Reasons TSLA may not do well

[Goudvisje]

Most people on this board (and I include myself here) are positive on Tesla the company and its car. However, contrary to many here, I am not as positive on TSLA, the stock. In fact, I just gave a short order on the stock. However, I must admit I am not very confident in my decision and I am going to monitor it quite closely to close it quickly if losses become to big. My main motivation to take this position right now is that the next significant milestone for Tesla is the introduction of the Model S in Europe. However, I don't think it will be as well received in the European market as in the US. In my opinion there are several reasons :

• Europe is behind in the economic cycle, leaving consumers with less confidence in purchasing big ticket items.
• The larger size of the Model S makes it a less attractive car for the European market
• A lack of supercharger network leaves a main issue on the table. This is especially problematic for European households that generally have fewer cars, meaning they do not have an alternative gas guzzler for the occasional longer road trip
• Tax incentives are not as generous in many parts of Europe as they are in the US
• No zero emission credits for cars sold outside of the US states with that particular system
• In many European markets, especially Germany, electricity is relatively even more expensive than petrol
• The always online approach as part of the car experience is more difficult/expensive to realize in a fractured telecom market with high roaming charges
• A few larger markets (Germany/Italy/France) have not seen a lot of reservation activity

What do you think about my arguments. Are they enough to warrant a price correction? Or do you think the strength of the American market will offset these weaknesses? Or am I wrong and are those weaknesses not that important for European consumers?

 

[Norse]

Seriously, do not worry about demand. Atleast not for the first 3-4 years. If you are gonna short, dont do it now. If you order a car from Norway now, you will probably have to wait for atleast half a year. It is also the safest car in the world. There are loads of People in Europe who wants big cars. In London you would have to pay 10£,(15$) each day you drive thru the city. Some countries and cities does not have as good tax incentives, but that will come. In some years the batteries will become cheaper, and EV will have an advantage over ICE cars without tax incentives. Remember there has been no advertising anywhere, so when the cars roll out in Europe, People will be shocked when they find out how good the car is. Superchargers will also come to Europe, and I think there will be big News the 31th of August.

Do not short this Stock.

 

[Goudvisje]

Thanks for your insight. It's true, Norway seems to be exceptionally receptive to the Model S. Together with Switzerland they are the two bright spots in Europe. But what worries me (or rather strengthens my point) is that those are also the two richest countries of the continent by far. I am also not as optimistic on your tax incentives. Many governments here are cash strapped and if they will switch from austerity to growth centered programs I think they'll prefer to invest it in taxes that touch the public at large due to the political pressure of various populist movements which is very succesfull right now. Superchargers in Europe would certainly be a big win and we will see what Tesla is able to announce on the 31st. But right now my money is more on a token, very local, system and not a comprehensive solution for the different regulatory hurdles to overcome in each individual market.

 

[Johann Koeber]

Most people on this board (and I include myself here) are positive on Tesla the company and its car. However, contrary to many here, I am not as positive on TSLA, the stock. In fact, I just gave a short order on the stock. However, I must admit I am not very confident in my decision and I am going to monitor it quite closely to close it quickly if losses become to big. My main motivation to take this position right now is that the next significant milestone for Tesla is the introduction of the Model S in Europe. However, I don't think it will be as well received in the European market as in the US. In my opinion there are several reasons :

• Europe is behind in the economic cycle, leaving consumers with less confidence in purchasing big ticket items.
• The larger size of the Model S makes it a less attractive car for the European market
• A lack of supercharger network leaves a main issue on the table. This is especially problematic for European households that generally have fewer cars, meaning they do not have an alternative gas guzzler for the occasional longer road trip
• Tax incentives are not as generous in many parts of Europe as they are in the US
• No zero emission credits for cars sold outside of the US states with that particular system
• In many European markets, especially Germany, electricity is relatively even more expensive than petrol
• The always online approach as part of the car experience is more difficult/expensive to realize in a fractured telecom market with high roaming charges
• A few larger markets (Germany/Italy/France) have not seen a lot of reservation activity

What do you think about my arguments. Are they enough to warrant a price correction? Or do you think the strength of the American market will offset these weaknesses? Or am I wrong and are those weaknesses not that important for European consumers?

