1/ As 2018 comes to a close, bear with me while I reflect on where $TSLA has been, and where it's going.
2/ $TSLA is making a concerted effort to sell every car possible in the U.S. by close of business tomorrow, as well it should, with the U.S. Federal Income Tax credit about to be slashed in half on January 1.
3/ $TSLA is also selling every car possible in the Netherlands, where a change in tax laws in the New Year will create a huge 2019 headwind.
4/ The real shock is that $TSLA failed to homologate the Model 3 in time to begin EU deliveries in 2018. Had Tesla done so, the Model 3 could have enjoyed the Q4 spike in Netherlands demand. As matters stand, though, the Model 3 will be disadvantaged by the change in tax law.
5/ More generally, $TSLA's failure to accomplish EU homologation much sooner is a huge missed opportunity. Based on the latest information from Tesla, EU deliveries will begin in late February at the earliest. So Q1 begins with two months of very weak sales.
6/ Who is responsible for the catastrophic delay in EU homologation? The ongoing exodus of top $TSLA management all but assured many planning & logistical catastrophes. And the responsibility for that lies with one narcissistic, raging, micromanaging, know-it-all CEO: @elonmusk.
7/ Remember @elonmusk's very confident promise that $TSLA would be producing 10,000 Model 3 cars per week by now? Did that happen? Had it happened, and had Tesla achieved timely EU homologation, Tesla would be headed to a massively impressive Q4, with record GAAP profits.
8/ Instead, $TSLA in Q4 will be, at best, flat relative to Q3. Some growth story. At best, GAAP profits supporting a market cap of $10B or so, using the very high end of P/E ratios at other OEMs.
9/ But even if $TSLA's Q4 matches Q3 (and I doubt it will), that's as good as it gets. Q1 is going to be a total disaster. A massive decrease in deliveries. A massive GAAP loss.
10/ Worst of all, $TSLA has not raised capital this year. Why not? There are many theories. I will focus simply on the consequences: Tesla's ability to do a major refresh of its aging Model S is compromised, as is its ability to develop the Model Y, semi, Roadster 2, and pickup.
11/ What about China? It remains a wild card. But the idea that $TSLA will be building cars by 2020 at a to-be-built factory on its Shanghai mudflat is fanciful at best. When $TSLA finally starts building there, it will face huge competitive pressures in the Chinese EV market.
12/ As everyone paying attention knows, $TSLA is going to face a tsunami of competition in 2019. The Jag I-Pace and Hyundai Kona are already making serious inroads in $TSLA's two most important EU markets, Norway & Netherlands.
13/ 2019 will bring the Audi e-Tron, a new LEAF, and other EV competitors. With Daimler and Porsche showing off highly-advanced prototypes of their EVs, which are now undergoing extensive beta testing. The kind $TSLA skipped with the Model 3.
14/ Which brings us to another important 2018 fact: with the Model 3, $TSLA has damaged its brand. It shortcut PPAP, line validation, and beta testing, It skimped on logistics. Consequently, there are many unhappy Model 3 buyers who must wait weeks or months for service or parts.
15/ The dangers faced by $TSLA externally are huge, but the dangers internally are even greater. Its CEO, prone to exaggeration and invention, told an outright lie of massive proportions with "funding secured." He has exposed the company to hundreds of millions in civil damages.
16/ Those lawsuits will develop momentum in 2019. All the while, $TSLA's CEO will be distracted by the highly meritorious defamation lawsuit from Vernon Unsworth, hero of the Empire. (Memo to Elon: settle it quickly, even if you have to stroke a check for eight figures.)
17/ The $TSLA CEO will have other distractions. The truly absurd Boring Company. DOJ investigation. SEC investigation. NASA with eyebrows raised about whether someone with his drug habits should be Chair of SpaceX.
18/ The SEC came with a gift to $TSLA in September: a template for stronger, more responsible corporate governance. But Tesla's truly terrible board sat on its hands & then allowed Musk to insult the SEC and spit in its face with the appointment of Larry Ellison.
19/ SV fanboys are cheering the Ellison appointment. They should think twice. He is likely to reinforce Musk's worst impulses. $TSLA's dysfunctional governance is about to go from bad to worse.
20/ That's not to say there won't be more $TSLA pumps ahead. Ellison will no doubt add to the stock-pumping mentality. His role as Elizabeth Holmes' enabler at Theranos, and his modus operandi at Oracle, give fair warning.
21/ But the overwhelming business realities faced by $TSLA are these: (1) demand for the expensive Model 3 is limited, and already exhausted in the US, (2) Tesla can afford to sell the car for the promised $35k, (3) Tesla is destroying its brand with terrible reliability, and...
22/ (4) competition is about to overwhelm $TSLA, first in Europe but coming soon to California and then other ZEV regime states. Why there first? Because $TSLA's Elon Musk is not the only guy who knows how to sniff out subsidies.
23/ The $TSLA competition will have the benefit of the full FIT credit while Tesla's shrinks to zero. Much of the Tesla efforts will be directed where they have always been directed: at state legislatures & the halls of US Congress.
24/ That remains the greatest danger to the $TSLA bull: the possibility that Tesla's unresting lobbyists will secure yet more subsidies, more tax abatements, more mandates to punish competitors. Failing that, 2019 is a year of reckoning. <fin>
25/ In the 21st entry, I wrote that $TSLA "can afford" to sell the Model 3 for $35k. I meant, of course, "can't afford." Though far & few will be the would-be buyers of a spartan, short-range, steel-roofed sedan. The $35k version will be so bad no one would want it.
26/ Eesh. In the 24th entry I wrote Tesla bull, when I meant, as the context makes clear, Tesla bear. Bulls, bears, we're all in for a wild ride in 2019.
