Skip to comments.Tesla CEO Elon Musk Fights Perceptions as Stock Drops
Posted on 02/26/2013 9:58:13 AM PST by jazusamo
Taxpayer-supported Tesla, recipient of a $465 million stimulus loan guarantee to produce yet another electric toy car (the Model S) for rich people, reported its 4th quarter earnings last week. The word from billionaire CEOElon Musk (Flickr photo: Jurvetson) was, well do better next quarter promise.
Thats a paraphrase, but nonetheless Teslas announcement fell short of most Wall Street analysts expectations. The company lost $90 million for the quarter as it ramped up production to fill pre-orders, paying workers to put in an average of 68 hours per week in December. On Thursday the company suffered the biggest one-day drop in its stock price tumbling nearly 10 percent in more than a year. Shares fell to $35.16 before recovering slightly on Friday, but were at $34.38 for Tuesday morning's opening.
Unlike its counterpart Fisker, Musk and Tesla have enjoyed comparatively better media coverage until lately. Two weeks ago the New York Times published its now-famous account of reporter John Broders drive from Washington, D.C. to Connecticut in a Model S, which featured plenty of white-knuckle range anxiety, freezing feet and ended with a tow-away. As Tesla shares fell in response, Musk responded bombastically with accusations that the report was faked and that Broder took detours and failed to charge the electric car properly. The test was intended to show that Teslas battery could survive a range of 200-plus miles before recharging is needed.
But the real question Wall Street appears to be trying to answer is whether the early interest in Tesla has been from early-adopters or only-adopters. In other words, is there sustainability in the market for the Model S (and possible successors) because Musk is doing things better where other electric vehicle producers such asGeneral Motors, Ford, Nissan, Fisker and others have failed?
Musk is doing his best to maintain that impression. In recent weeks he has boasted about the fact that Tesla has never had fires with itslithium ion batteries, unlike many competitors, and he very publiclyreached out toBoeing to show how he could help with the technology in their troubled Dreamliner jumbo jets. And despite the disappointing 4th quarter results, Musk assured investors that the current quarter would show a profit.
This is the first quarter that we have been at our target production rate, he said in last weeks earnings call. Were going to be profitable, and I think thats a pretty big deal. It took us an enormous amount of blood, sweat and tears to get there.
The positive rhetoric comes at a critical time, as Tesla plans to produce vehicles at a far greater pace 20,000 cars for 2013 than it has been. Before even the New York Times article hitthere were 1,500 order cancellations in the 4 th quarter (although it added 6,000 new orders), which left it at 15,000 standing orders at the end of 2012.
But in an interview with Bloomberg, Musk said the Times review took its toll. He said the company suffered a few hundred cancellations of orders, and that it may have cost Tesla as much as $100 million in the valuation of the company.
Lots of people said it doesnt matter if youre right or wrong; you dont battle the New York Times, Musk said. And its like, the hell with that. Id rather tell the truth and suffer the consequences, even if theyre negative .I do think (Broder) fudged an article.
Bloomberg reporter Betty Liu also asked Musk how much effect on demand for the Model S would be different without the U.S. governments $7,500-per-vehicle tax credit it offers for electric cars. He estimated that demand could be as much as 20 percent less without the incentive. And asked of his impressions about dealing with Washington, Musk responded, Its much less corrupt than people think it is.
Thats amusing. Some may quibble about what kind of inside-the-Beltway behavior rises to the level of corrupt, but that doesnt mean that plenty of other activity doesnt qualify as distasteful or even objectionable. For example, that the high-powered law firms that were tasked with evaluation and documentation of the Department of Energys loan guarantees (including Teslas) were major donors to Democrats, which assured the passage of the stimulus and President Obamas green agenda, doesnt pass the smell test.
Musk is also chairman of SolarCity and CEO of SpaceX , and in the Bloomberg interview he estimated hes visited Washington about 200 times, visiting dozens of Senators and at least 150 Congressmen. According to the Center for Responsive Politics, SolarCity spent $535,000 in 2009 and 2010 to lobby Congress and the Department of Energy on climate legislation, the Recovery Act, green workforce training and development, and provisions in various legislation relevant to solar development. SolarCity has sought to extend a program, due to expire at the end of 2012, that delivers to manufacturers an upfront cash grant in lieu of a 30 percent Investment Tax Credit (called the Section 1603 grant program). According to DOE reports, SolarCity received more than $66 million from that program.
The company also won a partial guarantee from DOE of a $344 million loan that will place up to 160,000 rooftop solar installations on military housing across the country.
Similarly, Tesla spent $480,000 from 2007 to 2011 to lobby Congress, the White House, EPA and DOE on climate and energy issues, the Advanced Technology Vehicles Manufacturing loan program, the Promoting Electric Vehicles Act, and the Recovery Act. As mentioned earlier, Tesla received a $465 million loan guarantee from DOEs ATVM program.
Musk is also a generous political donor, mostly to Democrats, although his investments and giving are equally diverse. He gave $290,000 to political candidates and the major parties from 2008 through 2012, which included $66,200 to the Democratic National Committee, $34,400 to the Democratic Senatorial Campaign Committee, and $63,500 to the National Republican Congressional Committee. His presidential candidate was Barack Obama, giving $2,300 for his 2008 campaign and $5,000 for the 2012 cycle. Besides Musk, a former Tesla director, Steve Westly,raised hundreds of thousands of dollars for both of President Obamas campaigns as a bundler.
