Tesla(NASDAQ:TSLA) Does Not Know How to Make Cars

Tesla(NASDAQ:TSLA) Does Not Know How to Make Cars
 Tesla(NASDAQ:TSLA) Does Not Know How to Make Cars

$TSLA, $GM, $TM, $VLKAY, $RACE

Tesla (NASDAQ:TSLA) weekly spins the market an amazing string of hyperbole from the smirking mouth and rolled up eyes of CEO Elon Musk, from ankling C-suite executives and disgruntled factory workers.

And that friends is great for Tesla’s legion of scalping day traders in it very overvalued stock, even though the fact is that Tesla, in its core mission, making cars, does not know how to make them.

The Big Q: Why?

The Big A: Baffling!

Tesla, Inc is a very tiny speck on the windscreen of the world’s real carmakers, and that is the existential problem that Tesla Bulls avoid.

The company is so small and owing to its extraordinary cash outflows getting smaller minute by minute.

Tesla’s $55-B market cap is  is beyond rationalization ply impossible, there is no rhyme, reason or math for that.

The Key issue facing  Mr. Musk’s rentier (Marxist capitalized) business Tesla, is the company’s reliance on off-line assembly to produce its vehicles.

Off-line assembly aka rework, is very costly, as the core profitability of any automaker is based on line speed, i.e. the number of units produced per shift. Tesla’s then are essentially hand made cars from used parts.

Last week it was reported that Tesla’s use of re-manufactured parts does not reconcile the notion of re-manufactured parts being used on new vehicles, it has been rumored that Tesla actually does this.

Tesla’s Fremont, Calif. assembly has a really bad reputation in the auto industry, and its JV with Toyota (NYSE:TM) was a rank failure.

Check out the NUMMI (the GM/TM-TSLA tie-up) for any of you really interested in the real happening at Tesla it is a must.

The more you study Tesla, the more you learn that Tesla’s management does not how to build a car and make a profit.

OK, people have told me that Tesla’s Model S has performed well in quality and owner satisfaction surveys, but the Model X has not, and it seems that once T-EV leaves the Fremont plant it is overall fine and dandy, until something happens, like an exploding battery, or a faulty plug in.

Getting from the idea of a revolutionary EV to the finished product is supposed to produce a ROC (return on capital) Tesla never has done that basic business task.

But, Tesla has produced negative EBITDA in Q-4 for the 2nd frame running. and that is just unheard of in business of automobile manufacturing.

Ferrari (NYSE:RACE) produced an EBITDA margin of 30.8% in Y 2017 and soon-to-be-public Aston Martin posted a 23.6% figure.

In contrast Tesla’s $1.6-B of negative EBIT in Y 2017 was matched by the company’s $1.6-B of depreciation and amortization.

So, Tesla’s EBITDA margin in Y 2017 was Zero, NADA! It is not sustainable.

Tesla burned $3.5-B of cash in Y 2017, and with the Model 3 still in what has been dubbed Manufacturing Hell.

Archive this: there will be No improvement at Tesla in Y 2018.

Let’s look at Tesla’s role in disrupting the world of automotive/truck transportation

If you believe in electrified power-trains then look to the most advanced automaker in the world Volkswagen (OTCMKT:VLKAY) masterful presentation in Berlin last week on VW’s plans to introduce an army of battery-powered vehicles by Y 2025.

If you believe in the future of autonomous driving lookr to General Motors presentation from December on GM’s strategy to exploit autonomous mobility.

These are fact-based presentations, but the stock market does not always consider facts and especially in Tesla’s case that is a fact.

The facts about Mr. Musk and Tesla is that he and the Company do deliver unfulfilled promises constantly, and Mr. Musk is a faux-visionary who has never proven that he can produce a profit making cars, let alone produce a positive return on that capital.

If you believe in that stuff then perhaps if you do not already, you should own Tesla stock.

But, remember that all rentier businesses fail, Tesla, like its namesake Nicola Tesla, will too.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 325.6 15 March 2018 -1.03 329.38 332.85 321.1 6,564,800
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Neutral (-0.19) Bearish (-0.26) Bearish (-0.29) Neutral (-0.03)

Have a terrific week

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

4 Responses to "Tesla(NASDAQ:TSLA) Does Not Know How to Make Cars"

  1. Jacques B Poirier   March 18, 2018 at 2:30 pm

    Polymath? more like a self-promoting Poly the parrot, repeating all the negatives to enhance an apparent brilliance. We support Elon because he has an unlimited capacity to make us feel good about life on earth, the country, California, ourselves. This writer is a defective fountain of enlightenment, spewing vinegar to thirsty like-minded readers attracted by the title. Go Elon, we back you with our hearts, minds, purchases, and investments!. We are creativity-addicts and problem-solving-fans. We have scorn for those who lack this special kind of appreciation.

    • Shayne Heffernan   March 19, 2018 at 12:39 pm

      We are creativity-addicts and problem-solving-fans, find a creative way to solve the problem of this becoming a real company

      • Paul Ebeling   March 23, 2018 at 6:02 pm

        Thank you Shayne, it amazes me how Elon Musk, a Marxist capitalist, running a few rentier businesses has captured the imagination of a small segment of people and convinced them his way will work, when the history of that method of business has Always failed wherever it was attempted. All the best, Paul

    • Paul Ebeling   March 23, 2018 at 6:04 pm

      Mr. Poirier,

      It amazes me how Elon Musk, a Marxist capitalist, running a few rentier businesses has captured the imagination of a small segment of people and convinced them his way will work, when the history of that method of business has Always failed wherever it was attempted.

      And yet those of you who follow this hypmeister, have no respect for the facts, and mock the people who do.

      Paul Ebeling

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