Zero Sum Bond Profile picture
May 6 89 tweets 35 min read Read on X
$TSLA Walls are starting to close in for Tesla, let's have a closer look:
1) The recent turnover in senior executives is incredible, with most having a tenure well over 5 years. From CFO, to head of HR as well as key engineering execs. What do they know that the market doesn't? Not to mention, huge stock sales on exit (e.g. Baglino). Image
2) Company has begun an intensive layoff program (estimates are around 10-20% of the workforce (further layoffs announced this weekend p. Linkedin), which appears completely indiscriminate (e.g. entire supercharger team - see the linked article) electrek.co/2024/05/03/rea…
3) Further to the point of layoffs being indiscriminate, the Company has pulled offers made to interns. Aborting hiring the cheapest future talent? What has changed in 6 months? forbes.com/sites/antoniop…
4) What has changed is demand. Over the last 18m the Company cut prices aggressively to stimulate short term demand. This works for a while, but ultimately cutting prices in consumer businesses destroys brands and margins (no longer premium, erodes scarcity) Image
5) There's only so far price cuts will go. Tesla has one of the oldest lineup among automakers - with the average age of its models at 9 years (ex-Cybertruck) - Where is the innovation to spur more demand? uk.motor1.com/news/677090/la…
Image
6) Tesla is now in a Catch-22, cut margins further and wreck margins (& burn FCF) and lose rev growth, or keep prices flat and lose growth. Going into Q2, seeing market share losses in Europe with Tesla no longer being the best selling EV in many key markets eg France. Image
7) In the US, seeing inventory pile up and nowhere to put it. Recently saw Tesla hire parking at a abandoned mall to park new vehicles.
8) Recent drone footage of its Fremont site shows inventory piling up on the grass with no parking space available.
Image
9) Additionally, outside of self-inflicted factors - Tesla is also being hit by slowing demand for EVs more broadly. As subsidies have lost their impulse to drive short term demand as well as concerns over depreciation/range, Consumers have started to shift back towards ICEs. Image
10) Outside of pure consumer demand, fleets and rental car companies have also stopped buying tesla's due to strong depreciation / unpredictable residuals and lack of consumer demand. carscoops.com/2023/12/sixt-d…
11) The lack of innovation, reliability issues, depreciation as well as Elon's persona has destroyed the brand - with Tesla ranking as the 2nd worst auto brand in an Axios survey in 2023. Months to cause, years to fix. digitalinformationworld.com/2023/05/tesla-…
12) Rather predictably, Elon has attempted to divert attention from its core automotive business to robotaxis, AI and robots. Full self driving has been promised to be imminent for almost a decade now and investors are getting inpatient.
13) There is only so much Elon/Tesla can promise today to juice the stock, with the Company's long history of undelivered promises becoming clearer every day. In many way, the Tesla acquisition really showed the emperor had no clothes. elonmusk.today
14) These broken promises historically were driven by his incentivisation structure. Now that it has been revoked, what incentive is there for him to stay (other than his existing stock, but given fading fundamentals he'd be better exiting ASAP)
15) Now analysts are asking Elon's commitment to Tesla (35:21, Q1 call) and his answer wasn't convincing to anyone. Large deliberate pause, no clear "I'm not leaving Tesla", but rather a vague answer. He also noted autonomy would be possible without him.
16) Elon is now playing his option value, see if the vote goes through to ratify his 2018 package otherwise he'll likely dump his shareholdings. The desperation of him and what is left of the (non-independent) board is clear with the new vote site votetesla.com
17) The new video from the chairman of the board pushing for investors to vote yes on ratifying the package, despite the Delaware court decision and the size of the package vs. Tesla's historic profits puts to bed any questions over the independence of the board.
18) As well as the issues with the board, worth noting the management turnover in key accounting/legal positions makes you highly doubt the Company's reporting. E.g. Dave Morton leaving as CAO after a month, CFOs always internal, GCs constantly leaving electrek.co/2023/02/10/tes…
19) Just to add smoke to the fire here, several whistleblowers have raised question's over the group's accounting - including one noting they were operating two sets of books.
