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Comment by artursapek | Hacker News Reader

It seems like TSLA is one of the most tirelessly shorted stocks out there. Why are there so many people betting against them?

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Because the valuation is insane. Tesla is worth as much as Nissan, yet has no sign of the ability to turn a profit.

I have a hundred shares. I wouldn't bet against Elon.

But they do turn a profit... then turn around and invest in growth.

Only via particularly tortured accounting.

No, the profit after all investment costs is thin and may depend on accounting, but the car production itself produces the money they are investing into e.g. the Gigafactory.

Tesla sold stock several times to fund the Gigafactory. Then they got Panasonic to pay for half of the Gigafactory.

That's not from profits, that's from shareholder investments. Its the power of the stock market to dump money into an asset. But don't pretend that Tesla managed to scrap together like $3 Billion from their years of operating losses.

https://media.ycharts.com/charts/aa2e00215ae08b27274cafbb493...

Here's Tesla's stock offerings, diluting Tesla shareholder value:

https://www.nytimes.com/2016/05/19/business/tesla-to-offer-2...

http://money.cnn.com/2013/05/15/investing/tesla-stock-offeri...

http://ir.tesla.com/releasedetail.cfm?ReleaseID=927533

TSLA is one of the most hyped companies out there. To vindicate the short-sellers, TSLA doesn't have to flop, it simply has to justify slightly less exuberance.

I'm very new to the stocks game so excuse what's probably a simple question, but would vindicating the short-sellers require TSLA shares to drop back down to around $180-190 or whatever level they were at before the shorts were in place?

Yes, exactly. Ideally (for the short-sellers) the stock would fall even further, as if the stock is at the exact level it was when they bought, then they'll only break even.

It would have to fall more than that to make up the interest they're paying on the shares they borrowed as well as brokerage fees.

With current interest rates, it wouldn't have to fall much more, but yes. Plus opportunity cost, and a return to compensate for the risk [1], etc.

[1] It's very risky to short a stock as you can end up losing a very large amount of money, as stocks can increase many times in value. When holding a stock, your risk is finite, as it can only lose 100% of it's value. When shorting, the stock can double or triple in price.

> With current interest rates,

Borrowing costs for TSLA stock have been over 20% annualized (I don't know the current situation).

They won't quite break even because of fees and margin interest charges.

Tesla is going up against an old, entrenched industry. Competitors have been around for many decades. Their odds have been slim. They have made mistakes. But it's looking better for them as time goes on.

Somehow reminds me of Tucker Corp.

Because they are a fledgling car company. Those are generally doomed. A few wrong moves, a few bad models, and you disappear. Either that or one of the established companies uses their resources to launch at competing product.

Frankly, the likes of Honda and Toyota are probably laughing at tesla. Once their ducks are all lined up their size will allow them to produce electric cars at an insane scale. Shortsellers bet on this happening sooner than later and have so far lost that bet. But that doesn't mean it cannot happen tomorrow. Telsa is still on a knife's edge, will be for a decade or more. Tesla knows this an so is trying to leverage its battery know-how into other fields, a hedge against a decent honda electric hitting the US market.

Yep. I am a Tesla shareholder and the growing short interest makes owning the stock all the more exciting.

Just because Toyota, Honda and the like manufacture gasoline cars at a large scale, one cannot postulate that they will overnight produce electric cars at the same scale. Assembly line retooling is a big deal.

It's the batteries. Tesla has a big lead over other OEMs in battery cost. This is obvious in the energy storage space.

Also, if some new battery tech comes out, then Tesla will get their hands on it, being half the world's battery supply.

Plus alternates. Toyota is pushing strongly for Hydrogen. And if petrol station chains are forward thinking they will encourage this too. Electric is too easy to make the petrol station redundant.

If I was Caltex/Shell/BP/Exxon etc I would be forming a group to drive support to hydrogen, both via govt and manufacturers. Should consumers largely go electric not many people will turn up to their shops any more.

It is going to be difficult to make money with hydrogen filling stations; both liquid and compressed hydrogen come with huge challenges in terms of transportation and storage.

Petrol stations will not make much money on electricity if they install chargers, but they will sell a lot of food to customers waiting to charge, even "supercharging" is quite slow..

Food/waiting thing is a good point but I imagine the bulk of people, if electric, will charge overnight and rarely need out-of-home power.

