The Cult of Tesla

teslacult

As someone rather detached from the automotive world — in other words, someone who considers cars to simply be tools and not extensions of identity — the fervor surrounding debates in the industry often seems strange to me.

Why so much psychological investment in the outdated idea that electric vehicles are crap and can’t compete with internal combustion engine (ICE) vehicles? Or, for that matter, the idea that electric vehicles can function as some kind of savior of humanity and preclude the need for fundamental changes to social/industrial systems if anthropogenic climate change is to be limited in any real way?

Ex-GM, -BMW, and -Chrysler exec Bob Lutz is a case in point. It seems like every chance he gets, he goes off on some rant about Tesla, CEO Elon Musk, or electric vehicles in general, rants that often don’t have anything to do with the facts of what he’s discussing.

His most recent rant, on CNBC, featured the claim that: “Tesla supporters are like members of a religious cult. Just like Steve Jobs was worshiped at Apple, it’s the same way with Elon Musk, who is seen as a new visionary god who promises this phantasmagorical future, a utopia of profitability and volume. The only problem is, Steve Jobs delivered and Elon, God bless him, hasn’t delivered a thing, except increasingly negative cash flow, and an increasing lack of profitability; more and more capital spending.”

Hasn’t delivered a thing? What world is Lutz living in? I’m by no means a fanboy of any kind, and yet I can easily say that no one out there is doing anything similar to what Tesla and Elon Musk have been doing. The all-electric firm has been a wrecking ball to the automotive industry. And its efforts appear to be picking up more and more momentum every year.

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Interestingly, the CNBC coverage, which was published before Tesla’s release of its Quarter 3 2016 results, included this bit: “Tesla is set to report third-quarter results Wednesday after the closing bell. The electric automaker is projected to post a loss of 54 cents per share on revenue of nearly $1.98 billion.”

Well, they weren’t quite right with that “projection,” were they? Whose bets were being set up by those “projections?”

Here are a few more of Lutz’s comments from the interview: “I just don’t see anything about Tesla that gives me any confidence that that business can survive. The last time I checked, (Tesla’s) quarterly cash burn is about $250 million. For a company that size, that’s horrific.”

And: “Every time (Tesla) gets a $500 million injection from a new stock sale or a $750 million injection of new money, it lasts them two or three quarters. This is a problem that volume can’t fix. … If you’re in a variable loss — that is, you’re not recovering labor and materials in your sale price — then doing twice as many, or three times as many, or four times as many (sales) doesn’t help. The losses just get bigger and bigger.”

Since when is Tesla not recovering production costs on its vehicles? Where does Lutz come up with this stuff?

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CleanTechnica

Define Irony: A cultist ridiculing, in a cult-like manner, a critic of his cult.

Mr. Ayre stipulates to “rather detached from the automotive world” and then zealously defends Tesla from Mr. Lutz’s factual statement:

“Tesla supporters are like members of a religious cult. Just like Steve Jobs was worshiped at Apple, it’s the same way with Elon Musk, who is seen as a new visionary god who promises this phantasmagorical future, a utopia of profitability and volume. The only problem is, Steve Jobs delivered and Elon, God bless him, hasn’t delivered a thing, except increasingly negative cash flow, and an increasing lack of profitability; more and more capital spending.”

The basis of Mr. Ayre’s criticism is the fact that Tesla managed to beat the analysts’ Q3 2016 forecast of “a loss of 54 cents per share on revenue of nearly $1.98 billion”  and posted a profitable quarter form only the second time in its glorious history.  I would venture a guess that the “automotive world” isn’t the only world from which Mr. Ayre’s is detached.

In three of the past four quarters Tesla fell short of the analysts’ projections, including Q4 2015, when analysts projected a minuscule profit…

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Source: Yahoo! Finance

More importantly, as the lower panel demonstrates, Tesla’s annual net loss has been growing geometrically.  Without a continuous infusion of new capital, Tesla would cease to be a going concern rather rapidly.

Telsa Operating Income (Loss), Thousands of USD

2013  ($61,283)

2014  ($186,689)

2015 ($716,629)

Tesla Cash Flow From Operating Activities, Thousands of USD

2013 $264,804

2014 ($57,337)

2015 ($524,499)

Through Q1 and Q2 2016, Tesla’s operating income and cash flow have also been negative.

The “quarterly cash burn” of $250 million may not he exactly correct, but Mr. Lutz is spot-on here…

“I just don’t see anything about Tesla that gives me any confidence that that business can survive. The last time I checked, (Tesla’s) quarterly cash burn is about $250 million. For a company that size, that’s horrific.”

And here, if you include all operating costs…

“Every time (Tesla) gets a $500 million injection from a new stock sale or a $750 million injection of new money, it lasts them two or three quarters. This is a problem that volume can’t fix. … If you’re in a variable loss — that is, you’re not recovering labor and materials in your sale price — then doing twice as many, or three times as many, or four times as many (sales) doesn’t help. The losses just get bigger and bigger.”

All companies have to include all operating costs when reporting operating income.  There is no special accounting exemption for being green.

Mr. Ayre’s laid out the best evidence for the Tesla Cult here…

Why so much psychological investment in the outdated idea that electric vehicles are crap and can’t compete with internal combustion engine (ICE) vehicles? Or, for that matter, the idea that electric vehicles can function as some kind of savior of humanity and preclude the need for fundamental changes to social/industrial systems if anthropogenic climate change is to be limited in any real way?

Clearly he is so deluded that he thinks the climate will behave for Elon Musk and “that electric vehicles can function as some kind of savior of humanity.”

About Telsa’s Q3 2016 “Profit”

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One day after Tesla said it earned 71 cents a share, adjusted, in the third quarter, several analysts poked holes in the company’s unexpected profit and revenue beat.

While acknowledging that Tesla had a good quarter, JPMorgan analyst Ryan Brinkman told investors that his team saw “one reason why the [third-quarter] earnings report is not as good as it looks, and another reason why it might not be as good as it looks.”

Brinkman’s issues were both tied to Tesla’s revenue beat. The automaker’s results included just under $140 million in zero emission vehicle credits, which are handed out to companies for selling zero-emission cars. That’s far higher than many analysts had forecast.

The JPMorgan analyst, for example, had expected the automaker to generate a mere $25 million from these credits. Tesla recognized a negligible amount of revenue from ZEV credits in the previous quarter.

Changes the company recently made to the way it reports revenue could be another reason its sales beat analysts’ forecasts by such as wide margin, Brinkman said. Revenue came in at $2.3 billion versus a consensus estimate for $1.9 billion, “even though the approximate number of deliveries in the quarter was known ahead of time.”

“We feel the difference clearly relates more to the change in accounting than it does to [average selling prices],” he said.

Tesla made this change to bring itself closer in line with GAAP accounting standards.

[…]

CNBC

The difference between the projected loss of $0.54 and an the reported profit of $0.71 per share was $400 million in revenue.  $140 million of which was corporate welfare (ZEV credits) and the rest due to lower capital spending and a change in accounting methods.

While I think Tesla’s are really cool toys, engineering masterpieces, and that Elon Musk is a brilliant person, the cult-like worship of the car and the man is one more reason to think that green ribbons are very appropriate for mental health awareness.

Source: https://wattsupwiththat.com/2016/11/02/the-cult-of-tesla/ 


 

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