Here’s Why Tesla Is A Giant Ponzi Scheme

You would think that investors would learn from their mistakes.  For example, a lot of Wall Street analysts – two dozen of them in fact – have egg on their faces after missing the disaster at Valeant Pharmaceuticals, a stock that I warned about last October when it was trading at $170 per share.  Today, with VRX stock down under $30 per share, the financial media and Wall Street has finally figured out what Sure Money readers knew before the rest of the crowd – that the pharmaceutical company was a house of cards built on a foundation of debt and a toxic business model.

Right now, my readers are about to get in ahead of the curve once again.

There is another stock market darling that has many similarities to Valeant – phony financial statements, a CEO spending overtime pimping investors and hedge funds into the stock, a mesmerized financial media, and a grossly overvalued stock – Tesla Motors, Inc. (TSLA).

In its defense, it must be said that unlike Valeant, which takes advantage of the sick by overcharging them for drugs, Tesla is trying to do something noble by building electric vehicles.  But these vehicles are primarily toys for rich people and subsidized by U.S. taxpayers, so the company’s nobility goes only so far.

And on a financial basis, TSLA is a ticking time bomb.

Here’s why you should get out of TSLA right now – and here’s how to profit.

Tesla Has All the Hallmarks of a Cult Stock

While the financial media and Wall Street analysts suck up to Tesla’s founder, Elon Musk, they ignore the fact that the company is running through billions of dollars of cash while running a massive Ponzi game on consumers.  In the last quarter, the company lost $19,059 for every car it sold (despite a starting selling price of over $70,000).  Its negative net margin was -24.6% compared to -16.4% a year ago. It promised to produce 200,000 cars in 2017, 500,000 cars in 2018 and 1,000,000 in 2010 but only expects to manufacture 17,000 in the second quarter of this year.  The odds of the company meeting these projections are about as high as the odds of Hillary Clinton starting to tell the truth. In the first quarter of 2016, Tesla burned $249.6 million in cash in operations, almost twice as much as a year earlier ($131.8 million). It also spent $233.8 million in capex, which it considered a victory since it was less than the the $432.3 million it spenta year earlier. It raised $715.4 million to pay for this, up from $186.2 million a year earlier. But it’s going to have to spend a heck of a lot more to come close to reaching its absurd projection targets.

Not to mention the fact that the cars themselves are literally at the bottom of the reliability list:

At this rate, Elon Musk is going to give carnival barkers a bad name.

In order to plug the hole in its finances, the company just sold $1.4 billion in stock (and Musk sold another $600 million to pay taxes on egregious stock option grants).  At the rate the company is running through cash, this new monty will last only for little more than a year.  The company should have taken the opportunity to sell $5 billion of stock.  Its cult members – excuse me, I mean its investors – would have happily paid more than $200 per share for that many shares.  It is going to be much more difficult to raise capital when the company really needs it – after the bottom falls out.

Tesla has all of the hallmarks of a cult stock.  Like Valeant Pharmaceuticals, which pimped every hedge fund and Wall Street analyst into buying it until the stock reached a ridiculous $263 per share while ignoring a rotting balance sheet filled with tens of billions of dollars of debt and goodwill on top of a corrupt business model that preyed on sick people and the American taxpayers that pay their bills, Tesla has enlisted Wall Street to suck in gullible investors and consumers.

Not that Wall Street needed much convincing.

On May 19, 2016, Goldman Sachs published a research report ludicrously comparing Elon Musk to Henry Ford and Steve Jobs while ignoring obvious flaws in how the company does business.  Even worse, Goldman used these bogus comparisons to paste a $250 per share price target on the stock one day before the company disclosed that it had hired – surprise! – Goldman to lead the stock sale described above.

