Merrill Lynch Attacks Tesla – Forbes Counters With Facts


Merrill Lynch Attacks Tesla

Merrill Lynch Attacks Tesla

In mid-November, Daily Kanban put out a skeptical Tesla piece titled “Brokerage: Tesla could be sitting on 3,000 unsold cars.

The Daily Kanban articles draws info from John Lovall, a research analyst at Merrill Lynch.  The article states:

“The Rule of Scarcity plays a large role in the persuasion process, as any pop psychologist can confirm. Nobody knows that better than master salesman Elon Musk. Waiting times for a Tesla are legend. If you believe the on-line chatter, the Model X is basically sold out for 2015. Is the scarcity for real? John Lovallo, a research analyst at Merrill Lynch, wanted to find out.”

“…Lovallo was told by Tesla that “essentially, in the third quarter, we sold every car that was. Including cars in, like, showrooms, and everything we basically had.” But then, Lovallo started going through the books, and he found that “Tesla’s finished goods inventory at the end of 3Q appears to tell a different story.”

“According to Merrill’s estimates, Tesla could have “approximately 3K vehicles stocked in inventory or in transit,” the brokerage house writes in a research note distributed to clients. Merrill maintains an “underperform on Tesla.” In the euphemistic world of research notes, this translates to “sell as long as there still are greater fools around.”

And concludes:

“All of it has the smell of sales not going as smoothly as they used to, and of Tesla finally getting some pressure to produce real returns on the exuberant investments.”

Forbes Defends Tesla

Forbes Defends Tesla

Meanwhile, Merrill Lynch’s note to investors states:

“Tesla has found it challenging to earn money on its vehicles, which could ultimately prove to be the biggest risk for the company and the pure electric vehicle market at large.”

Clearly then Tesla is doomed, right?  Wrong…says Forbes, who countered the Tesla hit piece with facts.


“Odds are you’ve never heard of John Lovallo, the Merrill Lynch auto analyst, but you can bet Elon Musk has. Back in February, Lovallo suggested Tesla was worth just $65 a share a day after it had hit an all-time best $265. In the ensuing 9 months, the stock has mostly traded sideways, closing above $251 yesterday. But Lovallo is convinced the worst is still to come.”

“In a research note to clients, parts of which were published in the Daily Kanban, Lovallo came just short of accusing Musk and company of outright lying during Tesla’s third-quarter conference call. The note claims inventories are rising, Tesla is failing to make inroads in China and then ranges into some downright bizarre claims about the profitability of the Model S itself. Tesla doesn’t reveal quite enough in its regulatory filings to take down every one of Lovallo’s claims, but this will come close.”

CLAIM: Inventories are piling up.

REALITY: Actually they’re down.

Tesla sold 7,785 cars in the third quarter, just a hair under the 7,800 it guided to at midyear. But because it had to shutdown its lone factory for about twice as long as planned — close to one month — production fell well short of goals. Here’s what the company said:

Our third quarter production was about 7,200 units which was — as we said about 2000 units less than our plan for third quarter. — Depak Ahuja, chief financial officer

Essentially in the third quarter we sold every car, that was including cars from like showrooms and everything we basically had. There was just nothing left to sell. — Elon Musk

In other words, to sell 600 more vehicles than the company made, it had to chip into inventories any way it could.

Typically, if you can discredit one claim made by an analyst, then that’s sufficient enough to make all claims by that analyst suspect.  However, Forbes didn’t stop there.  Forbes goes on to discuss Tesla’s too-long delivery chain, which accounts for these “unsold” Teslas by claiming “3,000 Teslas are headed somewhere as we speak, not yet delivered to customers.”  Forbes concludes:

“This would be bad for the company if it was news. It’s not. Last quarter, Tesla’s finished goods were $250 million so they are actually lower by about 10%. That’s completely consistent with Tesla’s story of selling everything that wasn’t nailed down. It’s completely inconsistent with Lovallo nearly calling Musk and Ahuja liars.”

Discrediting analysts with facts.  Forbes shows us how it’s done.

We highly suggest you read both source articles in their entirety by following the links below.

Sources: Daily Kanban & Forbes

Category: Sales, Tesla

Tags: ,

49 responses to "Merrill Lynch Attacks Tesla – Forbes Counters With Facts"
  1. Big Solar says:

    I figured Forbes would See Through that.

    1. kdawg says:

      I See what you did there

    2. Scramjett says:

      Well played sir!


    3. See Through says:

      Hey I just posted these links the other day, and my post got blocked 🙁 At least, you are writing an article about these, which is good.

      But that wasn’t Forbes defending. It was some unknown blogger’s post on Odds are, more people have heard of John Lavallo than this unknown blogger, who uses lots of flawed logic in trying to defend plummeting sales.

      While you are at it, check out If you order today, you can still get the P85D by December! Looks like soon Tesla will start 2-day delivery service like Amazon.

      And then comes the blow from low gas price , the final nail in the coffin for Gen III.

