Wrestling with myself over Tesla

5th Jan '20 by Muggles

12 comments 895 reads

This started as a ‘putting thoughts to paper’ exercise in my investment diary, so it is rather long and rambling. However, I thought I’d post it in case anyone is interested, and to hear others thoughts.

Skippable introduction

About 6 months ago, I got a call from Toyota. I’d bought a pre-reg car from them 2 years previously and they were calling to see if I wanted to upgrade to a hybrid. They gave me their patter about saving money and saving the environment, and sent me some cars with prices. However, when a ran the maths I found out the extra cost of upgrading wouldn’t be offset by the only slightly better MPG, and that their new car emissions weren’t much better than mine. When I emailed them outlining my figures and how I arrived at them, they (perhaps unsurprisingly) went quiet.

However it did get me thinking. For some time, I’d assumed my next car would be a hybrid, or maybe even a fully electric car. What had always put me off was the slightly goofy styling and tiny range of the old Nissan Leaf which I’d generalised to all electrics. I thought that the technology would be better and cheaper in the future, so I’d wait… but maybe now was the time to have a look. When I looked at the new range of electric cars, I was presently surprised. Price hadn’t really come down, but the range and technology had improved massively. I also liked how the main ‘aging’ issue over time was lower battery range, rather than reliability. I got quite excited about it, and I started to research electric cars, charging, finances, etc, and decided I wanted my next car to be electric. I then looked at which car I would buy. There were lots of options, and things like the new Leaf and Kia e-nero did well. But when I drilled into it, there was a standout winner

$TSLA Tesla model 3

The battery technology (for example, pre-warming the battery to ensure quick and efficient charging), and the ‘future proofing’ built into the model (regular software updates and extra hardware built in) put it way over the top. I usually sell a car when reliability/cost to maintain becomes high, and old technology (efficiency, safety etc – not just bells and whistles) fall too far behind. The battery is arguably the most…

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Dartford Tesla called me to tell me my…

Dartford Tesla called me to tell me my vehicle would take 6 weeks “probably less” and despite spending nearly £100,000 all of my e-mails have been ignored, the call centre won’t answer my calls and I now find (at the 6 week point and having sold my last car) that it will not be ready until end of March 2020 “or some point in 2020”. I wouldn’t bother. Other electric cars are available where the concept of customer service is understood"

I recommend a thorough reading of the Twitter account @TeslaCharts.

Disclosure: No position - way too volatile. I definitely won't be going long!

john2

5th Jan '20

You will notice that Tesla do not appear on the list of car manufacturers developing solid-state batteries.

https://www.navigantresearch.com/news-and-views/is-2020-the-year-of-solid-state-batteries-for-evs

Rhodie Jonners

The Chinese are already the largest producer of car batteries in the world. An interesting side point, to perhaps support Tesla, was an article I read recently about BMW. In it, BMW confirmed that people buy their cars because of the technical advancement, reliability, individual BMW-built aspects and reputation. The average BMW has around 500 parts to it, most built by BMW. They say the average electronic car has 50 parts, most of which, including the battery and CPU are made generically in China. So what will differentiate a BMW from a Geely in 10 years time? Who knows. But, Scottish Mortgage and a number of other very successful funds hold between 5% and 8% in Tesla, so they must be doing something right and they are most definitely advancing the electric car argument. If they can keep at the forefront of the technology, remain reliable, provide great service and produce stylish cars, perhaps that is all they will need to stay ahead of an otherwise homogeneous game?

MiserableJacktPotato

6th Jan '20

The batteries are made by Panasonic, not Tesla.

Your statement should be "other things bulls (not bears) are excited about"... The semi, roadster, Y and Cyberclusterf.

You've massively over-simplified the Bear case.

Major threat of litigation across several fronts including but not limited to:
SolarCity
AP / FSD misselling
AP / FSD accidents

Also, bears suspect;
Alleged (with examples given on Twitter) warranty fraud. I remain open minded.
Alleged (with examples given on Twitter, and Musk has already been censured by the SEC) securities fraud. I believe legal action is still ongoing. I remain open minded.
Accounts Receivable has rocketed, in the two quarters they "made a profit". From Paul Scott's excellent work I regularly see companies that are about to go bust (or are just straight fraud) have large accounts receivable.
The regular turn over of C-Suite and other executive personnel - most worryingly in the Accounting and Legal divisions.
Active investigations into the company by several US law enforcement and other regulatory bodies.

Further Musk regular makes market moving statements on Twitter (we know they're market moving because the market moves) but then fails to deliver on them. The defence "it was only a tweet not an announcement" is completely unacceptable.

With the EUs move to fine companies not meeting their emissions targets across the fleet, major competition is starting to arrive. Before 2020 Tesla's rivals had no incentive to sell loss making vehicles, now they do. They're going to have to compete with manufacturers who are prepared to sell at a loss as the loss has a positive business case.

There's huge dissatisfaction amongst the customer base. Customer service has been pared to the bone so they can "show a profit", there's huge waiting list for service and parts as well as deliveries, even though they're no longer "production constrained" here's a good example from Trustpilot"

Muggles

Hi IGotPoesJacket

Thanks for such a well thought out response (and picking up my typo! - corrected now).

You are correct I didn't state the bear care well, as I believe others have done so better elsewhere so simply directed others, but you have certainly added flesh to the bone for me on this. The biggest help, however was the fact the batteries are Panasonic, rather than Tesla pretty much destroys my main reason for seeing a way forward for the company. I need to do some more digging to work out exactly who does what, but that has been really helpful. I guess it is proof that when you start reading and get sucked into an echo chamber, even if you are aware of it and try to be critical of it, it is easy to not question key assumptions such that they are using Tesla's batteries!