If you think that Goldman didn’t have the order to sell the stock in its pocket at the time it issued its giddily bullish report, you don’t know how Wall Street works. And if you believe that the so-called Chinese wall between the research department and investment banking kept its analyst in the dark about the upcoming stock offering, you are a fool.  This is crony capitalism and Wall Street corruption at its worst.  While regulators are nitpicking every wealth manager and banker in the world over trivial compliance nonsense, Goldman Sachs flouted obvious conflict-of-interest rules and made the SEC look like a bunch of fools.

Goldman’s report argued that Tesla’s already absurdly overvalued stock was too cheap:  “Following a 23% decline in the share price post the Model 3 unveil, we do not believe Tesla shares are fully capturing the company’s disruptive potential.”  “Disruptive potential” is one of those meaningless terms that analysts use that allow them to put any price on a stock that they want.  Goldman downplays the fact that a dozen other companies already manufacture or are moving forward on plans for electric or hydrogen vehicles to compete with Tesla.  The only company about to get disrupted is Tesla.

Not to be outdone, however, the analyst at Goldman’s co-manager on the deal, Morgan Stanley, has an even more ridiculous $465 per share price target based on claims that Tesla will not only revolutionize the auto business but the battery business as well.  You can see how 24 analysts had “buy” recommendations on Valeant until the stock finally collapsed under $50 per share.

Behind The Glittering Façade, Tesla Is Bleeding – Badly

Speaking of Valeant, Tesla has concocted a scheme that puts Valeant’s worst abuses to shame.  Naturally the financial press and Wall Street are cheering on Tesla in this masterful example of a Ponzi scheme and a better example of why financial journalism and analysis deserves the moniker “dumb and dumber.”

In the company’s recent earnings release, it announced that it collected $1,000 refundable deposits from 373,000 customers for its new Model 3 that won’t launch until late 2017 (assuming it launches at all).  It noted, “We have obtained this level of reservations…with only a few social media posts” as though it didn’t have half the financial media broadcasting what it was doing.  But even that omission doesn’t properly capture the sheer idiocy of the company’s comment.  Elon Musk likes to drop tweets about the company like giant turds out of the sky promising new product launches and all kinds of surprises that investors slop up like fools, but behind the PT Barnum act the company is bleeding while making promises that it is not going to be able to keep.

Alarmingly (at least to anyone who actually thinks about things these days), Tesla didn’t stick this money in an escrow account; instead, these funds are sitting in its general account and will be rapidly consumed in operations.  Does the SEC even read the papers anymore?  And CNBC and the rest of the media sycophants cheered on the company’s reckless financial practices.  Welcome to finance in the Age of Obama.

Leave aside for the moment the fact that Tesla produces very expensive cars for very wealthy people. Or that these wealthy people who buy is cars are subsidized to the tune of $7500 per vehicle by the U.S. government (the $7500 federal tax credit begins phasing out after the company sells 200,000 vehicles, a number the company isn’t close to reaching).  A deeper look at Tesla’s financial statements – an exercise in which Wall Street analysts no longer engage (how do we know that? – look at what happened at Valeant Pharmaceuticals) – reveals a company running on fumes.

Tesla is a study in the use of non-GAAP earnings adjustments to create a false picture of financial health.  Tesla uses a variety of non-GAAP adjustments from the common to the ridiculous.  The common include phony stock option accounting adjustments that understate executive compensation expenses, something widely used by corporations and especially tech companies.  But then there are more arcane adjustments.  For example, Tesla pumps up its earnings for early extinguishment of loans it receives from the U.S. government – remember, Tesla’s business is heavily subsidized by the government due to its production of electric cars.  The company has earned a lot of money from government subsidies in its early year of existence.

