Predictions on the impending demise of Tesla

If the probable outcome is failure by all means try to overcome it.
But do it with your own money.
Never subject other people to your probable outcome of failure.
Elon Musk has vaporized millions of dollars of other people’s money.

“I never make predictions, especially about the future,” is attributed to Yogi Berra. Mark Twain is supposed to have said, “We can predict everything except the future.” These pithy remarks stand as a warning of the pitfalls of predictions, especially ones that do not rest upon a sound analysis of present conditions.

Predictions of earth’s future climate are made with utmost confidence by fools, frauds and firebrands relying on data they know, or should know, to be false. I suppose that is why their predictions are always just far enough into the future to assure they won’t be around when it becomes clear how ridiculously supercilious they are. It’s already clear to most people who aren’t true believers or whose living doesn’t depend on government grants to study climate change.

Unlike the climate catastrophe hopefuls, the financial gurus at Chicago based Vilas Management, the hedge fund said to have outperformed all others (I have no proof that is true, so take it as you will) have detailed significant facts and circumstances facing Elon Musk’s Tesla dreams. They are predicting impending disaster. My own personal prediction is that Tesla will fail, and probably soon. I have little to base that  on, except the fact that Tesla would not exist without government wasting lots of taxpayer money on it. Nevertheless, I’d never invest in a company run by a man who says he’s going to colonize mars. One nutty idea can lead to another, and that may explain Tesla’s existence and its impending end.

Here is the more qualified and informed opinion of Vilas Management, said to be “run by a shrewd manager with an engineering background”:

I think Tesla is going to crash in the next 3-6 months, partially due to their incompetence in making and delivering the Model 3, partially due to falling demand for the Model S and X, partially due to the extreme valuation, partially due to their horrendous finances that will imminently require a huge capital raise, partially due to a likely downgrade of their credit rating by Moody’s from B- to CCC (default likely) which should scare their parts suppliers into requiring cash on delivery (a death knell), partially due to the market’s recent falling appetite for risk, and partially due to our suspicions of fraudulent accounting activities, evidenced by 85 SEC letters/investigations and two top finance people leaving in the last month. We are doubtful that they can raise a meaningful sum in the face of these material issues. If the fall happened quickly, it could add substantially to the Fund (+30 to +50%), in part due to our purchase of put options. Tesla, without any doubt, is on the verge of bankruptcy.

Tesla is worth twice as much as Ford (NYSE:F)* yet Ford made 6 million cars last year at a $7.6 billion profit while Tesla made 100,000 cars at a $2 billion loss. Further, Ford has $12 billion in cash held for “a rainy day” while Tesla will likely run out of money in the next 3 months. I have never seen anything so absurd in my career.

One can find more, much more,  dismal commentary on Tesla with a Google search. For what it’s worth, I think the root source of Elon Musk’s Tesla problem is that he never aligned his company with people who had expertise and experience building automobiles of any sort. Musk’s idea may have been a good one but he was too full of hubris to realize it’s hard to build and run a car company without the talent and experience of people who have done it in the past.

Nikola Tesla (1856-1943) is the namesake of the Telsa car company. Mr. Tesla won the AC/DC current war with Thomas Edison. Elon Musk’s gamble with an electric car has to deal with the problems of DC current which is what all electricity from a battery is. That’s probably why some of Tesla’s cars have caught fire. Or maybe it’s just the lithium in the battery. At any rate, Elon Musk may have put too much energy into selling his dream to government and investors, and too little into the complex engineering required to build electric cars and run a car company. If he’d started with a small 3-passenger plug-in that would reliably go 65 miles before needing a 45-minute recharge and could be sold at a profit for $25,000, he would have had a company that could grow and expand.

He should’ve started at the bottom and worked up. Instead he started at the top with a $200,000 car and tried to work down to $35,000 car. There’s no future in that.

Print Friendly, PDF & Email

Subscribe to Blog via Email

%d bloggers like this: