Before getting into this article just a quick reminder that Wham-O makes Frisbees and Waymo does other stuff related to hubcaps. Waymo is a subsidiary of Alphabet, the umbrella corporation that operates Google. Earlier this week they issued a press release which I shall quote in part:
We’re excited to announce that the California Department of Motor Vehicles (DMV) has just granted Waymo the first permit in the state to begin driverless testing on public roads.
This permit is the result of new DMV regulations that took effect in April, which allow companies to apply for fully driverless testing within carefully defined limits, and is the product of nearly ten years of testing in California by Waymo’s team. It’s the first time that California has allowed tests on public roads of fully driverless cars ― that is, without a test driver sitting in the driver’s seat.
Waymo’s permit includes day and night testing on city streets, rural roads and highways with posted speed limits of up to 65 miles per hour. Our vehicles can safely handle fog and light rain, and testing in those conditions is included in our permit. We will gradually begin driverless testing on city streets in a limited territory and, over time, expand the area that we drive in as we gain confidence and experience to expand.
So if you operate, Uber, Lyft, or Yellow Cab, they’re coming for your job. Uber was just getting ready to go public, darn. They probably will anyway, but…
Folks, I know that I scoffed recently that this would happen and I still do but let’s talk about why.
In a word, my issue is infrastructure. The system that Google seems to be employing is dependent on outside connectivity.
With fully self-driving technology, the car is designed to do all the work of driving and the person in the vehicle is never expected to take control of the vehicle at any time. The National Highway Traffic Safety Administration (NHTSA) calls this a fully automated vehicle. This is the type of technology we are working on.
Cars driving without a driver is their goal. I submit to you that no vehicle can be equipped with the amount of technology needed to do everything that they are attempting. This is part of the reason they need to test in populated areas; this is not just a proof of concept by performing in traffic but a control and connectivity issue. They need to control the operating environment and have rock solid internet connectivity.
If you look under the hood, you will find that these vehicles operate just like your computer at work using a client-server model. The car has the sensors which send data to the server, the server processes the data and then controls the car. Thus like Elon Musk’s Tesla, they are geographically limited to certain areas of operation.
Thus the vehicle is “automated” but not “autonomous”. It does not carry everything necessary to operate in traffic. You can’t go to the local AAA, pick-up a map, scan it into the car, and then tell it to drive to Grandma’s house in Montana.
Once 5G cellular data is deployed, you will see the Google car significantly expand its driving area on the above map but like electric vehicles, it is a limited technology.
Despite what some fan boys have told me about how ingenious Elon Musk is, Tesla is once again in the news for blowing smoke. Being that they make electric cars, that in itself is quite a feat.
Following the recent spanking by the Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI) is looking into Tesla for lying to investors.
Federal Bureau of Investigation agents are examining whether Tesla misstated information about production of its Model 3 sedans and misled investors about the company’s business going back to early 2017, people familiar with the matter say.
Action in the criminal investigation, headed by the U.S. attorney’s office in San Francisco, has intensified in recent weeks after the Securities and Exchange Commission settled separate civil charges with Tesla and Chief Executive Officer Elon Musk, the people said.
Tesla had disclosed on Sept. 18 that it had received a “voluntary request” for documents from the Justice Department, 10 days before the company and Mr. Musk struck a settlement with the SEC of civil charges on in a separate case involving controversial tweets from Mr. Musk. But it hasn’t been previously reported that the Justice Department is focusing on Tesla’s Model 3 production issues dating to early last year and that the criminal securities-fraud probe is intensifying.
In February 2017, after reporting fourth-quarter 2016 results, Tesla laid out an aggressive production plan to bring out the Model 3, with plans to ramp up to 5,000 vehicles a week in the fourth quarter. On a conference call that month with analysts, Mr. Musk said he was pushing suppliers to be ready for a weekly run rate of 1,000 vehicles in July to 2,000 in August and 4,000 in September.
A few months later in July, Mr. Musk sounded confident that Tesla would be producing 20,000 Model 3s a month in December 2017, in line with his previous pledge of having 5,000 vehicles a week by year’s end. “Looks like we can reach 20,000 Model 3 cars per month in Dec,” he tweeted on July 2, 2017, days before the first Model 3 rolled off the production line.
Tesla ended up producing 2,700 Model 3s for all of 2017, and 793 in the last week of 2017.
Now the FBI is comparing the company’s statements with its production capability during 2017. Authorities are homing in on whether the company made projections about its Model 3 production knowing it would be impossible to meet the goals, people close to the situation say.
Give Musk’s erratic behavior recently and his supposed genius I.Q. it makes me wonder if he wants to be kicked off the Tesla Board so when the proverbial wheels fall off the company he can avoid the blame. I don’t recall that being the captain’s strategy when the Titanic hit the iceberg but then again you can only go down with your ship once.
I was invited to a social function last Friday to celebrate the fall ritual of Octoberfest. I engaged a person that I know at the party in conversation. The subject of Elon Musk came up, partially because the person hosting the party just purchased a Tesla. I recounted the production difficulties, Elon getting kicked off the board of his own company, and the quality control problems of Tesla which are well documented. Boy did I get an explanation from an alternative world.
I was told that Elon Musk was screwed by the big three automakers because they fear him. The reason his manufacturing plant is not producing enough units (cars) is as follows:
This person told me that he knows for a fact that the company that sold the manufacturing robots to Tesla purposely sabotaged the equipment, so it would not work. He claimed that Tesla hired a South Korean company to rewrite the robot’s software and that the manufacturing problems have been resolved. He assured me that Tesla is exceeding its manufacturing goals and is really making money hand over fist.
I asked about the Wall Street Journal article and others stating that most cars were defective and required repairs, before they could be sold. Also, that Tesla is not making enough units to be profitable. He told me that this too is due to the Detroit automakers controlling the media because they spend so much on advertising that they have arranged it so that Tesla only gets bad and untrue reports in the popular media.
At this point, I’m thinking this guy is channeling Preston Tucker.
Preston Tucker
I asked about our friend’s car. “Yeah he likes it,” I was told, “It did have a defective paint job, but they fixed it right away and now everything is great.”
I commented that there is not enough infrastructure to make Tesla the car of the future. His spin was that Tesla’s will be people’s second car i.e. commuter car and everyone will own one.
He then brought up the subject of self-driving cars. I was promised that self-driving cars would be widely available in five years. The commuter lanes would be only for self-driving cars and they would be computer controlled and drive 120 miles per hour and be four inches from the car in front of them. They would be like impromptu trains that speed up and down the freeways (think NASCAR on steroids.)
I was assured that in five years it would be commonplace to see vehicles with no drivers or passengers zipping around the highways and byways of America (Think Jetsons meets Bladerunner.) I asked about the many wrecks of self-driving cars and was told that once again it was just bad public relations. I was assured that every Tesla crash was driver error even when autopilot was engaged. He assured me that other companies have technology far beyond what Tesla is using and they are ready to deploy it now.
My comment was that humans are better drivers and that you can’t have a mixture of humans and robot piloted vehicles on the same roadway. He laughed and said the computers were far safer drivers and stopped just short of saying that we would all have to surrender our driver’s licenses. He just said that the next generation will not even have a license because computers will be driving everything real soon.
So, there you have it. Cue Rod Serling’s voiceover because the way that conversation went, I think one of us was “in the Zone…”
The Securities and Exchange Commission (SEC) has issued the following edict:
Elon Musk has been forced to step down from the Board of Tesla but he will remain CEO. Translation, he is figurehead of the company but can be out voted if he wants to do stupid stuff.
Within 45 days, an independent chairman will replace Musk, who will be ineligible for reelection for the next three years. Tesla will also be required to appoint two new independent directors to its board, in addition to putting into place controls to oversee Musk’s communication.
“You’re a legend in your own mind.”
—Clint Eastwood as Dirty Harry in Sudden Impact (1983)
Elon Musk is not just a legend in his mind but for many that uncritically accept his claims. Musk follows the axiom of selling the sizzle not the steak . The difference is that Musk is finding that he can’t deliver and a few folks that he has bewitched are waking from their stupor to find that reality is a cruel thing.
Is Tesla really the future?
Below are some quotes pulled from a New York Post story on Musk and Tesla.
Musk is walking a razor wire, another source says, between the things he’s promising and the things he can actually deliver. Until recently, Tesla investors and employees bought into Musk’s vision, even though Musk was “saying things that don’t make sense, because he’s accomplished so much.”
“He is very difficult to move off his stance,” says the source. “He’ll say, ‘The car can do X, Y or Z,’ And yes, that is possible — two decades from now,” the source said. “He bases his argument on the physically possible rather than the practical reality.”
One insider … says that when Musk tweets about a new functionality or feature, it’s often in response to a fan who has asked when such a thing might be available. Musk, says this source, will often email the tasked department, then tweet back to the fan the date it will be done, no matter how unrealistic the request.
Meanwhile, Tesla’s current great hope, the (relatively) affordably priced Model 3, is having its own issues, as is the sales force responsible for moving them.
On Tuesday, Business Insider reported that although Tesla hit its production goal of 5,000 Model 3s by the end of June, 4,300 of those vehicles required substantial fixes. That’s 14 percent making it through “first pass yield,” or an initial production line that requires no fixes at all.
This Tesla employee isn’t surprised.
“The Model 3s come in [to the showroom] scratched or damaged,” he says. “They don’t fit together properly. If you look at the panels, they’ll be mismatched. They won’t line up.”
On Thursday, Business Insider reported that Wall Street analysts tore apart a Model 3 to find multiple failures, including “inconsistent gaps & flushness throughout the car, missing bolts, loose tolerances, and uneven & misaligned spot welds … The results confirm media reports of quality issues & are disappointing for a $49k car.”
Even as doubts fester within Tesla’s factory walls, few want to believe the trajectory may be downward.
“Elon emails us directly, saying ‘We’re on top, we’re going to prove [everybody] wrong,’” this employee says. “Everyone realizes it’s f–ked up, but everyone’s afraid of losing their job before Tesla ‘hits it big.’ It’s a mess.”
Elon Musk and his fantasy car company Tesla were in the news with a strange story. It reminded me of the movie Tucker when the 1950’s car company was taken to court for ripping off investors for selling dealerships with no cars. In the days leading up to the trial, Tucker and his band of merry men, cobble together 50 cars to show that he had production capability and his business model wasn’t a scam. Tucker rolled the 50 cars onto the grounds of the courthouse and lost his company anyway. These 50 cars are still in existence today and are among the most desirable collectables.
Tucker: The Man and His Dream
Tesla Background
Tesla is burning through its cash at an unsustainable rate. Their credit and stock have been downgraded. Then media reports surfaced a week ago that orders for the Tesla car for the everyday person (Model for $35K) were being cancelled faster that new orders were coming in. Tesla has never hit their promised production goal of ten thousand cars per week.
Early this morning, analysts at the New York-based investment banker downgraded Tesla shares from hold to underperform (Wall Street-speak for “sell”). Needham cited several reasons for its newly bearish stance on the electric-car maker, as outlined in a report on StreetInsider.com
Complicating matters further, Needham notes that its “checks” on the market show that Tesla is experiencing net cancellations of Model 3 orders by customers as “refunds are outpacing deposits.” The analyst believes this trend is accelerating, with as many as 24% of would-be buyers now asking for their money back.
In a coup de grace, Needham ends with a point on Tesla’s cash burn.
Tesla burned through $4.1 billion in negative free cash flow last year—twice its $2 billion reported loss and more than twice the $1.6 billion in negative free cash flow it suffered in 2016, according to data from S&P Global Market Intelligence. Faster Model 3 production is supposed to mitigate cash burn, but Needham believes Tesla will still go through a further $6 billion “through 2020.”
The analyst also notes that Tesla has a $1.5 billion debt payment coming due in 2019. Although Tesla has enough cash in the bank ($2.7 billion, according to S&P Global figures) to cover that payment now, continued cash burn will eat away at it, meaning that by the time Tesla’s debt comes due, it may not have cash on hand to pay it. That implies additional debt issuance (i.e., paying debt with more debt) or stock sales (i.e., dilution) may be necessary to keep Tesla solvent.
None of this adds up to much of a buy thesis for Tesla stock—but it may justify a sell.
In addition to the above, Elon Musk has been saying stupid stuff on Twitter; especially about the divers that saved the cave kids.
At a crucial juncture for the company, which is struggling to show it can mass-produce an electric sedan and generate cash, Musk has tangled very publicly with government regulators, stock analysts, journalists, former employees — even the creator of a farting-unicorn coffee mug.
On Sunday morning, after a rescue diver took to CNN to criticize as a “PR stunt” Musk’s offer of a small submarine to transport a Thai soccer team out of a flooded labyrinthine cave, Musk called the man a “pedo” on Twitter — short for pedophile.
Musk soon removed the tweet but not until the unsubstantiated slur had ricocheted around the world. The diver told reporters he’s thinking about suing Musk.
Tesla has yet to officially comment on Musk’s accusation. Thus far, Tesla’s board of directors has been silent on the matter. But on Monday, Tesla’s stock fell 2.75%, to $310.10. It is down 14% since Musk announced on July 2 that Tesla had hit a goal of producing 5,000 Model 3s a week.
Musk’s confrontations come as he continues to struggle to fix crippling production problems with the Model 3 electric sedan, which Musk regards as a “bet the company” proposition.
The production goal Tesla hit earlier this month lags far behind earlier benchmarks set by the company. In August 2017, Musk told stock analysts there should be “zero concern” the company would hit 10,000 Model 3s a week by the end of this year. The calendar says that’s still possible, but he’s currently struggling to sustain the 5,000-a-week rate.
Meanwhile, the company’s cash pile continues to shrink. When a section of the Model 3 assembly line was shut down after Musk — who is not only the company’s chief executive but also its chief engineer — failed at an aggressive attempt at robot automation, he set up a tent in a parking lot at the company’s Fremont, Calif., factory to handle the overflow, with partly finished car bodies transported from factory to tent on tractor beds and forklifts.
Tesla Yesterday
Portions of the Internet blew-up yesterday when it was announced that some enterprising fellow on Twitter had found a whole lot full of thousands of Tesla cars. Shortly thereafter, another bunch was found in another city.
Aerials of the facility identified earlier today at 500 E Louise Ave, Lathrop, CA…more to come, but I didn’t want to make people wait any longer to see the big picture.
Yesterday, several Twitter sleuths uncovered two parking lots, in Lathrop, California, and the other in Burbank, California, at which several thousand Tesla Model 3s are being stored.
The thousands of Model 3 cars are jammed together on dusty lots, baking in the California sun. Approximately 2,500 in Lathrop and another 2,000 in Burbank.
And what ever could be the reason for Tesla storing hundreds of millions of dollars of inventory in dusty lots when it instead could be converting the cars to cash, given what it claims is strong demand?
Is it logistical chaos? Do the cars need rework? Is it all part of some grand plan?
I don’t have the answers, but the questions are not going away.
Tesla’s (TSLA) grand plan was to avoid hitting the magic 200,000 federal income tax credit limit in Q2. To that end, Tesla would stockpile cars near the end of Q2 so it could unleash them in Q3, as every car it delivers in the U.S. in Q3 and Q4 will qualify for the full credit.
Tesla evidently executed the first part of the plan, stopping just short of the 200,000 number as June ended, reporting more than 11,000 Model 3 cars in transit.
So, is this just a tax dodge? A Tucker moment to boost faith in the company or what? Remember that Musk has been cutting employees in some parts of his empire and working others like dogs. Tesla has been promising production numbers of ten thousand units a week for the last several years but has failed to deliver. They also absorbed the debt from Solar City. And as shown above, he is in bad shape.
As I was researching for this blog, I found an opinion piece that expresses what I was about to say so I will just quote it. This was published earlier today.
One disastrous tweet has finally revealed Elon Musk for what he is: a fraud.
Enraged that a British cave diver called his idea to rescue the Thai soccer team for what it was — “a p.r. stunt [with] absolutely no chance of working” — Musk took to Twitter and called him a “pedo.”
Just like that, Tesla’s market value plummeted by $2 billion.