And then there is an adjustment that is little more than fiction –  Tesla pumps up its earnings by an entry called “Model S gross profit deferred due to lease accounting” – and if that sounds confusing it is.  First, while the company uses the term “lease accounting,” this line item relates to cars that the company sells, not to cars it leases.  Tesla guarantees to buy back all Model S vehicles it sells after between 36 and 39 months old for 50 percent of their value.  It expects to make money by reselling these cars and reports that expected profit (whether realized or not) as gross profit that it uses to adjust upward its earnings – hence the line item “Model gross profit deferred due to lease accounting.”  But this is just a management estimate and not an actual number.  Tesla defers the residual value it is obligated to pay to repurchase these vehicles until the 36-39 month period expires and carries that value on its balance sheet as an asset where it is depreciated.  As of March 31, 2016, the company had $2.24 billion of “Operating lease vehicles” on its balance sheet, up from $1.8 billion three months earlier at December 31, 2015.   As of March 31, 2016, it had $192.4 million of guarantees that were exercisable by customers over the next 12 months, up from $136.8 million three months earlier at December 31, 2015.  This is a huge and growing cash liability for a company that already has massive capital expenditure needs to meet in order to increase its ambitious – and likely unachievable – production schedule.

How to Play the Tesla Disaster

There are some simple rules of thumb in investing.  One of the most important is “keep it simple.”  Tesla, like Valeant, violates that principle at every turn.  While I don’t hesitate to recommend that investors avoid the stock at all costs and even short it through long-dated puts, there is one risk to doing so that must be acknowledged – the possibility that the company could be acquired by a cash-rich company like Apple, Inc. (AAPL) or Alphabet, Inc. (GOOG). For that reason, I would limit any short sale to buying put options.  But the one thing I would not do is touch this company with a ten-foot pole.  Without being acquired, this stock should trade in the low double digits.

If you are interested in buying puts on TSLA, I recommend the TSLA January 2017 $100 puts (TSLA170120P00100000). At this writing, they’re trading at about $1.35; pay no more than $1.50.

Sincerely,

Michael

75 Responses to “Here’s Why Tesla Is A Giant Ponzi Scheme”

  1. Ettore Di Biagio

    I live in Canada and the rules up here are far more restrictive than in the USA. That said the CHRONIES are sacking the tax life blood out of the American people by any company that has a great salesman to master the talent or getting government to fork over much-needed elsewhere tax dollars and then enlisting a Wallstreet crony to boast and lie to get even more money from not only the rich but hard work people that need the money for other more important things. In the end all will be revealed and TULSA will be sacrificed just like VRX.

  2. Rick Armbruster

    And to add to the above: July 2016 issue of Motor Trend has at least a 15 page photo/text spread on the various Tesla models on the way for 2017. So this auto industry rag written by pr types from the manufacturers is gaga over this company’s cars.

  3. this article is completely ridiculous. do yourself a favor and actually test drive one of these cars, more meaningful dd then any article you will ever read on the company. this is revolutionary company with a revolutionary product and they need to account for things in revolutionary ways for it to make sense.

  4. Good work Michael, as it vindicates my claims to friends that Tesla is a disaster waiting to happen and I have held this view for 18 months from snippets picked up here and there from analysts like yourself. I feel the same way about their batteries as well. They have way over extended and are an incredibly bad risk.

  5. Hi Michael,

    Great article. I agree with your analysis. The whole time I was reading it, I was hoping you would suggest puts when the “hot air” starts to go out of Tesla and it beings to fall. I understand what “puts” are and what “shorting a stock” is. Unfortunately it has been quite a while since I have executed a put. Can you explain in detail how you would execute a $100 put and describe how this would work, and how you might attach a stop loss to the put to limit losses if market goes in the wrong direction? Do you also have a refresher “Shorting Stock” course or a video series that we can review to understand how to execute a TSLA January 2017 $100 put from your recommendation? If not, can you recommend where to go to get a review of how to execute puts so that I can understand the mechanics of the trades as well as the risk/reward of shorting stocks?

    Thanks,
    Steve,

  6. I have parallel reasoning regarding the value of this stock but I don’t know if it is possible to get by the Masters of the Universe who watch over it. I have bought puts on it twice and got my head handed to me..

