Einhorn Says Tesla Once Again "On Brink of Failure"

-edited

“We believe that right here, right now, the company appears to again be on the brink.”

MarketWatch reports Tesla again ‘on the brink’ of failure, says Einhorn's Greenlight hedge fund.

Tesla Inc.’s “wheels are falling off,” sometimes literally, and the Silicon Valley car maker appears to “again be on the brink” of failure, David Einhorn’s Greenlight Capital told investors Friday.

Hedge-fund titan Einhorn is a frequent Tesla critic who has called Chief Executive Elon Musk “erratic and desperate” and last year compared Tesla’s path to the path of doomed investment bank Lehman Brothers.

While Musk may promise Model 3 worldwide demand of around 500,000 to 700,000, “the reality is quite different,” as demand from the fan base has already been satisfied, Greenlight said.

“If Q1 is any indication, total annual global demand for the Model 3 is 200,000 vehicles,” it said. “We believe that (Tesla’s) poor reputation for quality and service and diminishing tax incentives are limiting broader demand.”

“We believe that right here, right now, the company appears to again be on the brink,” Greenlight said.

“The signs are everywhere, from the lack of demand, desperate price cutting, layoffs, closing-and-then-not-closing stores, closing service centers, cutting capex, rushed product announcements and a new effort to distract investors from the demand problem with hyperbole over (Tesla’s) autonomous driving capabilities,” it said.

Tesla Won't Survive

I side with Einhorn on one point: Tesla will not survive. The company has too much debt and its product is poor.

Timing is another matter. Story stocks survive much longer than anyone thinks, then collapse all of a sudden.

When? I don't know.

Mike "Mish" Shedlock

Comments (54)
View Older Messages
Greggg
Greggg

His whole scheme may have hinged on The Paris Climate -Accord-, I mean Agenda ( better description) becoming a world wide thing. Oh my, it seems to be the center of protests, such a pity. Hearing gasoline at $1.62 per liter ($6.12/gallon) in British Columbia is very popular either.

Tengen
Tengen

The "Mish Editor" spamming the comments has got to be Wagner. Only he would be obsessed enough with Tesla to pull a stunt like this.

hmk
hmk

My own impression is that Tesla faces an uphill battle. The stock is ridiculous, there is no basis other than speculation for it being that high, a story stock. I give Musk credit for trying but I feel he is becoming desperate to keep the company alive. I do feel bad for him. I just don't see a business case for EV's at this point but I believe at some point in the future technology will advance to make it practical and economic. I hope the company survives but hope isn't a good business strategy.

BoneIdle
BoneIdle

Musk should have stuck with the upmarket models and then licenses out his technology to “real automotive manufacturers”.

IMHO as a electrical engineering and company director

Malcolm6
Malcolm6

Like most of you here and Mish, I am a sceptic of Tesla, and of electric cars in general. I personally do not like them. However, my brother, who is an electric car fan (almost a fanatic) bought a Tesla 3 which he has had for nearly a year and loves it. He has had no quality issues, and especially loves the self driving which he has found amazing, and he uses it nearly all the time (he is not stupid and keeps his eyes on the road and his hands on the wheel). My brother, and I are both climate sceptic, so this is not the reason he likes his Tesla. He likes the idea of electric cars because of their simplicity (he is an engineer, I am not), and feels they ultimately should be cheaper than internal combustion. He is also much more optimistic than I am that batteries will continue to incrementally improve. So my position is mainly that it is a very interesting saga to watch. But I am fairly sure that the market cap of Tesla is not sustainable even if Tesla survives.

Jackula
Jackula

Gonna be had on the cheap by Apple or ? next recession at the latest. Smart money sells it now if possible.

Advancingtime
Advancingtime

Thanks for noting. "its product is poor"! With so much new competition heading it way I also contend it is only a matter of time.

CCR
CCR

If your name isn't Apple, Amazon, Microsoft you are on the brink.

KidHorn
KidHorn

IMO, a big issue with switching to electric cars for the masses is the batteries require rare earth elements. Which, by definition, are in very short supply. I don't think electric vehicles can account for say >10% of the market unless and until new battery technologies are developed that don't use rare earth elements.

frozeninthenorth
frozeninthenorth

There is no doubt that many "orders" for Tesla 3 were tax games -- buy a Tesla, get the tax credit and sell the car at a premium...However, there are a few interesting facts (1) There are issues with batteries -- and Tesla is not getting enough, (2) Tesla is "profitable" at least not bleeding money anymore. (3) those who purchased Tesla "knew" they were buying something revolutionary -- and that there are certain risks with such purchases.

Now, Tesla is modifying its vehicle offering, even offering leasing! That shows its a maturing company. Now, Tesla may not survive, there is no doubt that the company has a lot of debt, but I think it's a little early to assume that the company will die very soon. Tesla's ultimate risk is the possibility that it will not be able to refinance its debt. Ok, I buy that, still, the vehicle proves hugely popular and have wide profit margins.

On the tech side the new motors have even fewer moving parts than the old ones, Tesla is saying that its cars are good for 1 million miles and that the batteries should last half that. If the cars are resistant to rust with few moving parts, and that the "maintenance" issues are resolved -- Tesla may be seen as the Japanese cars in the 1980s: they lasted far longer than their American counterparts, they were cheap to repair and cheap to operate.

Don't bet against the guy who makes a long lasting simple and elegant product

Cocoa
Cocoa

TELSA should have licensed the Cloud, AI,software and technology to US manufacturers who can actually build cars. The software is very cool-the performance of the batteries is great. Its not a bad car but it's too much for an independent. If TESLA tanks the US government should nationalize it and license designs out. Building hardware and writing code are 2 different things and TELSA is bad on hardware

llkrea
llkrea

These are similar negative comments I remember seeing for Jeff Bezos in 1999, but I agree that they were justified. It was easy to make the argument that Amazon was a poor investment at the time. But I have learned to trust the person behind the company ... Bezos had a vision ... Steve Jobs had a vision for Apple. I see a similar drive in Elon Musk for Tesla. My high school son (and his friends who are into cars) rave about the Tesla. It has the same mystic and cult following as Apple products. I tried the iphone and iMac (twice in fact) and didnt like either one, but I never bet against Apple. When I hear Musk in interviews, he reminds me so much of Jobs and Bezos back in the day. I simply think the odds of Tesla going under is similar to Apple and Amazon when they were first getting going ... it may seem that the company has a better chance of folding than succeeding, but I have learned not to bet against someone with drive and ambition. Not even the best analyst knows ... and of course this is only one person's opinion. But I think I remember Warren Buffet saying he wasnt investing in Amazon for whatever reason, so take that for what it is.