Musk has been in business since 2002. His stated goal is nothing short of transforming humanity through his products: his electric cars, space travel, and an underground high-speed Hyperloop system.
He has yet to succeed at anything but somehow spins every failure into proof of imminent success. His only accomplishment has been this decades-long Jedi mind trick.
Tesla is best known for blowing deadlines and consistently falling short on production.
In November 2017, Bloomberg reported that the company burns through $500,000 per hour. For two years now, Tesla has been suffering an epic talent drain and in May, two top execs — one the liaison with the National Transportation Safety Board — walked out the door.
Tesla was founded in 2003, but the world’s largest automakers quickly surpassed Musk’s vision for electric vehicles. Tesla will never catch up. Shareholders are finally catching on.
So should the government, which reportedly gifts Musk’s companies with an estimated $4.9 billion in subsidies.
Star investor Jim Chanos called Tesla a “walking insolvency” back in 2016. He doubled down in December, saying Tesla is “headed for a brick wall.”
What Next?
Musk is playing games with the Tesla company and that is nothing new. He is a cross between P.T. Barnum, Preston Tucker, and the fictional character played by Danny DeVito in “Other People’s Money”. Musk is using other people’s money to bring a utopian energy dream of environmentalists and Leftists of many stripes to fruition. The reality is that Musk is ultimately going to live or die in the free market. Every time the Establishment types bet on winners and losers, we all lose. Musk is a dreamer and an idea guy. What he sells is smoke and mirrors, the realities of making a profitable product on such a large scale are beyond him but as long as he can keep people investing in the pyramid then it keeps going.
The fact that there is no infrastructure to keep the electric car business running is something people are willfully neglecting. You don’t have the freedom to drive Tesla cars anywhere you want. Even in states like New York and California, most of the state has no ability to charge electric vehicles. Also, where is all the electric generation to keep such a fleet of battery operated vehicles going to come from? Especially when most folks will want to charge their cars at night. These same states are outlawing every known electric generation method in existence with the hope that solar and wind will be the answer. But that’s my point, there is no existing reliable form of energy production except technology based on nuclear or hydrocarbon fuels. Liberal energy policy is based on bad science and wishful thinking.
The self-driving technology employed by Tesla is a class action lawsuit ready to happen. Sooner or later the government is going to be forced to confront Musk for the safety record of his vehicles. Currently, government is trying to shelter him from the consequences of the deaths caused by failures of his system. How many deaths does it take to call the Tesla product defective? Other automakers and insurance folks are watching this aspect of the Tesla company. This might be the path to the financial ruin of one Elon Musk.
Elon Musk’s dress rehearsal for leaving his troubles behind
That Musk appears to be playing games with Washington to keep the Federal tax credit in place is disturbing. Again, at some point the government giveaways will end and he will have to stand on his own two feet. Some day soon, the free market will decide Musk’s fate. Donald Trump winning the 2016 election was his worst financial nightmare. Had Hillary Clinton won, the floodgates of government incentives would have flowed to Musk for decades. California’s mandate that all houses built after 2020 must have solar will benefit Musk but it’s not enough to bail-out the Solar City albatross that he wrapped around the necks of Tesla investors.
Musk is running out of time, money, and excuses. Lucky for him, Mars is a nonextradition planet. At least he might utilize SpaceX for a unique exit strategy for his financial problems.
By now you should know X always has his smoking gun aimed at someone. I’ve even been made abreast of the fact that some citizens of this republic are sleeping with both eyes open instead of just one. If you need another reason to be vigilant and join their ranks ponder this next…
I want to train my fire on one Elon Musk, the CEO of Tesla. Turn on a finance show, read a paper, or just listen to small talk and you hear people placing this guy in the same category as Bill Gates, Steve Jobs, Warren Buffett and Larry Ellison. I have never really understood it, Gates, Buffett, Ellison, Jobs were all great innovators and leaders of companies that essentially print money to this day. Hence as William laid out in a different post they are all quite wealthy. Musk on the other hand runs a company (Tesla) that is basically doing what Amazon.com does; they are selling what is essentially their take on the future.