  7. Gee, Michael, can you leave your biases out of it? Trump has lied infinitely more times than Hillary and this “…finance in the age of Obama” is just the culmination of something that began with Reagan’s dismantling of nearly everything. You’re way too smart to make lame attempts at hack stand-up. Give us the report without the political bent. The God of Money is what you worship. We get it. Leave it at that.

  8. Really-A PONZI SCHEME,
    Most short sellers post crap like Micheal did just to reap the rewards. A revised 370k orders since March 31 is unprecedented in the auto industry and Tesla is a technology company/ energy company. The Giga factory’s alone has been given a valuation of $50B. Billion if you can’t understand. Elon has performed miracles and yes, it is a cult stock, but someone had to make the change since this technology has been out since the 1970’s and the oil companies and auto manufacturers were against the electric car revolution. Man get with the times and really say to yourself if this isn’t revolutionary. Mike, you are shorting this stock CORRECT? Get a life and let technology take its course. Elon is genius and and wants to do good for all mankind. But the nay sayers must have a say and Mike, your one of those. I hope you make money shorting this stock. Best of luck to you.

  9. Bruce Quinlan

    I am both long and short TSLA so you know my bias. From time-to-time there emerges some brilliant people. Rarely do these folk also manage business brilliance. I have 5 post-grad degeres but I cannot think of anyone who has managed to do what Musk thinks he can do, and has the track record he already has. My questions are:
    1. Can he transcend his human limits as we all have to do the almost impossible?
    2. Can he pull off what is so clear to him as profitable to humankind to add to his record of impossible accomplishments?
    I have bets both ways. How would we know he is a business genius unless he risks failure?
    Taking on whole auto and energy industry? Awesome go for it!

  10. Let’s see if you can solve a simple math problem related to battery powered cars. What is the minimum expected spacing between charging stations for a major highway? Inputs are 3000 cars per hour (a very low figure for i-95), 200 miles per charge, 65 miles per hour, charging time of 20 minutes. Don’t worry about the statistics – just figure out the average – and decide if this is a reasonable approach to personal transportation.

  11. I see 2 Peas in a Pod. That’s what I smell. So you might say that what I see and what I smell is so completely outta whack, you’d say, and I agree with you all. See the parallel in opposite direction . Here Michael wants to profit by preaching downside whereas Goldman preached upside. He wants you to BUY “HIS” short puts knowing fully well deep inside otherwise. I wonder why he didn’t throw in Space-X in the pot just as much too. He could’ have claimed “clair voyant” for “possible future” disaster because all space exploration is a as he likes to say so much ” a disaster waiting to happen”. I hate to call this kind of “reality arcane” scare crow cries a worthy of 4 letter. I just hate to be in his shoes like a stinking vulture preying on innocent gullible people he claims he’s here to save.

  12. Hack…above is right. Unless the present battery storage capacity DRASTICALLY changes electric cars are just as big a pipe dream as H2 powered cars due to logistics and infrastructure requirements. Not saying that the technology can’t happen with new materials like graphene but that has to happen first. Get that range up to 1000 miles and electric cars could work.

  13. I am not planning to buy puts on Tesla right now even going out to Jan 2017. Why not just watch for a breakout of the current range and use the 20, 50, Moving averages crossing down or up to trade? I don’t know about Tesla’s bad balance sheets. If Tesla is a technology/energy comp. could they possibly have some owner ship in a graphene comp. I have been reading about graphene becoming a revolutionary new source of light weight and inexpensive source of power. Maybe other variables to consider?

  14. I say go for it. Express your views on politics and anything else you want. It’s called freedom of the press! One of the biggest complaints about the Left (by the Right, of course) is that they want to shut up anyone with a dissenting opinion. Could be happening here. My opinion, no Trump supporter ever said Hillary couldn’t speak…They call her a liar.

  15. Interesting article. I wish you would leave out the gratuities cracks about Clinton and Obama. They add nothing to the analysis, but make me wonder whether the whole thing is driven by ideological bias

  16. Interesting article. II wish you would leave out the gratuitous cracks about Clinton and Obama. It adds nothing to the analysis but makes me wonder whether the whole thing is driven by ideological bias.

