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1/ Thread with my updated view of $TSLA. With two quarters of positive GAAP net income and cash flow, the longs are out celebrating victory en masse, but it seems premature.

How well is $TSLA doing now? Feedback and comments welcome. $TSLAQ (disc: short)
2/ Executive departures have been a red flag at $TSLA for a long time, but Q4 earnings call’s shocker of CFO Deepak Ahuja leaving and being replaced by 34-year-old Zach Kirkhorn (with 2 months as VP Finance under his belt) raised these questions once more.
3/ Previous Finance departures during the two most successful quarters in $TSLA’s history?

CAO – Dave Morton
VP Worldwide Finance & Operations – Justin McAnear
Senior Manager, Finance & Operations EMEA – Alex Buhr
4/ In addition, former CFO Jason Wheeler (succeeded by Ahuja) was also there for just 18 months before departing. Comprehensive list of $TSLA departures, as updated by @Paul_M_Huettner, is available at…
5/ While deliveries in 2H 2018 were impressive, $TSLA still showed $3.1B of inventory in Q4. Per Q3 10-Q, roughly 50% of that were finished goods – why aren’t all cars sold?

How does >$1.5B of inventory work with the whole unlimited demand thing? More
6/ There being a demand issue in the US (with demand pulled forward to Dec by expiring FIT credit) is also supported by the myriad of price cuts by $TSLA:

$2K on all models in early January
$9K S/X late January
$1.1K M3 early February
killed 75 S/X, etc.
7/ These constant and often repeating price cuts have also made many $TSLA purchasers frustrated as they feel they should have waited – leading to this hilarious flow chart to determine how screwed they got.

Bullish for future demand? Or for resale value? Doubtful.
8/ $TSLA is reportedly manufacturing for Europe and China deliveries early on in the quarter, but why aren’t the parking lots filled with cars emptying?

InsideEVs estimated ~6.5K M3 and 1,8K S/X deliveries for January -- Q1 looks like a disaster.…
9/ $TSLA’s Q4 letter guided for 360-400K deliveries in 2019, with Musk then suggesting “maybe in the order of 350-500K Model3s” (excl. S/X) in 2019.

But if there’s demand for so many cars, why is Panasonic lowering guidance for $TSLA batteries?
10/ What about M3 demand internationally then? Goldman analyst David Tamberrino estimated European M3 pre-orders at 20K and single-digit thousands for China (1-1.5 months of production).

Of course, Musk did nothing to suggest there’s more demand for $TSLA’s M3 (desire vs demand)
11/ Meanwhile ICO, the company preparing M3s for delivery in Europe, abruptly saw its contract ended shortly after deliveries started. No one really knows why, but it probably doesn’t help Q1 deliveries…
12/ As if margins were not suffering enough by lowering prices and fewer units being moved in Q1, the vehicles sold in Europe and China won’t result in ~$2.6K of GHG/ZEV credits per vehicle sold, further deteriorating existing margins
13/ But could $TSLA not become a profitable car manufacturer (ignoring the P/Es those trade at) at the guided delivery levels?

As it turns out, the economies of scale may have been fake, driven by shutting down failing $SCTY…
14/ Likewise, $TSLA’s gross margins (which Musk’s gargantuan compensation plan is tied to) are, while impressive relative to competition, not real.

This is of course old news, but see more by Montana Skeptic from early 2018…
15/ At the very least, aren’t $TSLA lightyears ahead of competition when it comes to batteries? Roth analyst suggests that $TSLA actually has no edge when it comes to battery costs compared to its competition. Whoops.…
16/ As @GatorInvestor explains, there’s also a chance (as guided by $TSLA in Q3) that $TSLA’s net income will be pushed down further by one of the last line items that often lessened the blow, as VIE cash flows may be turning negative…
17/ With $TSLA’s guidance suggesting more than a doubling of cars in 2019, the Company must be investing heavily in CapEx to ensure fitting luxury car service experience with plenty of Superchargers for everyone, correct? Turns out that’s a no, too, at ~$2.5B in 2019.
18/ Now, $2.5B doesn’t sound like little, but $2.1B in 2018 was not enough to avoid long service wait times and lines at Superchargers, and the number of cars are set to double again. Lots of catch-up tp do and the growth story is also busted, with Q4 D&A exceeding CapEx by $170M
19/ This year also sees investment into the Shanghai Gigafactory to build 3K/week M3s and MY cheaper. How are things going in China?

Turns out, financing isn’t secured (no 8-K) and the timeline of 3K cars/week by end of 2019 might be a little optimistic…
20/ OK, so 2019 might be tricky, but that doesn’t take away from two successful quarters.

Unless, of course, something in the historical financials would deserve restating? Well, hilariously low warranty reserve could count (h/t @GatorInvestor)
21/ In Q4 $TSLA stopped selling FSD (vaporware), which was effectively 100% margin for $6K, some of which likely has already been recognized as revenue due to “progress” towards the tech existing.

What about those financials?…
22/ But could we be close to FSD, arguably one of the larger drivers of $TSLA demand per Musk’s Master Plan Part Deux?

CEO of Waymo, the leader in autonomous driver, disagrees strongly…
23/ The near future will also mean paying off a $920M bond from the catastrophic $SCTY acquisition on March 1, but luckily $TSLA had $3.7B of cash at FY2018.


Maybe not. See @Keubiko’s estimates based on low interest income from massive cash on BS
24/ To make matters worse, with AP stretched to $3.4B vs. $950M of AR, $TSLA cannot afford the NWC cycle to reverse. But how could it not?

What can the Company still do in Q1, or even in Q2, to avoid that w/o spike in demand?

Will Zach be able to work magic a la Deepak?
25/ Doesn’t matter though, because But Musk is worth >$20B, with a $10B stake in SpaceX he could use to fund $TSLA at will, right?

Well, SpaceX failed raising two rounds (D+E) in 2018, suggesting there isn’t much demand for his equity. Also: layoffs…
26/ What about tapping the public markets? Per $TSLAQ’s own @BSA19741, $TSLA is no longer a WKSI able to raise money easily.

Could this change once the 10-K is released and signed by PwC and Deepak? Maybe, but they still need people to give Musk money.
27/ Is there any chance that PwC might not sign off on $TSLA’s internal controls or financials? It’s highly unlikely, but at least @markbspiegel has done his part in highlighting some of $TSLA’s most outrageous issues
28/ If nothing else though, at least $TSLA can control costs. It laid off 7% of its work force in December ($400M run-rate savings p.a.) and is expected to announce a second round of layoffs next month.

Not bullish for a “growth” company, though.…
29/ To close out this prolonged thread, @StuartMeissner has been retained by a new $TSLA insider for a new whistleblower suit and Wochos lawsuit and curious Parulekar case remain outstanding.

And then there are a couple of other lawsuits
30/ Last but certainly not least (and perhaps the opposite), is #ExplainTheVINs, which deserves its own thread, provided by @TeslaCharts
31/ So to summarize -- I remain convinced $TSLA has an unsustainable business model, is lacking demand for its poor quality vehicles and is quickly destroying its brand w/ quality & service issues..

I don't expect Chapter 11, though. Musk will run it to Chapter 7. $TSLAQ
Err, this bond originated from $TSLA — my mistake
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