• Europe is behind in the economic cycle, leaving consumers with less confidence in purchasing big ticket items.

Porsche just announced an increase in sales of 17 %; the 'rich' are not so dependent on economic cycles.

• The larger size of the Model S makes it a less attractive car for the European market

Maybe for some. But the model S stands out in so many areas, it should do well in spite of size.

• A lack of supercharger network leaves a main issue on the table. This is especially problematic for European households that generally have fewer cars, meaning they do not have an alternative gas guzzler for the occasional longer road trip

This is a big one.

The sensible thing for Tesla to do (and so announced by EM) is to install SCs in Europe. The continent being small even a few Scs would make a difference. Say 10 in Germany and the country is covered. Personally I will be keeping my Lexus Hybrid just as long to get confident doing long distance trips. Actually yesterday I returned from a trip to our office in Neuss (430 km away, using the roadster), thanks to a HPC near Frankfurt. I am hoping the Model S will cut travel time in half.

• Tax incentives are not as generous in many parts of Europe as they are in the US

This is true.
In Germany most cars in this category are bought by businesses. If Tesla were to offer a tracking system that complies with the German tax office, this would be an instant plus and push sales a lot. The tax code requires proving the amount the car is driven for business purposes (as opposed to getting to work or non business use). Because the car knows where it is at all times, this would be easy to implement. Touch one of three buttons on the touch-screen at departure (Business/way to work/private) and write to database. Sum up the km (weekly, monthly, yearly).

• No zero emission credits for cars sold outside of the US states with that particular system

Tesla does not rely on these credits for their well-being.

• In many European markets, especially Germany, electricity is relatively even more expensive than petrol

This is true. OTOH why not do as I am planning to do: Install a car port or garage with solar panels. Get 2 Tesla cars: One is always charging when the sun is shining while the other one is used for driving. Solar is big in Germany; perhaps a direct charger (solar to Tesla) could improve efficency even more because the inverter/charger could be circumvented?

• The always online approach as part of the car experience is more difficult/expensive to realize in a fractured telecom market with high roaming charges

I hate this. It is not a Tesla specific problem. Whenever you pass the border The EU is limiting roaming charges, but this is not sufficient. Competition is not driving the priced down, as it should. In the mean time I will be turning off the connectivity when I pass the border. Hope the car works fine without it. Also hope the stored maps are any good. When are they updated? At all?

• A few larger markets (Germany/Italy/France) have not seen a lot of reservation activity

Germany do love German cars. I believe it will be neccessary to see several Teslas out on the road. Then the tide will break. I guess it might be a bit slower than in California and we are 18 months behind (deliveries in small quantities starting just now). Reservations will pick up within 6 months. I am so glad we are getting a much matured product.


I think it is great to see what Tesla is doing in Germany and Europe. As Frank Sinatra might sing nowadays

Start spreadin' the news, I'm leaving today
I want to be a part of it: Tesla, Tesla

​

......

If you can make it there, you'll make it anywhere,
It's up to you, Tesla, Tesla

​

 

[uselesslogin]

• In many European markets, especially Germany, electricity is relatively even more expensive than petrol

This is true. OTOH why not do as I am planning to do: Install a car port or garage with solar panels. Get 2 Tesla cars: One is always charging when the sun is shining while the other one is used for driving. Solar is big in Germany; perhaps a direct charger (solar to Tesla) could improve efficency even more because the inverter/charger could be circumvented.

This is true? Can you elaborate? My Google search indicates electricity in Germany is about $0.35 per kwh and petrol is about $2/liter. I mean I guess it depends how you look at it but the bottom line is the per-mile cost for fuel in a non-electric car would be about double. Is electricity actually $0.70/kwh?

 

[maekuz]

This is true? Can you elaborate? My Google search indicates electricity in Germany is about $0.35 per kwh and petrol is about $2/liter. I mean I guess it depends how you look at it but the bottom line is the per-mile cost for fuel in a non-electric car would be about double. Is electricity actually $0.70/kwh?

