The bears have a case against Tesla. So, let's take a look at it in brief. Below, we look at each of the most pertinent "bear" cases, and we follow it up with some bull analysis. As always at InsideEVs, we say "take it or leave it and make your own financial decisions," but here it is, nonetheless.
- Tesla is not financially viable. Under this bullet point, I include all potential financial difficulties Tesla may face. I include demand here, as it has been relegated to a subset and no longer deserves a category of its own. The bears hardly bring it up anymore, except for the Model S and Model X.
- Tesla has quality, fit and finish, and service problems it cannot overcome. Tesla is inadequate and knows little about the vehicle manufacturing business.
- Tesla has many legal problems and lawsuits filed against it. Problems with the SEC, judgments and suits related to (but surely not limited to) the take-over of "Solar City."
- Elon Musk is an ineffectual leader, a showman, a charlatan, a liar, a fakir, and a knave. All ad hominem attacks against Musk lie here.
- Tesla is overvalued since it's really an OEM (legacy) company now, or soon will be as it will be quickly caught and surpassed by legacy automakers. The so-called arrival of "Tesla Killers" is a meme the bears now attempt to disown.
In a nutshell, those are the major complaints against Tesla, or at least most will fit into those categories. If I've missed some, I'd gladly make an addendum here if you find yourself so willing to add some notable and realistic commentary below.
It's critical to note, the bear case is not without merit in my view, as at times many of their complaints have been wildly accurate, despite the fact that some bulls will go to great lengths to prove otherwise. Honestly, it always goes both ways, and there's some good and some bad on either side for sure. But, for a moment, let us set aside the bear thesis and ask a few pertinent questions.
- Is there an EV revolution? If so how is it proceeding?
- Is there any company that is leading the parade?
If we look at what is happening to the legacy auto industry, falling all over themselves to announce battery factories opening, along with new EVs coming along, meanwhile announcing close to 100k lay-offs, coupled with the closing of plants associated with the ICE, we must clearly perceive that the auto industry thinks so, (i.e. it seems clear there is certainly an EV revolution).
That said, it will (sadly for EV fans) proceed at a pace that will only gather steam over time due to various factors, mostly political, country, state, region, cities, demands for lower or no emission vehicles, etc. In reality, the superiority of the EV itself will only be gradually realized and accepted over time by today's car-buying public. Not to mention that all the negativity and inaccurate mainstream coverage about EVs complicates the issue on an arguably extreme level.
Back to 'Da Bears.
- Tesla has had some real and obvious financial difficulties but may be out of the woods, at least for now. As a long investor, I'm well aware that the company and its CEO need to behave and continue to remain fiscally responsible. However, at the same time, in order to continue to grow exponentially, it will need to spend a lot of money over the next decade.
- Tesla has made marked improvements in these areas. Even 'Bad' Bob Lutz was impressed, along with many others (Jim Cramer) that had once put a great deal of effort into criticizing Tesla and Musk. Note: Cramer is now buying his wife a Tesla. The automaker is fully aware of continuing service difficulties and continues to improve in those areas too. In fact, only two InsideEVs affiliates own Model 3 sedans, and both have experienced quick repairs.
- I think the various lawsuits may involve some settlements, but they won't derail the cannonball that is Tesla. The suit bought by the Unsworth has been dismissed, and Musk is seemingly putting much-needed curbs on his counterproductive proclivities.
- Musk is not flim-flam man, he's not selling snake oil, this is not some "Ponzi scheme", and he will not be ridden out of town on a rail. However, there's no discounting the obvious. He's a showman through and through and he'll continue to have something to show the world. Still, I'm more than willing to admit that Musk, like any human with hardcore and world-changing goals, does falter. He surely has his 'windows moments', but even the conductor can't stop the roaring freight train that is Tesla.
- Tesla will soon be like all other OEM's which trade at a PE of 5-6. The most grizzly of all bears have said so right? I say, crawl back into your cave with this silly roar. While at one time, the forest quaked with fear, it seems those days may be behind us. Now, many of us just laugh at the narrative.
As always, we'd love to hear your thoughts and insight in the comment section below.