20) As such, it's incredibly hard to take the Company's financials and $26.8bn of cash at end of Q1 too seriously given the Company likely pulled out all the stops with deliveries, squeezing suppliers and other measures to window dress q/end. ft.com/content/87dd7a…
21) There's a reason nearly every OEM has gone bust in the US at one point or another: capital intensity, operational leverage, cyclicality and competition. Tesla made the classic business mistake of expanding supply too quickly. It will be hard to reverse en.wikipedia.org/wiki/List_of_d…
22) Unlike other OEMs, Tesla runs its own dealer network - essentially holding all inventory produced on balance sheet (rather than flushing to its dealer network). There is no exit valve to push more supply to. Without rationalising supply, cash burn & inventory will explode.
23) If Tesla faces a similar demand drop to what was seen for conventional automakers during 2008 (new vehicle sales dropped 18%), the cash burn rates could be rather incredible. As a reminder, this was the peak quarterly cash burn of the big 3 automakers in the US during 2008. Image
24) Q1 begun the unravelling, with FCF of -$2.5bn with deliveries down 9% with the gap between deliveries and supply exploding. If deliveries normalises to 2022 levels now price cuts have slowed and subsidies flatlined, company could easily burn $4-5bn+ a quarter. Image
25) Not only this, Tesla faces litigation in relation to its products and services. Most notably, the NHTSA re-opened its probe into Tesla's Autopilot / FSD recall. Should the NHTSA drive a more aggressive recall, could face litigation from consumers. static.nhtsa.gov/odi/inv/2024/I…
26) Outside of litigation from consumers for product quality issues (Cybertruck?) and mis-selling of products (FSD?) - company also faces a major threat of penalties from regulators for mis-selling (Dieselgate style?) as we saw today:
27) All things considered, Tesla will likely have to raise more capital (debt or equity) either back half of 24 or early 25 given cash burn & minimum cash needs. Elon will likely try and repeat the 2019 playbook by using an event (e.g. Robotaxi event this year) to pump into.
28) The Robotaxi event is another charade. NHTSA is demanding more information on the recall because of a series of accidents since the "recall" which didn't really affect how people used it. The reality: Tesla has more accidents than any other OEM forbes.com/sites/steveban…
29) Not only has Tesla not made any regulatory actions to start robotaxis, but the FSD software continues to pull outright dangerous moves that show it is nowhere near ready and perhaps never will due to hardware limitations.
30) So distressed automaker likely needed to raise cash in next 12 months under multiple investigations, with a super stale lineup and how is it priced? Well I'll leave that to your interpretation. Forward multiples also based off goal-seeked hyper bullish sell side estimates. Image
31) Over the last 12 months EPS estimates by the street have been cut in half - yet the stock is actually broadly unchanged over the last year. Given the abovementioned trends, I believe we could easily see EPS go negative by the end of the year Image
32) Twitter really showed how fast it can unravel and with recent disorderly layoffs, falling demand / deliveries and investigations into the company heating up I strongly believe Tesla will unravel in the next 12 months. Eventually the market will hunt down Elon's margin call.