  17. Ronald E. Baker

    I have followed this saga for many years. It reminds me of the US Government’s involvement in Solar Panel (Solyndra for $ half a Billion) and similar “green energy” windmill and solar energy companies which failed miserably. Don Quixote bait, 2016 style! When the government starts to pick green-tech winners they invariably break into the nation’s bank accounts and the taxpayer’s safe-haven cash-boxes to nobody’s benefit. California here we come; again! Here we Yankee traders go again! The current Lithium miners and battery builders are an even bigger menace, with scam ripples of hype showering and spilling over across the world. Apres’ Elon Musk et Al Gore: la deluge!
    What we all need is clear, transparent, forensic GAAP accounting oversight on all these pie in the sky projects before we all face ruin. Ah the madness of crowds; and P.T. Barnum bla bla for suckers!

  18. Always comforting to see the bears getting it wrong over and over again with TSLA. Even more satisfying when they show their political bias with ignorant comments. They don’t understand the company, the technology, the pent up demand for the product, and most importantly, the abilities, vision, and drive of the team.

  19. Got to admit I loved the comments about Clinton and Obama. Finally we are hearing what people really think. Must be some of Trump is rubbing off. Well, it’s about time. I guess I have a mind and can agree or disagree and I don’t have to make a big deal about it, one way or the other. Just use the information if you want. Yee Gads relax and enjoy the ride!

  20. The only way Hilary would know Truth, would be to look it up in a Dictionary—What emails, on Who’s server??…Hilary, “Many dozen’s of those were personal emails from my husband, Bill”…..Bill Clinton, During an interview, “Actually, I really don’t send very many emails, in fact, I emailed Hilary maybe once or Twice.”

  21. Consumer reports put the car at a very low reliability rating, yet they repeatedly put it in the first place for its category. Many owners of first-off-the-line cars have noted the build quality and reliability has significantly improved with more recent models. This is something to be expected from a company building it’s first ever assembly line.
    That said, the stock is most certainly priced highly, with all the potential from battery storage priced in.
    As to production ramp-up, so far, Tesla has managed to ramp it’s production to its predicted targets, essentially doubling the production every year, only missing that in 2015 by about 10% due to Model X part supply and line setup issues.

    Tesla does sell well in other markets (Switzerland and even Germany), who do not offer incentives for electric cars.
    The notion of TSLA profiting of the 7500$ incentive is strange. The customers receive that money, and Tesla doesn’t increase its price where that incentive is offered. So it’s the customers who profit, and the question is valid whether someone who buys a 70000$ car needs a 10% rebate.
    I own one, and if I can help it, I don’t ever want to buy an ICE car again.
    Also, your article does not consider where the money goes – Tesla is addressing the biggest problem with long range electric travel, quick charging stations. Other manufacturers rely on governments to define standards and provide infrastructure. Tesla build it themselves and pay for the build. Might (yes that’s an IF) be possible they can monetize this later by licensing this infrastructure to other manufacturers. Because it exists NOW, it doesn’t need a years long rollout such as CCS or other standards.

    Yes, high priced, but in need for a bankruptcy? I don’t think so and certainly don’t hope so.

  22. Very valid points, the accounting is dubious at best. How can you value a battery factory at 50B, it’s under construction, zero profit, and no foreseen profits for sometime. TSLA is like going to Vegas, if Musk can pull it off, shareholders have a chance of winning, if time runs out and the cash is gone, well then, good luck to share holders .

  23. Not getting the purchase with strike price so far out of the money at $100. Can U explain?
    Also Michael, how do financials compare to Amazon that does not make money but keeps going because it can keep raising money in capital markets to go along with giving people what they want without making profits from what i understand?