Tesla—if you’re wondering—is behind the electric cars that you see every once in a blue moon on the road. Also they own a network of charging stations, mostly in California. However, Tesla has never managed to be profitable, yet their stock has surged over the last few years. I wondered aloud, why is this?
I must say I am fascinated by Musk in the same way other people are. He speaks eloquently and always talks like a slick sales man selling a promise of prosperity just beyond the horizon. He has some very innovative ideas like trying to make an all-electric car go mainstream. He wants to take cars to space through his SpaceX program, and bought SolarCity—who is the largest solar panel provider in the USA.
Here is where the fascination stops and reality sets in. Musk fancies himself as an Amazon.com style disruptor, truth be told he is anything but. SolarCity is run by his cousins, both of whom just left the company I may add. Also in 10 years of operations, despite being the #1 rooftop solar company, they have yet to turn a profit. Tesla is simply promising a future that is unrealistic at best and the next Enron/Solyndra/Fisker at worst. In a daring and in my mind foolish gambit, Musk rolled all the SolarCity debt into Tesla just to keep his empire afloat.
Allow me to explain my thesis. Musk and his corporations are fully subsidized by you and I; Joe Taxpayer. Why do cities and states keep sending money to Musk, especially since it’s a failing enterprise? Easy answer, Musk is very good at playing the game! He is very close to the Governor of New York, Andrew Cuomo. This relationship paid off handsomely; the state gave SolarCity $750 million to build a large factory and only charges SolarCity $1 a year for rent. Seems pretty lucrative for a company that still cannot post a profit. SolarCity and Tesla don’t just play in New York, they have been very active in California, Arizona, and a handful of northwest states. (Of course California is fertile ground with funding sources like AB-32—thanks Arnold) Reno built a battery facility for his Tesla subsidiary that I am sure was at a cost very little to Musk.
In total, Musk and his cronies have received north of 5 billion in subsidies and tax breaks over the past decade, a total that interestingly enough amounts to about half of Musk’s net worth. However that’s not even the most brazen thing Musk has done.
Danny DeVito in poster for 80’s movie Other People’s Money
Now Musk is playing in the political game. He donated over 3 million into a race for public utility commissioner in Arizona. He was the only donor. I’m sure he is getting his people on the commission to advance his SolarCity subsidiary. He can’t afford another fiasco for SolarCity like Nevada. Source: Nevada solar power collapse
My issue: he is doing this lobbying with money taken from the taxpayers. Musk is enriching himself while making the public responsible if he fails. Great gig, where do I sign up?
So why does the stock of Tesla keep going up if it is a Ponzi scheme? Easy answer, right now the words “disrupter” and “green” are buzzwords that are dominating the political and financial scene. Musk as I mentioned earlier is very gifted at promising investors and politicians that success is literally just beyond that corner or just over that horizon. Most all of these political and consultant types eat this stuff up; hence Musk is able to get a factory in Buffalo, New York for free, or a battery plant for next to nothing in Reno. Musk is the current poster child for the Liberal belief that government creates jobs.
Wait until Gavin Newsome gets elected in California, the money spigot may not shut off for 8 years! Chiefly my concern is this, while electric cars may be the rage and solar may be good for the environment, why are we continuing to allow the government pick and choose what type of business succeeds in this country? This is because the liberals are able to successfully convince other politicos in the room to vote their way every so often. The Left in this country have a vision; Obama tried it with Solyndra and Fisker. Liberals would love to see everyone driving a Tesla Model S and have rooftop solar everywhere thus eliminating utilities and pollution emissions. As long as Musk is able to continue buying himself more time and earning more subsidies he will eventually become too big to fail, think that is his end game?
When Enron, MCI, and World Com failed, investors and those affected said they wish they would have known sooner. This was their warning then and mine now, I personally would not touch this company with a 100 foot pole. If you need more proof go to your local Home Depot, watch the SolarCity rep chase customers around the store in a desperate attempt to sign-up new clients. Oh, and if you do sign on the dotted line, don’t forget, Musk gets all those government tax rebates for “going solar”, you just get a bill for the next 30 years to pay your solar lease because he owns the equipment on your roof. It may not save the planet, but it allows Musk to live another day off of taxpayers like you and me.