      1. Tim says:

        Ah yes, all those Tesla buyers just looking to save money on gas. The ASP on a Model S is about $100k (and probably heading higher with the introduction of the dual motor). To suggest Tesla buyers, even for the future Model D that doesn’t have a final price, are price sensitive to the fuel cost is so outrageously ludicrous it’s hard to believe you make that argument in any serious manner.

        1. See Through says:

          Tesla’s high share price is due to expectation of exploding sales of its mass market car, the Gen III or next model. If cheap gas prices stay for a decade, all those hopes are dashed to ground. In my comment above, I’m not talking about gas prices eating Model S sales so much. But the Gen II or whatever is the mass market car will be called, will suffer a lot.

          All reports indicate cheap gas is here to stay for a long long time. We all speculated on many Tesla killers. But the ultimate Tesla killer, the OPEC, just entered the arena through the back door unnoticed.

          1. Lustuccc says:

            Fuel mile costs 5 times electric mile. When the gallon will be at 1$ we speak again.

          2. Spec9 says:

            If cheap gas prices stay for a decade? LOL! That’s a good one. Good luck with THAT.

          3. Rob says:

            Just for the record, could you please tell the class what YOUR idea of what ‘cheap’ is?

            At the moment petrol here in England it is around £1.22/litre and diesel £1.24.

            That’s five and a half pounds per gallon!!!!
            Which is down from SIX POUNDS a gallon a few months ago!

            The price here needs to halve before anybody in this country would describe the price of fuel as ‘cheap’!

        2. See Through says:

          If you say Tesla buyers are not sensitive to gas prices, then Why does ordering site show additional $200 in gasoline savings?

          Example ( P85D):
          $1,350 /mo. 12,000miles /year
          Estimated Lease Payment $1,141 /mo. Including Gasoline Savings

          DOES ANYONE KNOW IF TESLA UPDATED THIS SAVINGS IN THE LAST FEW DAYS/WEEKS? At $2/ga gas, the gasoline savings should be halved.

          1. Big Solar says:

            Wow, you,ve gone from partial troll to full on troll in a short period of time!

            1. See Through says:

              Wow! You have gone from partial blind to full blind when it comes to facts and data.

            2. Anon says:

              No one goes, “Full Troll”. 😉

              1. Steven says:

                No, See Through does, and, quite regularly.

              2. Rob says:

                They do in Sweden. I’ve seen the movie!

          2. MDEV says:

            We buy Tesla because is one of the best cars in its class, just happen to be electric and even is the gas in a fantasy story get down to $1 per gallon I still choose electric, gasoline even for free still stinks and produced green house emissions.

      2. Rob Stark says:

        Tesla has always given the TOL Model S priority delivery.

        IF you order anything other than the TOL model you have to wait till MARCH to get your Model S.

        Every Quarter means new high in deliveries.

      3. Mint says:


        Of course they’re prioritizing P85D production. Are you really so dumb that you can’t figure out why?

      4. Murrysville EV says:

        “And then comes the blow from low gas price , the final nail in the coffin for Gen III.”

        The Leaf is still setting record sales. You know, people buy EVs for reasons other than saving gas.

        Hybrids – which still need gas – are suffering in sales. Behold the Volt and Prius.

    4. Steven says:


  2. Realist says:

    A simple calculation of total lifetime production and total life sales of model s(both official numbers) shows there was ca. 2500-3000 more produced then sold (the number is not sure because some 2 Q didnt have production number except that it was higher then sales), so 2500 is lower bound

    1. buu says:

      and to ship to EU or Asia takes about 3 weeks, which equals at current production 2500-3000

  3. Mark B. Spiegel says:

    “Essentially in the third quarter we sold every car, that was including cars from like showrooms and everything we basically had. There was just nothing left to sell. — Elon Musk”

    And yet Consumer Reports broke the story (since widely and independently reported elsewhere) that Tesla had 2300 leftovers discounted by as much as 2% a month and $1/mile.

    So who did you say was lying?

    1. pjwood says:

      You sure you’re being accurate in comparing what one party says about November, to what another said about September?

    2. Tech01x says:

      It is clear that Tesla sold everything they could sell… the operative word is “could.” They probably have pretty much nothing left to sell that could be sold.

      Given there are roughly 135 galleries, there are cars in each gallery, and they all have to be refreshed with newer models during the course of the quarter, especially with the new features. There are at least 2 per gallery for inside showing, which is 270 cars.

      Then there are test drive cars. There are usually 2-4 of these per gallery. Let’s say they sold all of these but 1 per gallery. After all, they still have to do some test drives. So that’s another 135 cars.

      Then there are service loaners. Tesla has gotten a lot of heat over selling every last service loaner and they do keep some at the end of the quarter. Let’s say that’s 2 instead of the normal 4-5 per service center, so that’s about another 200 cars.

      270+135+200=605 cars that represent the minimal inventory level to maintain sales and service.