  24. Can u explain thinking around buying the $100 put which is so far out of the money? saw this on some of ur other recomendations. also how does Tesla financials stack up against Amazon which keeps trudging on for years without making profit? tks

  25. There is, no doubt, a lot of hype in the deluge of emails that come with the subscription to the newsletter — but, often, such is marketing. That said, however, the quality of this writing and the stacked, one-sided bias of this article wasn’t even worth of the sad Fox News Network. I will file this article and revisit the wisdom, guidance and insights offered in the next couple years. Undoubtedly, one of us will be sadly mistaken.

  26. Michael- Perhaps you should consider a stint as a commentator on Fox News or throw your hat in the ring as a ghost writer or press secretary for Trump. Your tone of astonished outrage fits their arrogant, argumentative one-track style of thinking to a T. The world is a tough place for the far right and I’m sorry you have to suffer through so much hypocrisy on the part of The Others. A program of selective deportation and/or extermination of all left wing idiots and Millennial Visionaries should bring you some peace.

  27. John Angelico

    ed dantes on June 3, 2016, at 2:54 pm said:

    this is revolutionary company with a revolutionary product and they need to account for things in revolutionary ways for it to make sense.

    Sorry, but they are producing real stuff. It just happens to be in your opinion “revolutionary.”

    The product may be revolutionary, but their engineering is no more revolutionary than other auto makers.

    Their accounting does not need to match the putatively “revolutionary” heights of the technology they are producing, but it can be as up to date as the rest of the industry , thank you very much.

    This analysis can be verified using public information, so go to it, and assess the company for yourself, but don’t excuse dodgy accounting by relating it to the technology they are producing.

  28. The reality of battery technology limitations will extend in to the next decade. So, the government is subsidizing wealthy Americans to commute to work. How long do you really think that will continue before the electorate demands Tesla to compete or die?

  29. The problem, as always, is timing. I knew the dot-com bust was coming, back when all the boosters, like some on this page, were saying, “no, no, this is a new type of economy, a different economy.” Well, it wasn’t. But, I just didn’t know when it would tumble.

    Similarly, the looming mortgage crash was obvious to anyone watching their home value zoom ever upward, while seeing irresponsible people they knew getting loans with zero down. And, again, the same people with their heads in the clouds were insisting that, “no, no, mortgages are rock solid, the best investment there is!”

    But, when would it happen? How long could powerful interests keep the music playing?

    I knew GM would eventually crater, back when others assured me it was just too big to fail. Well, it was, in a manner of speaking, but only because the politicians decided it was, and rushed to the rescue. So, that is a warning to those who would short TESLA – powerful interests may be able to get Uncle Sugar to prop them up, at least for long enough for your puts to sour.

    Anyway, the thing of interest to me is seeing all the magical thinking going on in the heads of several commenters. There’s one born every minute.

  30. The electric car was the inspiration for the modern automobile, Mrs Benz had one, and it inspired Karl to build a vehicle with a longer range and able to refuel quickly. There were very bright people working on battery technology at that time, and they told Karl that his invention was unnecessary because longer range and faster charging batteries were “just around the corner “, the same thing is being said today, and probably will still be said in another 100 years. Nic Tesla fought the battle of his life to defeat DC power, to have his name on these cars is a insult to a great mind.

  31. Barry, I don’t do much analysis on the fundamental side but, I see Tesla chart (20 year weekly) and it sure looks like a market top to me. There are many heads and the volume is substantially high. I think that stok has just about had it. Next stop I see will be at around forties, back to the base. Obviously, it’s not going to happen next week or next month…. give it some time. Now you put your money where your mouth is and buy a couple of thousands of Tesla. There is no point arguing here. Instead, go ahead and argue with the market.

  32. Ronald Sarson

    Once again the “Liberals” are proving to be anything but “liberal” when it comes to comments they don’t happen to agree with. Please continue with your assessments as you see them. This is not The Washington Post.

  33. The stock isn’t going to crash because a large portion of the people who invest in it believe in the company and are in it for the long haul. Article writers like this (and their sohrt buddies) keep telling people “Time to drop! 1, 2, 3, and! Wait, you didn’t drop it. Let’s try that again.”

