The Weekend Edition is pulled from the daily Stansberry Digest.
The concerns continue to mount for one of the market's most beloved companies...
We're not fans of electric-car maker Tesla (TSLA) and its "visionary" founder Elon Musk... It isn't that we have a problem with the products. Rather, it is Musk's questionable ethics, and the fact that it is simply a terrible business.
Tesla has missed virtually every manufacturing deadline and sales target it has ever set. It loses money on every car it sells, despite forcing taxpayers to subsidize a huge portion of the cost.
It has burned through nearly $10 billion since 2012... holds another $10 billion in debt... and has almost never turned a quarterly profit. And yet, somehow, we're supposed to believe the company is worth roughly $60 billion today.
Of course, you've likely heard all this before. But if you thought Tesla had problems now, just wait... A virtual tsunami of new competition is coming soon. As Bloomberg reported this week...
In North America alone, the number of electric vehicles will soar to 47 by the first quarter of 2022 from 24 in the third quarter of this year, according to data from Bloomberg New Energy Finance. China's EV market will go to 80 from 61, and European buyers will have 58 electric choices, up from 31. Globally, there will be 136 EVs on the market by the end of that year, and that doesn't even include the hybrid models or fuel cells.
That will make for a very crowded field in a nascent zero-emission car market that most consumers have yet to embrace and where financial losses loom large. In the U.S., electric car sales were less than 1% of the market last year, according to the International Energy Agency. They were 1.4% in China and in the U.K.
"Companies are committed to electric cars, but there is little evidence that there is a lot of consumer demand for it," said Kevin Tynan, senior analyst with Bloomberg Intelligence.
This last point is important...
Economics 101 tells us surging supply combined with tepid demand is a recipe for lower prices. This isn't great news for any electric-car maker, but it's especially bad for Tesla.
Worse, more competitors – including Audi, Porsche, BMW, and Mercedes-Benz, among others – are now targeting the luxury segment of the market where Tesla largely operates.
If Tesla can't make money with practically no competition today, what hope will it have when the competition really gets going?
In the meantime, Tesla continues to fall short of Musk's lofty goals...
When the company launched its new, lower-cost Model 3 sedan in July, Musk promised that production would ramp up quickly.
He said Tesla would produce 100 units in August, 1,500 in September, and a huge 20,000 per month by December. From there, Musk said production would really take off... He said the company plans to make 500,000 Model 3s in 2018, and 1 million in 2020.
So how is his big plan coming along? More from Bloomberg (emphasis added)...
The automaker built only 260 Model 3s during the quarter ended in September, less than a fifth of its 1,500-unit forecast. Output of the sedan that starts at $35,000 – roughly half the cost of the least expensive Model S – was lower than expected because of unspecified "bottlenecks," according to the company.
Musk has engendered enthusiasm about the future of electric cars and has automakers including Volkswagen, General Motors, and Daimler lining up to compete.
But what Tesla hasn't done is prove itself as a mass manufacturer. The slow start for Model 3, which was designed for easier assembly, reignites concern that the company will struggle to reach the lofty production targets set by its CEO.
You'd be a fool to believe Tesla will produce 1 million Model 3s per year anytime soon...
According to Karl Brauer, executive publisher for Kelley Blue Book and Autotrader, that ramp-up rate is unprecedented among experienced, high-volume automakers. (Tesla is neither.)
But Musk couldn't even meet the first of these projections. Worse, Tesla produced just 25,336 total vehicles across all its models last quarter. This is less than it produced in the three months ending in June.
In other words, Tesla is actually producing fewer cars just as it has promised to begin making exponentially more.
Maybe Musk is on to something... After all, when you're losing money on every vehicle you produce, making fewer cars doesn't sound so bad.
Before we wrap things up today, we need to pass some exciting news along...
Earlier this week, TradeStops founder Dr. Richard Smith sat down for an exclusive interview that was broadcast from Stansberry Research headquarters...
In it, Richard shared the same compelling research he recently presented to a standing-room-only crowd at our private Stansberry Conference in Las Vegas, including...
- How you can easily triple the performance of the Stansberry Research recommendations you already own...
- How to safely position yourself to earn every penny possible from the final "inning" of this long bull market...
- And how to know without a doubt when it's finally time to head for the exits.
No matter how long you've been investing... and no matter the size of your portfolio... if you're even a little worried about the markets today, you owe it to yourself to review Richard's work.
Regards,
Justin Brill