33) Just to emphasise how disorderly the layoffs are (outside of interns having offers pulled, entire teams being laid off), Tesla's career site has 3 jobs for the entire US. I get people are being moved around internally with layoffs, but for a firm with 100k+ FTEs this is nuts Image
34) Employees through Glassdoor and Linkedin really give you some good insight to what's really going on:
Image
35) When you dig deeper there's a range of other peculiarities at Tesla. Unlike every other S&P/OEM company, Tesla uses its own ERP system (vs Microsoft, SAP, Oracle etc) called WARP - which when you consider the accounting / governance issues is worrying erpresearch.com/knowledge/whic…
36) Tesla/Elon also has a very aggressive retaliation with whistle-blowers & a culture of fear of retaliation preventing anyone stepping out of line. This is not normal. bloomberg.com/news/features/…
37) Instead of whistleblowing and facing the same fate, some employees are just leaving over quality concerns / fear of retribution. Take Ethan Heald for example - senior Mechanical Design Engineer at Tesla. Image
38) The rush to deliver the cybertruck led to one of the most disastrous product launches in history. With an almost immediate recall on a potentially fatal accelerator flaw as well as products being delivered almost as if they're prototypes with severe issues at onset Image
39) Mechanics on youtube have been tearing down the cybertruck and finding huge flaws. Either Tesla continues delivering these trucks and potentially faces huge warranty / legal claims in the future down the road or ceases production.
40) It's not just the CT, the cutting corners has been getting worse for its existing models. Tesla has the most problems p/100 vehicles out of any OEM bar Polestar (257 vs. 2022 reading of 226). Tesla is blaming customers in many cases for its own issues reuters.com/investigates/s…
Image
41)Tesla has tried to cover up issues, including creating a team to suppress range complaints. "Some employees celebrated cancelling service appointments by putting their phones on mute and striking a metal xylophone, triggering applause from coworkers" reuters.com/investigates/s…
42) The company also informed employees to only communicate via voice re product quality issues and not writing to avoid producing incriminating evidence for future regulatory investigations. businessinsider.com/tesla-told-emp…
43) The flagrant disregard of regulations / cutting corners is evident across Musk related companies. With exceptionally high injury levels across its manufacturing sites. SpaceX also failed to report required injury data to regulators for years. whichcar.com.au/news/teslas-gi…
44) This same cavalier attitude is evident in Elon’s approach to company perimeters/related party dealings. From the bailout of SolarCity to save his cousins to transferring engineers from Tesla to work at Twitter. Regulators are starting to look. wsj.com/business/autos…
45) The most egregious example of this is . On Tesla's Q1 call, Musk told investors that Tesla should be viewed as an a AI or robotics company. Yet at the same time, Elon is raising billions for outside Tesla x.AI
X.Ai
forbes.com/sites/robertha…
Image
46) On the same note, Elon also uses Tesla to pump his / insider crypto holdings such as Dogecoin/Bitcoin to the detriment of its reputation and potentially exposing it to future litigation. uk.finance.yahoo.com/news/elon-musk…
47) Additionally, during the Twitter takeover Elon borrowed $1bn from SpaceX like it was his personal piggy bank & breaching its fiduciary duty to shareholders. It does make you question the potential for moving cash between Elon entities. bloomberg.com/opinion/articl…
48) Back to Tesla, one has to question the $8-10bn 2024 capex guide (2023:$8.9bn). In the context of huge layoffs, no new models (2 cancelled), gigacasting pulled, Gigamexico paused, Supercharger team gone - are they overcapitalizing or is it AI (using Tesla resources for xAI?) Image
49) Given xAI employees are using X/Twitter offices and data & history of shady related party dealings, it's probably not too far to think Elon is using Tesla's resources/capex for xAI. wsj.com/tech/ai/elon-m…
50) See H100 GPUs by customer for Nvidia vs. what Elon has said Grok required in terms of compute required. This should be investigated by regulators.
Image
Image
51) Following on from Capex, on other accounting mysteries, Tesla continues to record substantially lower warranty claim rates compared to other OEMs despite Tesla having the most problems per 100 cars of any major OEM. Image
52) It has been well covered in the press that Tesla has been aggressively recording warranty expenses as goodwill as well as in whistle-blower complaints. You may ask why? insideevs.com/photos/710083/…
53) Employing this strategy allows you to artificially lower warranty provisioning / COGS and record warranty expenses at the time incurred as goodwill/SG&A. As long as the business was growing, this strategy worked great to defer the real costs of the warranty of their vehicles.