In terms of customer feedback, some of the data from the Bloomberg article suggests that complaints (or rather, issues with the cars) are going down, but it certainly has been an issue, and they only really talk about issues with cars, rather than customer service which is I suppose quite different. Also potential for a biased sample?

Thanks again for the constructive critique. You've given me a lot to think about and research before I push the button.

I hadn't seen it! Interesting stuff. I suppose they have so much invested in the current technology they have to double down. Very interesting that other car manufacturers are almost not choosing to compete on that front and try and cut them off ahead. Thanks!

Thanks Rhodie. Interesting stuff - I perhaps need to look at other ways of getting exposure to the growing market for batteries. Maybe I need to see if I can read more of Scottish Mortgage etc rationale for Tesla. As you say, if they can keep ahead technology wise they could be onto something, but you could make the same argument for Tesla as BMW in 20 years - if BMW have caught up in tech, what's to differentiate the two? Lots to think about. Thanks for the thoughtful response.

I don't work in this field, so my understanding is far from complete. I do know that the early Teslas were powered by several thousand Panasonic laptop batteries, and that although things have now developed beyond that stage Panasonic still provide significant input to Tesla's battery gigafactory. Although Tesla currently are said to have higher capacity batteries than other EV manufacturers, things will change when solid-state EV batteries are commercialised. The solid-state batteries will be lighter, charge faster and not require cooling.

I like the idea of buying an EV, but I will wait until the solid-state technology has proved itself before I do.

Incidentally, there was an article in last weekend's FT stating that UK motorway service areas would like to install more EV charging points, but are being quoted tens of millions of pounds to upgrade their electricity supplies to provide sufficient bandwidth. The more people own EVs, the more the problem of the capacity of the electricity grid will assert itself.

GF2 in Buffalo has series problems, it’s meant to be staffed by Tesla employees but mostly appears to be Panasonic employees. It’s also supposed to churning out 1000 solar roofs per week by the end of last year. There’s a load of state (ie NY not Fed) money and contractual obligations on Tesla that outwardly appear not to be being met. When you dig into it there’s loads of these little not quite healthy areas of the company.

The batteries are also an issue because they don’t assemble batteries in China. Where are the made in China batteries coming from?

You may have a point in that Tesla may have “special Tesla” batteries that Panasonic make for them, I too may have been sucked into the bear echo chamber on that.

The company may well come good and overcome all these issues. It’s still at a crazy valuation even if it does imo.

If you do jump in, all the best with your trade (genuinely).

"Incidentally, there was an article in last weekend's FT stating that UK motorway service areas would like to install more EV charging points, but are being quoted tens of millions of pounds to upgrade their electricity supplies to provide sufficient bandwidth. The more people own EVs, the more the problem of the capacity of the electricity grid will assert itself."

I'll have to dig this out! Sounds very interesting. Maybe this is where batteries come in again? Cheeper to install batteries to charge up overnight on cheeper electricity on their usual bandwidth when few people are traveling, then discharge during the day while people charge up. Not a permanent solution, but possibly an economically viable one, particularly if large commercial storage batteries become more widespread?

Thank you! Taken in the spirit it is meant. I'm going to do some more digging on the batteries/Panasonic/china thing before doing anything. If batteries are my key reason for investing I need to be sure they are what I think they are. Then I'll take another look at the finances. Cheers!

David Banning

29th Jan '20

My man in the USA who's services I subscribe to has tipped TSLA going to $100 by end 2020 - that was in Nov 2019. Back then they were around $30. I have been dipping my toe in every 2 weeks taking nibbles in CFDs and another sale has just popped up at £2K bring the total to £7K. **** THIS HAS BLOWN ME OVER ****

IT IS BY FAR MY MOST SUCCESSFUL TRADE IN 1 STOCK IN THE SHORT TERM LIKE THIS.

However, the account was not all positives there were 2 sales of 200 loss total 400.

Maybe I am AWARE OF THE risks IN THESE TRADES - BUT PLEASE BE ADVISED THIS IS ONLY PART OF MY PORTFOLIO SO I CAN AFFORD TO DO THIS.

I HAVE BEEN PUTTING IN 0.2 CFDs ON THE IG PLATFORM.

I am therefore going with Musk - even if there is Hype involved. However, I am very closely monitoring my positions.

HHR

30th Jan '20

Thanks for this article and all the comments.

I am a massive Tesla bull of longstanding.

One bull point you haven't covered is Tesla doesn't have dealers. I think this is important because it means Tesla pockets the dealer's margin and controls the price charged to the customer. Conventional companies can't easily copy this model becausse they are contractually locked in and their ice cars need dealer service etc.

I think it's interesting when you say you keep coming back to Tesla's potential as a technology company and yet at the same time you don't find ap a reason to invest. I think Ap will change the car market beyond recognition and Tesla appears to be one of the leaders in the race. It's the Americans who lead the world in software not the Japanese or Germans. . For my part I agree with bears Tesla looks expensive compared to VW but compared to Apple it looks cheap. Everyone has a phone and everyone has a car costing 60 times as much. Apple came from nowhere to dominate the phone market and bulls are hoping Tesla could do the same in cars.

Wrestling with myself over Tesla

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Muggles

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Dartford Tesla called me to tell me my…

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