      That means there is roughly 1800 cars left in finished goods inventory. That represents just over 1.5 weeks of production and given the length of import times into some countries like China, these cars are likely sitting waiting for import inspection and just missed delivery. At any one time, there are likely a 2-4 weeks of production in transport, so 1800 represents a draw down.

      This is hardly a large amount of finished goods given the number of the galleries and service centers nor the current production volume.

      1. Big Solar says:

        I don’t know who knows what but I put my MS up for sale and buyers got in a bidding war over it within a couple days and I sold it at a literal 2000 dollar profit when the bidding was over.

        1. Rob says:

          Many people did that with Morgan back in the 80s and 90s and made a lot of money!

  4. Euro View says:

    Insideevs should have titled :

    Merril Lynch attacks Tesla with facts – Forbes counters with facts .

    1. Tesla Fan says:

      is your view a little muggy with all that diesel pollution? 🙂

  5. pjwood says:

    Maybe it is more relevant to call whether Tesla can deliver 100,000 cars in 2016, than to play whack a mole 2,500 times.

  6. Assaf says:

    “Merrill Lynch Analyst” cough cough cough ROFLMAO

    I’d take all of ML and its Bailout Bunny BOA and stuff them and esp. their executives somewhere dark and damp. Instead, they still have “Analysts” (cough cough cough) who make “projections” that real people actually have to refute.

    And people wonder what’s wrong in the world…

    1. See Through says:

      “And people wonder what’s wrong in the world…”
      – No. I’m jusy wondering what’s wrong with YOU!
      Anyone who doesn’t agree with Tesla’s lofty share prices and does independent research must be wrong.

      1. Tim says:

        I think that might be your challenge. Tesla’s share price – along with most other share prices – have little to do with any simple fundamentals. Many stocks swing wildly either being undervalued (ahem, AAPL) or overvalued depending on many factors. Revenue, costs, market, guessing, and hope are just some of the inputs to share value.

        However, none of that bears on Merrill Lynch analysts having any track record suggesting their analysis is worthy of consideration. They’ve clearly shown themselves to use “analysis” to manipulate the market to their own (and their clients’) advantage.

      2. QCO says:

        So, the real issue of concern to See Through is the lofty share price, not the way Tesla is being managed.

        That’s more understandable, but not unique since many high growth tech companies have become casino stocks that are decoupled from fundamentals typically found in lower growth blue chips.

        Stock speculation doesn’t imply Tesla is not shipping cars per plan.

  7. DonH says:

    Amazing. Everyone talking about price and gas savings instead of the real reason for going electric, which is my and your grandchildren not having to wear a respirator at the school bus stop. Wake Up.

    1. BraveLilToaster says:

      I thought the real reason to go electric was the fact that if we want to survive as a species in 2100, we have to completely ditch fossil fuels by 2050.

      Changing an entire infrastructure takes time, so we have to start now if we have any hope to succeed in that time frame.

      1. Anon says:

        It should have been done in the 1980’s, when they knew about it. Too late now, that ship has sailed. It’s all about mitigating the damage– not preventing or reversing it.

        1. See Through says:

          Quite simply, the world is being brainwashed. The best way to a better planet is to fire the economists, who in their relentless efforts to increase GDP, cause immense damage to everyone. Then lower consumption and activity level. Most work is neutralizing each other’s work anyway. Think about it. Recession and less consumption is the course for greener planet. No complex solution needed.

          1. Steven says:

            Fine, to paraphrase Shakespeare, let’s kill all the economists.

            Then what?

            I don’t see how you can get a world full of privately owned vehicle owners to go 100% public transit, so what do you expect the vehicles of the future to be powered by?

            Dead dinosaurs or electrons?

    2. JRMW says:

      My primary reason for going electric is to help us become energy independent so that we can get out of the Middle East.

      The benefits to the environment are icing on the cake.

      1. Anon says:

        Like, letting a rich biodiverse planet retain most of it’s life forms (along with us), is “icing on the cake”.

        Bloody hell… 🙁

      2. Jouni Valkonen says:

        No, the point of electric cars are that they are simply better and more convenient cars. Tesla Model 3 will be the best car that has ever driven on this planet.

        The boosted economic growth due to less imported oil and more exported oil and environmental benefits are just extra. And they are the reason why it makes sense that governments are subsidizing electric cars as long as there are gasoline/Diesel cars and trucks driving.

        1. Rob says:

          Sorry, if a car costs $100,000, I fail to see how you can call it ‘the best’!

    3. Foo says:

      Not to mention that, when the zombie apocalypse comes, you will still be able to charge up your Model S from your home solar panel array.

  8. Ryan says:

    Look at the bright side… if See Through continues to short Tesla, eventually his internet will be shut off for non-payment

    1. Anon says:

      One can only hope…

  9. Recoba says:

    difficult to say who is right and who is wrong. MaybeBut the shutdown of their factory not only was caused by “maintenance” but also by a forseeable lower demand?