54) Now volumes are in contraction, Tesla faces a real risk of warranty costs exploding as the age of the average vehicle under warranty expands. It has been doing everything it can to blame consumers for its own faults to kick the can down the road. reuters.com/investigates/s…
55) Interestingly, consumers have been noting that Tesla's latest service appointments are months out or are being cancelled for no apparent reason. Tesla stalling to avoid recognising servicing costs / forcing consumers to try and fix the cars themselves. Image
56) Tesla's strategy to do everything to avoid servicing (stalling & blaming customers) & lack of reliability has led in part to insurance costs exploding. Catch-22-> kick can on servicing (inflate financials) but kill demand due to soaring insurance costs inews.co.uk/inews-lifestyl…
57) Another accounting question is the Company's leasing / residual value accounting. The Company takes residual value risk on the bulk of its vehicles leased by itself. The Company also provides external leasers with residual value guarantees.
Image
Image
58) Considering the above, Tesla used car prices have fallen 33% y/y and 53% off the Aug-22 peak - yet the Company has yet to take a significant impairment / loss on the crashing residuals from either its own leasing program or on residual guarantees provided to external parties Image
59) In FY23 Tesla had 72.2k (FY22: 47.6k) deliveries subject to operating lease accounting where the company would have had residual value risk in the bulk of cases. Hertz by contrast took a $245m write-down on just 20k of its 60k EVs (largely Tesla) due to crashing residuals. Image
60) So Tesla leased 120k vehicles itself (exc. external lessors) over the last 24m and didn't note once in Q1/24 & Q4/23 that falling residuals had an impact? Worth noting that the impairment for HTZ was as of Dec31, with used Tesla prices having falling an additional 17% since. Image
61) Tesla going ex-growth also poses unveiling other hidden issues. Tesla has long underpaid its staff when it comes to cash pay, making up for it with stock options. With the stock languishing & toxic work environment, what is there to keep people? businessinsider.com/tesla-pay-vs-f…
Image
62) The underpaying of employees is starting to show itself with an increasing drum beat of a potential unionization of its workforce. Tesla is doing everything it can to avoid this, including some rather drastic actions. reuters.com/business/autos…
63) One only has to look to how long the strike has been going on in Sweden to realise how disastrous the same would be in the US for example. Another Catch-22, can't afford higher staff costs, but needs to retain employees.bloomberg.com/news/features/…
64) One also can't compare wages between Tesla and its peers given it is the only OEM left in California. When Toyota closed the plant, they noted "the economics of having a plant in California so far away from the supplier lines" in the Midwest "just doesn't make business sense"
65) Having a manufacturing site far away from suppliers and the most expensive cost of living in the country reflected in the price paid by Tesla for the site - just $42m (vs. $1bn+ cost for a new plant, albeit closed post financial crisis in 2010). .reuters.com/article/idUS35…
66) While this may have been ok in 2021-22 when EV adoption was still very strong (in part due to highly favourable subsidies) and BEV competition was more benign, it makes you question how they will perform in future years with such a manufacturing disadvantage vs peers.
67) The same is true for its German plant. While its peers have been scaling back to high labor, energy costs - Tesla again took the other side. Elon himself called the Berlin and Austin sites "massive money furnaces" in 2022 amid supply chain challenges. cnbc.com/2022/06/23/mus…
Image
68) So what are you left with? Its only decent manufacturing site is in Shanghai which accounts for c.50% of production. China attracted Tesla with loans, tax benefits and subsidies. Now competition is established, China may make life for Tesla difficult. businessinsider.com/tesla-china-co…
Image
69) It makes you wonder how much cash flow they can really ever bring back from China if the profitability of their foreign earnings is skewed to China. $4.43bn of cash was held in Yuan/EUR (2022: $3.42bn), but the Company doesn't disclose how much specifically is Yuan. Image
70) Another accounting question is Tesla's cash balance. Despite a healthy cash balance and solid "reported" FCF, the company raised substantial debt in 23 - refi'ing its $2.5bn RCF with a new $7bn facility in Jan as well as raising $3.93bn of new ABS debt backed by its vehicles Image
71) Combining the above with its homegrown ERP system and exec changes (CAO leaving after a month giving up $10m+ option package), one has to ask if that cash really is there. There's many examples of confirmation fraud such as Wirecard and Parmalat.