    And look at the politics laced into here. He’s really trying to appeal to the right wing green haters – but why would those people ever touch green stock for any reason?

  34. of course Elon Musk has good ideas but I think he is taking advantage of the government’s new interest in sustainable energy so he can get a whole lot of free money in the form of grants and tax incentives

    unless he starts making a real push to get products out for sale either directly or by license agreements he is just going to end up using all the government’s reserves for sustainable energy

    I don’t believe he is an environmentalist , I think he is a profiteer

  35. This article is even more relevant today! The thing one seems to acknowledge is that most of the people waiting to buy their new car will for $35-50K NOT get the $7,500 tax credit they expect to get. Once Tesla sells more than 200,000 electric cars, the credit drops the half than for 3 months and then to 25% of than for the next 6 months. And then the credit is forever gone… unless Congress restores it. If Congress EVER wants to balance the budget, these credits for rich people must stop. When TSLA tanks, the door will not open winde enough for the investors trying to sell their worthless shares.

  36. Rick, if you believe that Tesla’s can not sell without those credits, then by all means, please, put another massive short on them.
    To be fair, THIS TIME, it might come true. At the very least, it will only be a little bit of money lost, as oppposed to those that put a short on back in june for this past Jan.

  37. @Rick in MI

    “….Once Tesla sells more than 200,000 electric cars, the credit drops the half than for 3 months and then to 25% of than for the next 6 months…..”

    This is not the entire picture. Once Tesla sells 200k IN THE US it then has 6 months of unlimited sales in the US for those people to get the tax credit then the credit drops in half in the next quarter. So everyone on the reservation list for Model 3 in the US will get their credit.

  38. Robert Schubring

    The “Model S gross profit deferred due to lease accounting” story raises an interesting issue. In theory, a Model S that was destroyed in a collision or for some other reason was not worth rebuilding for resale, has to be stripped to recover the lithium from the batteries. Lithium recycling is absolutely necessary. Lithium salts are neurotoxic. They’re sold by prescription as drugs for treating bipolar disorder and an overdose of them is harmful. Therefore, nobody can simply pour lithium down the drain and contaminate someone’s drinking water with the stuff.

    Once we grasp that reality, we see that the cost of recycling a Tesla Model S is finite. And the question that follows, is what that cost actually will be.

    Yes, if there’s an accelerating demand for lithium salts, every smashed Model S can get recycled to supply lithium for new lithium batteries.

    What happens when lithium battery demand slows?

    It’s evident that nobody’s quite sure, how to fit all the components of damaged Model S batteries into the manufacturing process at the Tesla Gigafactory and responsibly reuse them, rather than dump them outdoors where they can cause groundwater toxicity.

    So in truth, nobody has a clue what will be the scrap value of a no-longer-running Model S.
    The lithium in the batteries will be worth something. And it will cost something to retrieve that lithium. It will cost extra, to retrieve a high-enough percentage of the lithium, to prevent groundwater contamination.

    The same principle applies to the electrolytic solvent and the porous graphite electrodes in those batteries. Toxic residues of solvent can make the electrodes unsafe to store outdoors. And burning the graphite contributes to carbon dioxide emissions, believed by orthodox Green thinkers and the high priest
    Albert R Gore himself, to cause climate change. This inconvenient truth can be avoided, if most of the graphite can be sliced and trimmed to fit into another battery system and reused. Any electrode material that has to be discarded, is an opportunity to earn carbon-emissions reduction credits, if there’s a safe place to bury the graphite underground, where it won’t catch fire. That, in Green parlance, is “carbon sequestration”. Yes, it can work.

    What’s missing from the analysis, is just exactly how Tesla arrived at the numbers they claim, for the value of the scrap in a no-longer-running Model S. There’s a scarcity of data and experience, at doing any of these steps with smashed Model S cars.