$0.35 sounds about right. it goes up to $0.40 if you're with a green electricity provider.

 

[Goudvisje]

Porsche just announced an increase in sales of 17 %; the 'rich' are not so dependent on economic cycles.

Interesting, I tried to look at a few other luxury brand manufacturers. Most of them seemed to enjoy rather robust sales growth anywhere but in Europe. Unfortunatly, I didn't actually think of Porsche. Is there a breakdown of their regional sales figures available?

The sensible thing for Tesla to do (and so announced by EM) is to install SCs in Europe. The continent being small even a few Scs would make a difference. Say 10 in Germany and the country is covered. Personally I will be keeping my Lexus Hybrid just as long to get confident doing long distance trips. Actually yesterday I returned from a trip to our office in Neuss (430 km away, using the roadster), thanks to a HPC near Frankfurt. I am hoping the Model S will cut travel time in half.

A related question is will their business model of providing this service for free also work in Europe. Especially with our higher electricity costs. Maybe they can buy at wholesale prices?

In Germany most cars in this category are bought by businesses. If Tesla were to offer a tracking system that complies with the German tax office, this would be an instant plus and push sales a lot. The tax code requires proving the amount the car is driven for business purposes (as opposed to getting to work or non business use). Because the car knows where it is at all times, this would be easy to implement. Touch one of three buttons on the touch-screen at departure (Business/way to work/private) and write to database. Sum up the km (weekly, monthly, yearly).

Very nice suggestion, but it's hardly something unique. Most luxury cars have onboard GPS and would be able to replicate this functionality quite easily if it proves to be a decisive seller?

Tesla does not rely on these credits for their well-being.

Not for much longer, but all results up to today include significant revenue from these credits?

This is true. OTOH why not do as I am planning to do: Install a car port or garage with solar panels. Get 2 Tesla cars: One is always charging when the sun is shining while the other one is used for driving. Solar is big in Germany; perhaps a direct charger (solar to Tesla) could improve efficency even more because the inverter/charger could be circumvented?

I am quite skeptical the average consumer is going to go through such great lengths. Either they have already a solar installation just because it makes sense for them (feed-in tariff etc...) or they don't. I am sorry but I feel like your suggestion for two cars does not feel like a serious one.

Germany do love German cars. I believe it will be neccessary to see several Teslas out on the road. Then the tide will break. I guess it might be a bit slower than in California and we are 18 months behind (deliveries in small quantities starting just now). Reservations will pick up within 6 months. I am so glad we are getting a much matured product.

What surprises me even more than Germany is France. They have cheap (nuclear) electricity, aren't as emotionally attached to their cars and autobahns as Germans and have a sizeable fairly affluent rich-life-style embracing community around the cote d'Azur but hardly any Tesla sales.

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This is true? Can you elaborate? My Google search indicates electricity in Germany is about $0.35 per kwh and petrol is about $2/liter. I mean I guess it depends how you look at it but the bottom line is the per-mile cost for fuel in a non-electric car would be about double. Is electricity actually $0.70/kwh?

As a data point from the Netherlands : electricity is around 25 (euro)cents per kWh. Or around 5ct per km driven. Diesel is about 1.45EUR per liter meaning with a recent car you are looking at 7-8ct per km driven. So there is still an advantage of driving electric but it's quite marginal. On the one hand it is something that points to a less enthousiastic reception of the Model S over here, but on the other hand, you don't buy a Tesla to save money so I am not sure how important it really is on the bottom line.

 

[Johann Koeber]

I am currently paying 0.30 € per kWh. My roadster consumes about 150 Wh per km, 15 kWh per 100 km.
That amounts to (0.3 €/kWh * 15 kWh/100 km =) 4.50 €/100 km

My Lexus Hybrid consumes 8 l of premium gas per 100 km. Gas in this area is currently 1.60 per l. 12.80 € per 100 km.

That is almost triple cost.