Image
Image
72) In 2008 Elon's brother noted he "took risks that seemed like they could have landed him in jail for using someone else's money". Similarly, his poker strategy is very telling of his attitude towards risk. books.google.co.uk/books?id=h_SAD…
Image
73) Also interesting re: accounting is that despite financing its customers financing agreements / leases on balance sheet, the Company hasn't mentioned any pickup in bad debts despite US auto loan delinquency rates hitting a 13 year high: investopedia.com/auto-loan-deli…

Image
Image
74) Interestingly re leases/financing in a last effort to raise deliveries, Tesla has introduced low interest offers for its Model Y (0.99% <=60m, 1.99% - 72m, 2.99% -82m). The cost of the promotion is evidently long term loss making in order to drive ST deliveries. Kicking can. Image
75) Despite Tesla's cash balance, Tesla is funding these loans through a middleman called FIConnect (according to a buyer that has gone through the process) who sells the loans on. Some buyers have recorded FICO scores as low at 660 and being approved
76) One has to ask just how desperate Tesla is right now for cash / to work down inventories if they're willing to sell cars at a substantial negative gross margin (if you run some of the below FICOs at the typical duration of 72m and work out the implied subsidy in post 74) Image
77) It's not just in the US, in the UK they're also opened up 0.5% APR for purchase financed by Lloyds, 0% leasing in Germany as well as 0% in China (again through financing partners). All that cash and they're giving away their cars at negative GM? benzinga.com/government/24/…


Image
Image
Image
@MartinViecha Would be good to go through this.
78) We also shouldn't forget PWC (Tesla's auditor) is conflicted given the level of consulting work that they do for Elon entities. Interestingly in Korea, Tesla's local accounts are audited by Taesong who found a major issue with Tesla's accounting. news.bloombergtax.com/financial-acco…

Image
Image
79) Let's take the auditor that signed off Tesla Germany GMBH in 2021: Harald Wimmer. He's actively posting about events from PWC's consulting about EVs. Think he's really digging it hard to Tesla's home made ERP system WARP that employees say is hard to navigate?

Image
Image
Image
80) The need for an impartial auditor becomes more clear when you look at the governance of other Elon entities. The head of Elon's family office is also holding 1 CEO and 2 CFO positions despite no experience running companies or even accounting.
81) Not to mention, SpaceX has had liens placed against it from failing to pay bills (despite a valuation of $180bn per Bloomberg in 23). This is not what you would expect from a healthy company. Where there's smoke, there's usually fire. reuters.com/technology/spa…
82) Maybe more telling is the army of touts. Many set up LLCs for what it appears to be cashing in from promoting Tesla. Several flew to Austria recently from the US to present to push the Elon vote proxy. We are meant to believe they did this for free?
83) Elon directly subscribers to many of these touters, such as @ICannot_Enough, proving direct payment (without getting onto X monetization and other means). He is telling people to vote yes to the Elon pay deal. This is a proxy violation that this is not being disclosed.
Image
Image
@ICannot_Enough 84) Even more damming is many of these promoters are affiliated with Rebellionaire. A company that targets "All-in" Tesla investors. In their promotional video they use Elon Musk's voice to sell their product, not to mention the price targets set by them.

Image
Image
@ICannot_Enough 85) As well as this, Elon's most reposted account @cb_doge is apparently his friend: Bill Lee. The same friend that made the largest commercial Dogecoin transaction in 22 (likely made a fortune from Elon pumping doge?), as well as being an investor in other Elon entities

Image
Image
Image
86)As things are starting to spiral out of control at Tesla & Elon entities, it has become more clear in Elon's personality-> attacking the press as well as competitors (such as Yann LeCun of Meta) as well as endlessly posting on non-business matters on X.