In the end, when you review the news about Musk and his enterprise, theres a lot of quibbling over matters of degrees. Is his political activity just redistributionist corporate cronyism or actual corruption? Is he telling the truth or is the New York Times, or is it somewhere in-between? Can his electric cars really travel over 200 miles on a charge only to require at least an hour to fully recharge (on the fastest, and rarest, chargers), or dont they?
These would be stupid questions that almost no one would care about if the government didnt gamble public money by giving billionaire Musk who just bought a $17 million mansion in Bel Air the huge loan. While taxpayers subsidize the foolishness of rich people taking at least an hour (and usually longer) to repower their cars, the rest of us struggle to get by in the real world where we can refuel our vehicles in five minutes and be on our way.
Musk has said he has been paying principal and interest on the loan, on time, which is comparatively commendable when you consider the failures of Solyndra, A123 Systems, Fisker and others. But in the big picture, why should taxpayer money be risked for any of these shenanigans at all?
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com , an aggregator of North Carolina news.
Musk has a bit of a blue tinge to his skin.
/ end irrelevant musing.
One could only hope that he crashes and burns spectacularly.
Yep...The guys a billionaire, let him cater to the very wealthy with this car with his own money.
There’s no way the buyers of electric vehicles should be getting a $7500 tax credit, especially on a $100,000 car.
Too bad Nikola Tesla’s (Super... Genius...) memory is being marred by this boondoggle.
Last fall my buddy's daughter ordered the Tesla SUV and put down 5 grand deposit and it was supposed to be built in 2014. But they made her a deal on the sedan and she got it instead - last week.
The nearest dealer is 185 miles away, so they delivered it via a transporter to her house. She gets "free" juice at her employer and has a long commute. Will be interesting to see how the economics work out. The thing is plenty fast, 0-60 under 6 seconds. Looks very much like the latest Jaguar sedans.
A nice looking car but it should be for that kind of money.
She better hope she doesn’t have a break down that requires dealer service. :-)
They claim the “Tesla Rangers” come with their mobile service rigs. This will be interesting to follow now that I know somebody who actually has one.
Thanks, keep us informed if anything comes about.
What’s scary is that if he fails, idiot boy in the bananna shack will just bail him out with our money.
All while vacationing for the hundredth time on our dime with his man love.
Well its a nice looking car....heck its a luxury car.
I don’t have a problem buying one...but I do have a problem with the government getting my money involved.
I am very curious about her ‘long term road test’ of this car - especially dealing with range and driver comfort (heat). Heck I’m also curious to know what air conditioning does to the range.
My biggest curiosity is the battery (and I understand this being a luxury ‘toy’, some might not care. Interpolating from their pricing options, depending on the battery, it is worth approximately 40-50% of the car’s value, and warranteed for 8 years/125k miles. I remember growing up in the 1970’s, and if a car got to 100k miles, it was time to think about a new one. But now its difficult to find a used one with less than 100k. Cars just plain go alot further, without major engine problems. I’ve got a few with over a quarter million miles in the driveway right now. Anyway, I assume that the battery will pretty much be toast long before this car gets near 200k miles...with a big price tag to replace. I just wonder how that will work out for people who actually drive to work and put miles on a car like this.
Rumors are that Volkswagen, one of the first purchasers of the 100 thousand dollar gems, found about $140k worth of car and batteries! Usually such a product is a loss leader, although with free money from Uncle Sam, it’s not obvious where any profit would come from with Tesla.
Weren’t they supposed to $40-50k? Well, that’s the stripped models they’ll build later with 40-80 mile batteries! Current versions (for free PR test drives) are much more.
Just to be fair, hybrid battery packs seem to have no problem getting to 200,000 miles. Like gas engines, some will fail before then, but there are ones around with over 10 years and 300,000 miles.
Toyota, for example, warranties their batteries 100% for at least 100,000 miles.
Electric-only vehicle battery packs should probably perform similarly.
I believe the reason Musk is so ticked off about the NY Times article is that not only is he relying on government loans but investor money. That article hurt him with investors and the stock slide is proof of it. That's just my view.
I've seen others classify Musk as a con man.
Here’s the pricing and options for the four different Model S Teslas.
“Just to be fair, hybrid battery packs seem to have no problem getting to 200,000 miles. Like gas engines, some will fail before then, but there are ones around with over 10 years and 300,000 miles.
Toyota, for example, warranties their batteries 100% for at least 100,000 miles.
Electric-only vehicle battery packs should probably perform similarly.”
Yes there may be some Prius driving around with 300k miles. But you know what? You could take the battery out of the Prius, and the only thing you would notice is a slight reduction in mileage. In other words, it doesn’t really matter, and that battery riding around in a 300k Prius is probably completely useless anyway.
There will be no 300k Tesla battery packs. Period. Its the only means of propulsion, and you most certainly will notice when it starts to be a problem.
And its not quite like a gas engine. It will start to fail on the very first day. That’s right. That’s how all batteries function. Every single time they are charged and discharged, their efficiency drops slightly. This is why my car engines tend to last longer than my cell phone batteries. They always will.
Then there’s the ‘bricking’:
Anyway, back to normal battery life - Tesla knows exactly what it is. They have to have tested it. And people are constsntly asking the question on their website...and they never get a straight answer. That makes me very suspicious the battery life expectancy isn’t much longer than the 8 year warranty.
Sounds like there might be a business opportunity for someone to convert “bricked” Teslas to gasoline power. It might end up being less expensive.
That’s a good idea.
“Loans” to companies and tax credits to purchasers of their products. Theres a whiff of fascism is the air.
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