 

[Norse]

In Norway, With gaspriced at 2EUR you make and cheap electricity you make Money buying a Tesla. It`s so cheap that my landlord dont even charge med for electricity. A Tesla is also very cheap to buy. No taxes whatsoever. A BMW M5 starts at 200 000 Euro. I now drive a 2007 model Audi A3, but I will buy a Tesla. And I will make my Money back. I also make less then a average Norwegian, and I will buy it for myself. So Imagen how big the market will be only in Norway.

Each time you buy a Tesla, they charge u 2000 dollar or something for Superchargers. If they deliver 10k cars to Europe, they have 20 million dollars for superchargers? I think they will hook up With SolarCity and set up alot of Solarpanels and chargers around Europe.

 

[Citizen-T]

The truth is that Tesla doesn't need a lot of sales in the EU to be phenomenally successful. I mean, let's say you are right. Only really super rich people that are willing to drive a very large car in the most tax friendly countries in the EU buy the car. Are there 20k of them? That's a really small percentage of the overall luxury market, so I bet there are at least 20k of them.

I also agree that even if your thesis is correct, your timing is bad. Tesla isn't planning on delivering 40k cars until next year. It might be until Q4 2014 before the market sees evidence of what you said here (at which point you will have already accumulated huge losses).

Shorting Elon Musk has never really gone well. I'm sure there are better candidates out there if you are looking for a short.

 

[ongba]

Seriously, do not worry about demand. Atleast not for the first 3-4 years. If you are gonna short, dont do it now. If you order a car from Norway now, you will probably have to wait for atleast half a year. It is also the safest car in the world. There are loads of People in Europe who wants big cars. In London you would have to pay 10£,(15$) each day you drive thru the city. Some countries and cities does not have as good tax incentives, but that will come. In some years the batteries will become cheaper, and EV will have an advantage over ICE cars without tax incentives. Remember there has been no advertising anywhere, so when the cars roll out in Europe, People will be shocked when they find out how good the car is. Superchargers will also come to Europe, and I think there will be big News the 31th of August.

Do not short this Stock.

+1. The stock has been a widow maker for shorts and I think it will be so for the foreseeable future. If you must short, I implore you to do it via puts or if shorting shares, to buy calls to limit any potential losses.

 

[uselesslogin]

I am currently paying 0.30 € per kWh. My roadster consumes about 150 Wh per km, 15 kWh per 100 km.
That amounts to (0.3 €/kWh * 15 kWh/100 km =) 4.50 €/100 km

My Lexus Hybrid consumes 8 l of premium gas per 100 km. Gas in this area is currently 1.60 per l. 12.80 € per 100 km.

That is almost triple cost.

Yeah that is what I thought. The per mile (km) savings are actually more than you can get in the US in your case. Electricity may be cheap here in the US by comparison but so is gas.

 

[T B]

You shouldn't worry too much about Europe - on the contrary!

...

• Europe is behind in the economic cycle, leaving consumers with less confidence in purchasing big ticket items.

Cars on the other hand are generally more expensive in Europe than USA, making the price difference between electric and ICE cars smaller.

• The larger size of the Model S makes it a less attractive car for the European market

There are plenty of big cars in Europe too.

• A lack of supercharger network leaves a main issue on the table. This is especially problematic for European households that generally have fewer cars, meaning they do not have an alternative gas guzzler for the occasional longer road trip

Tesla is deploying a supercharger network in Europe too. Plus EVERY power outlet in Europe is 240V (minus some odd countries), allowing you to charge overnight anywhere.

• Tax incentives are not as generous in many parts of Europe as they are in the US

True, it is very different from country to country. Some European countries have though MORE generous incentives than US.

• In many European markets, especially Germany, electricity is relatively even more expensive than petrol

Say what?! Petrol is MUCH more expensive in Europe than US. Electricity slightly more is some countries, slightly less in others.

• The always online approach as part of the car experience is more difficult/expensive to realize in a fractured telecom market with high roaming charges

Might become an issue if you travel abroad. Not an issue while in your own country.

• A few larger markets (Germany/Italy/France) have not seen a lot of reservation activity

Because Tesla is still as unknown here as it was in the US one year ago.
Plus, US made cars have very bad reputation in Europe.
It will change when Tesla test drives begin...