87) It's also a matter of time before state officials start scrutinising deals made. NY state provided Tesla with $1bn of funding to build its Buffalo solar plant. Despite this, employees are being used for data admin roles and the roof of the plant is covered in Chinese panels.
Image
Image

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Zero Sum Bond

Zero Sum Bond Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @ZeroSumBond

Jun 4
$TSLA $TSLAQ Can someone explain to me how X or xAI paid for that computing hardware when X by all means is insolvent and xAI hadn’t done its raise and didn’t have the capital? So Tesla paid and the equipment was given away? cnbc.com/amp/2024/06/04…
$TSLAQ $TSLA So Tesla supposedly took 15k H100 deliveries in 2023 per industry analysis, yet per this CNBC report it diverted 12k H100s to X/xAI in 23 under Elon's instruction? So it all really went to X/xAI? Image
$TSLA $TSLAQ Q1-24 deck shows H100 equivalent GPU capacity. This shows c.15k equivalent around Q4-23 (in-line with industry forecasts), yet 12k were diverted to X/xAI? So essentially capturing resources that had been shifted to x/xAI? Therefore, IR presentation misleading/wrong? Image
Read 6 tweets
May 30
The Twitter Class Action Complaint v. Elon Musk has been released by the SDNY. The case outlines Elon (& FA Birchall's) disregard of SEC filing requirements and market manipulation in regard to the purchase of his initial Twitter position
The complaint begins that Musk and Birchall (Musk's FA) enlisted a redacted MD at Morgan Stanley to acquire a position in Twitter secretly. Birchall informed the MS exec their plan had been blessed by legal counsel (when they hadn't even consulted with their legal counsel). Image
Despite awareness of the 5% disclosure rule by both Elon and Birchall (Elon testified under oath in his 2018 SEC deposition to this, as well as filing 20 13D/13G filings historically ), Musk failed to file any 13D/13G filing when Morgan Stanley acquired over 5%. Image
Read 27 tweets
Apr 27, 2023
$BTU The thing I think people are forgetting is the convert. There’s a reason they have the buyback policy changing in H2, they’re going to want to attack that with the cash first by tendering/ making offers to holders. You can’t put that in a press release.
I suspect they may say that on the call, but hard to put in writing clearly. I think we all know you don’t need 900m cash on balance to run this company.
Why else would you spend a year thinking of a share buyback/divi program and have it change in 1 qtr after being announced. Think about it
Read 5 tweets
Apr 18, 2023
1) People still keep DM'ing me if coal is still my largest holding as I've been quiet lately (been on safari in Namibia/Botswana with no internet). Why? Quick reminder:
2) Supply side is not fixed. Despite prices being well above the cost curve now for a prolonged period for both met and thermal, we are not seeing any meaningful pickup in capex to meet demand (/replenish broader depletion). Chart below from $METC Q4-22 (p16). Image
3) The broader coal industry is still an easy punching bag for politicians looking to win votes (Take this from the UK as an example independent.co.uk/climate-change…). Unless there is a radical change in the attitude of people to coal / the environment, this is unlikely to change
Read 19 tweets
Mar 3, 2023
Be careful chasing the analysis of certain people on fintwit pumping TSX V names.....
Then look who's CEO, sure he wouldn't do anything bad and make shit up biv.com/article/2012/0…
"Last month, the BCSC fined one of Barkerville's then-directors, Farshad Shirvani, after he admitted to making "materially false" filings for Casa Minerals Inc., Doubleview Capital Corp. (TSX-V:DBV) and Next One Capital Corp.".
Read 13 tweets
Feb 16, 2023
Wonder where coking coal prices go if steel demand properly picks up. $ARCH $AMR $HCC $BTU.
Let us not forget:
Read 5 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(