Tesla, or if all the other car companies would catch up and put Tesla under, as in going bankrupt. The answer was that Tesla would not be bought now because the price is too high in relation to the volatility of production. Once the stock price went down, or met the reality of production, the company would be looked at by technology companies and other by-product industries.
BMW tariffs for imported cars to the United States
Tariffs are part of a negotiation of what the company has to offer. BMW has invested almost 9 billion in the Spartanburg plant, they’ve hired 10,000 employees in the plant, and there are 40 direct tier one suppliers located in South Carolina and 235 suppliers that work with that plant in the United States.
There are about 350,000 cars produced in the plant, and 70 percent of those are exported from the United States increasing our trade value by $10 billion in 2016.
General Motors has pulled out of Europe altogether. They have nothing to offer in negotiation for better tariffs. For BMW to show an annual economic impact to the US of $38.B – I’ll let them have 2.5% tariff on 250,000 cars annually.