    A century ago, the high tech titan of the day, called General Motors, faced a technical problem with the autos it built. Engines made a knocking noise and lost power, when you accelerated the car under load. They devised a bug fix. A new chemical substance, tetraethyl lead, was to be added to gasoline, to stop the power loss from “knock”. The company’s publicists leapt to promote the new chemical substance, calling it the remedy to a major public health menace. That menace, urban insect populations that lived in horse urine and feces that accumulated in city streets and had to be shoveled up and hauled away by the thousands of tons a day, was genuine and palpable. And what nobody at General Motors considered, is what would become of the lead emissions that came out the tailpipes of their cars.

    As a result, lead is now a common contaminant in the topsoil on which we all depend, to grow our food.

    Yes, it’s always possible to prohibit one health hazard, by compelling people to tolerate another one.

    However, it’s bad policy to do so.

    I’d hate to see a Wall Street bank lobbying for sudden rule changes to how lithium battery recycling wastes are managed, in an effort to stop Tesla Motors from collapsing, and we end up with another environmental catastrophe as the result.

  39. Forget all about the hype. If Tesla cannot sell enough cars(with better reliability) and it continues to borrow the way it has done to date then no amount of credits will save it from the trash can.
    Read the balance sheet and understand the ability of the company to be able to continue to borrow well into the future. Eventually the books have to be balanced and if that does not happen within a reasonable time frame no matter how hard Musk sells his concept the money will stop flowing in and the company will be destined for the same scrap heap as Valeant. Do not bury your head in the sand people there is no free lunch.

  40. Amazing how short-sighted people are. They are also afraid of change. We can’t keep poluting our air with carbon. The EV is the best alternative, now, until something better comes along. As yes there will be failures along the way. These are the true pioneers of the future. Elon believes that we can change for the better. Why not give him the benefit of the doubt.

  41. Your observation that such cars are being bought by the rich (or rather just by rich show-offs) is not just for USA applicable. And the idea that these vehicles will contribute environmental benefits remains with a big question-mark. If they were to sell as hoped/feared, the damage to already scarce resources would be enormous. How would we be living in a world without copper ? Here in Germany it was targetet to have one Million by 2020, but since the buyer-subsidies came on, only about 250 applications for such per week have been handed in, 250 x 52(weeks) x 3 (years) hardly scratches the surface. Your comment about expensive models fits the situation here too.
    Apart from eliminating vital resources, there still is missing a credible value for the emissions reduction. But even if it were 30%, most of the world is ignoring the possibiliies to make existing conventional vehicles less polluting. Even if the 1 Million were to be reached here, but the possibility to reduce fuel consumption by around 8%, and the oil burned by over 50% (so more than halving the fine-dust which is blamed for lung cancer), 1 Million x 35% hardly does anything compared with the ignored 50 Million x 8%. This possibility is being actively opposed, as it also reduces wear, and so sales of spare parts and Service, while extending the life of the treated vehicles. And, now for 7 years, a new Technology for hydrogen is being ignored, which would have fuel production and disribution, and the vehicles, no more expensive that for petrol and ist vehicles,

  42. Bottom line. Unless they can make better quality cars for half the price they are going down. My model S which I have had for nine months is a piece of crap. Build quality less than my last Merc costing half as much. Once real people start to get the M3 (not the fanbois) the fall will start as the populace will realize that the product is unreliable and of lousy quality.

  43. Hedge funds have been short Tesla since it crossed $100 and have been killed. Hard to bet against Elon. The grim financial numbers remind me of Amazon or Facebook early on when they had no revenue. The reliability chart looks like fake news to me. Tesla is the lowest maintenance car I have ever owned. An internal combustion engine has 2,000 moving parts. The Tesla has 18. Need I say more.

  44. I guess Tesla’s just going to make it up in volume. Or maybe they’ll just make up all the numbers, which is almost what they did.

    Based on the suggested options information, I assume this is an old article; the January 2017 puts are expired by now. But this story is the most extreme case of hopium I’ve seen since Charles Ponzi was active.

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