 

[Goudvisje]

In Norway, With gaspriced at 2EUR you make and cheap electricity you make Money buying a Tesla. It`s so cheap that my landlord dont even charge med for electricity. A Tesla is also very cheap to buy. No taxes whatsoever. A BMW M5 starts at 200 000 Euro. I now drive a 2007 model Audi A3, but I will buy a Tesla. And I will make my Money back. I also make less then a average Norwegian, and I will buy it for myself. So Imagen how big the market will be only in Norway.

Each time you buy a Tesla, they charge u 2000 dollar or something for Superchargers. If they deliver 10k cars to Europe, they have 20 million dollars for superchargers? I think they will hook up With SolarCity and set up alot of Solarpanels and chargers around Europe.

Thanks, this gives some pretty good insight into why the Model S is such an attractive proposition in Norway!

 

[gregincal]

I do believe that Europe will be slow starting, but demand in the US will more than make up for it. I think Europe will come around. As far as the stock price Tesla is still selling cars as fast as they can make them, so I don't think it matters.

 

[Goudvisje]

+1. The stock has been a widow maker for shorts and I think it will be so for the foreseeable future. If you must short, I implore you to do it via puts or if shorting shares, to buy calls to limit any potential losses.

Yes, I have limited my downside. Anyway, I am not off to a good start with my trade today it seems, but I can suffer some more before I need to close up shop.

 

[sub]

not to be rude, but it seems you should have asked these questions before taking your short position? You seem to have the same misconceptions/misunderstandings as all the other shorts that have not done so well recently.

 

[Goudvisje]

Cars on the other hand are generally more expensive in Europe than USA, making the price difference between electric and ICE cars smaller.

Most cost differences are due to multiplicative issues (VAT, higher financing costs) and therefore grow the gap as the car becomes more costly.

Say what?! Petrol is MUCH more expensive in Europe than US. Electricity slightly more is some countries, slightly less in others.

Surprisingly not. California has $15cts/kWh which is 11 EUR cts/kWh. European prices can easily be 25-30EUR cts/kWh or more than double. Gas prices in California are about $1 per L or 75 EUR cts. Any serious European driver will compare this with diesel which you can have for less than double that. Therefore electricity is relatively more expensive (multiplier >2) than ICE cars (multiplier <2). And that's with California. If you take Texas (8EUR cts/kWh and 70 EUR cts/L) the price delta becomes even larger (multipliers >3 versus approx 2).

Might become an issue if you travel abroad. Not an issue while in your own country.

Most of our countries are smaller than your average state...

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not to be rude, but it seems you should have asked these questions before taking your short position? You seem to have the same misconceptions/misunderstandings as all the other shorts that have not done so well recently.

True, on the other hand, I have not yet heard anything that would dissuate me from my position with the exception of how attractive Norway is for Tesla owners. Anyway, I am relatively lucky in the sense that I can stay quite austere towards this investment because it is a relatively small position and my future is locked up elsewhere anyway. I am actually more interested in finding out if I am wrong or right than in the result itself.

 

[deonb]

Note that most of the shorts out there still have a fairly bullish sales outlook for Tesla, they just believe that the stock is overvalued by comparing the future projected sales figure to GM's EPS today. While we disagree with that metric, if you don't know anything about the company and it's just one of a thousand items in your fund, and 'just another auto manufacturer', I can see that someone can come to that conclusion.

I also personally think that there should be bears out there that are concerned with Tesla's ability to ramp up manufacturing rapidly enough, but if there are, they're fairly quiet. But this one is a real risk in my opinion - if Tesla can only bring up their capacity to 50'000 cars per year 4 years from now, they'll be in serious trouble. Ramping up is not an easy thing to do, so if something ever happens to Elon, I would think about shorting the stock based on this.

However, a position that's based on the believe that Tesla won't be able to sell one of the best rated and safest cars in the world, is off in danger land.

 

[MarkR]

Germany does love German cars.

​

True . . . very true. I bought an MS and my German wife likes it, but wouldn't consider trading her 7th BMW for a Tesla. She's waiting for BMW to come out with an electric drive. Yes, we're aware of the i3, but it is a hybrid and sloooooow.