Thread by @CadgerGreg

Why Tesla’s growth story is laugh out loud funny and it’s stock price is beyond Ludicrous. Tesla is not a growth story.

End of post.

Well okay so you don’t want to take my word for it, fine. Really it isn’t. Tesla is Tesla’s biggest problem. $tsla $tslaq

Elon Musk wanted to be an innovator. Not just of the electric car but the auto industry as a whole. Vertical integration of all facets of the auto industry. GM and Ford had no idea what they were doing, right?

100 plus years of doing things a certain way was out of touch with consumers & lacked efficiency. Out of touch legacy dealers detracted from the buying & service experience. Tesla would have a customized ordering experience & integrated service centers which would act as

a delivery hub. All owned by the mother-ship itself. Buying, service, delivery & even the network which would provide charging all vertically controlled and maintained by a single entity.

Wonderful in theory, terrible in practice, awful for growth. Lets just look at an oversimplification of the process of how GM builds, sells and delivers a car and compare it to Tesla. GM builds a plant let’s say in Michigan.

The plant builds and assembles the car and then upon final inspection will deliver the car to a dealership. The dealership essentially becomes the owner of the car and GM’s only obligation after delivery to the dealer is the warranty repair accrual on the books. That is it.

GM’s financial obligation is over. The dealer in exchange for the right to franchise GM’s auto business agrees to meet certain standards established by GM in selling & maintaining the cars on it’s lot. The dealer is responsible for hiring & staffing the sales and services centers

not GM. The dealer incurs the cap-ex and the operating costs of the sales and service aspect of the legacy auto model. This relieves GM from using it’s resources to maintain, staff and build sales and repair centers.

That money can be reinvested into expanding plant capacity, research and development and hiring additional employees. Furthermore, after purchase the consumer drives down the street and fills up their vehicle at an independently owned and operated gas station.

Tesla on the other hand builds the car at it’s Fremont plant, delivers the car to the Tesla service center & maintains ownership of the vehicle until delivered to the customer. Unlike legacy auto where the dealers pays a certain % of the vehicles value as it sits on the lot,

Tesla is on the hook for the inventory and that cash flow is tied up in inventory. The sales staff, the repair staff and the overhead of the service center all on Tesla’s books. Oh, and after the car is delivered to the customer and the customer wants to use a charging station,

yeah, that has to be built and maintained by Tesla as well. Well this is great right? They have control of everything. Not so fast, think about it. As Tesla builds cars their investment into this infrastructure must also be increased.

The investment into this infrastructure takes away from Tesla’s ability to reinvest this money into growing it’s production. This limits Tesla’s ability to grow. This is why Tesla is not Amazon. We have all heard the tech comparisons of Tesla “the innovator of the auto industry”

The comparisons to Amazon and other tech giants as the next Silicon Valley success story. Not a car company, a technology story. Is Tesla the next Amazon? Of course not. For one it is a car company and comparing it to Amazon or Apple is well Apples to Oranges comparison. But if?

Amazon’s Jeff Bezos could have sold every book in the world numerous times over and never made a dime. Yet, Bezos realized that instead of Amazon being a bookseller it would use it’s distribution centers to become a retailer of not just books but all products.

Amazon became the largest middleman of consumer goods and consumers turned to Amazon for it’s variety and ease. Here is the big difference. Amazon was able to
reinvest in it’s growth because it didn’t have to build centers of production just centers of distribution.

All of that money not wasted on the vertical integration of the manufacturing and supply chain could be reinvested into growth. Tesla’s model doesn’t allow this investment into growth it caps it. Every area Tesla is introduced it must build service centers, train and hire repair

staff & build the supercharger network. This requires huge amounts of capital and slows growth to a snails pace. This has been proven as Tesla has expanded its operations from the United States to the entire world & sales increased from 90,966 in Q42018 to only 112,000 in Q42019

That is 23% growth after opening up the entire freaking world & taking advantage of generous tax subsidies. It looks even worse when you realize that the approx 21,000 car increase is 1 day of GM's worldwide sales. (Actually less, GM sold approx. 22,598 cars per day in 2018.)

Yes, you read that right less than one day of GM’s sales is the entire quarterly growth of Tesla. If your argument is Tesla is production constrained you are right. Tesla’s model will always make Tesla production constrained and constrict growth

making Tesla’s valuation truly ludicrous. Still need convincing, Part 2 we will cover the numbers. $Tsla, $TslaQ