According to wiki the cost to put in Hydrogen fueling infrastructure would be about 20% of electric: https://en.wikipedia.org/wiki/Hydrogen_station

That sounds like one of those "alternative facts". After following the cite trail from Wikipedia, it was apparently something someone from the hydrogen car industry said at a conference. No further cite or info on what exactly they are counting in that figure.

This cannot be true, unless there is a new way to store hydrogen which is completely revolutionary.

Cost difference does seem counter-intuitive but not an expert. I also wonder if rather than transporting hydrogen around they could make it on site from piped water. Not sure if electrolysis of water has scale benefitsm of mass producing hydrogen then trucking around. That could reduce cost of transport... but then that would be much the same as electric anyway with the inevitable energy loss on conversion...

EV chargers are much cheaper to operate/install than gas pumps; and gas pumps should be less expensive than hydrogen filling stations, i.e. something does not add up here.

It's very expensive to keep hydrogen cool enough to stay liquid, but it's not exactly cheap to keep hydrogen compressed in massive tanks that always leak either. Moving it around is another problem, I find it extremely unlikely that this costs less to operate than electric infrastructure, which is static.

Hydrogen doesn't really make much sense to me. It's hard to work with so if you've got a bunch of it laying around why not combine it with some CO2 frozen out of the air to form methane, something you can pack much more densely in tanks and which won't tend to leak through so many things? You'll produce CO2 when you burn it but no more than what went in to creating it in the first place. Some back of the envelope math says you're losing about 25% of the energy in the Sabatier process to do that but it makes all the transportation and storage of the fuel so much simpler.

Because it isnt about the science. In most jurisdictions if co2 comes out the tailpipe it isnt "zero emmissions" regardless of the overall numbers. There are also other non-carbon forms of pollution that any ic engine must address (no2 etc).

> Tesla has a big lead over other OEMs in battery cost.

Do they though? How come GM was able to shop a reasonably priced Chevy Bolt as a competitor to Model 3?

I realize that in car manufacturing GM is a leading brand with economies of scale working for it, but in electric battery world they're a nobody, so I'd expect them to pay close to market price, no Gigafactories and all?

Do they lose money on Bolts?

Yes, they lose money on bolts or at least break even. I'm trying to find the source on it but from what I read the reason they are making the bolts is to get ZEV credits that'll offset their larger & more profitable trucks and gain experience in building electric cars so if (when?) they have to compete head to head with Tesla on a larger scale that they'll have the knowledge to do so.

I don't know if it's all about ZEV credits, those have dropped to "pennies on the dollar" nowadays, so would be more efficient just to buy them on the open market (which GM still does) http://www.businessinsider.com/elon-musk-trump-decision-on-e...

Tesla has the batteries, but they don't have the rest of the car. Honda and the like, even GM, can churn out new models built to very high standards much faster than Tesla. BMW is doing very well with pure electrics without much press. They are looking at shipping 100k electrics this year. Tesla may be the cool luxury brand in california, but BMW is in a different league in terms of build quality and worldwide acceptance. If tesla misses the "cool" factor, BMW is right their. That potential for upset is driving the shortsellers.

Personally, I'd never buy a car from someone as small and young as tesla. They just don't have the legs. I've been brought up to buy good used cars and drive them until they die. I expect 20+ years. BMWs, Mercs, hondas, even jeeps and Volvos really do last that long if you are nice to them. Until I see a 25yo Tesla driving down the road I am not a potential customer.

> Tesla has the batteries, but they don't have the rest of the car.

Tesla doesn't have to make a single car anymore if automakers would make a real electric car; they'd just supply the industry with batteries. But, compliance cars. So, Tesla plods on with their own vehicles.

I was considering buying a Tesla a few years ago, but the finish and interior of any other luxury sedan blew the Teslas out of the water, and it's definitely where they are lacking.

However, I wonder if it's harder for Tesla to get better at fit & finish and interiors and quality, or if it's harder for the entrenched players to gut their petrolhead heritage, and sacrifice their lucrative combustion engine business, and especially the lucrative service & repair business it creates.

Another angle is that Tesla is Silicon Valley bred, they're a software company through and through. The other companies treat software as an afterthought, their infotainment systems range from "monstrosities" to "I don't want to claw my eyes out yet". None are good. Some are bearable. Teslas is good, and it's an obvious priority, and software is such a huge part of modern cars and their performance, that the hardware will be commoditized.

It's definitely interesting!

> Tesla is Silicon Valley bred, they're a software company through and through

Are they, really? I'm not impressed. Software is very central to their cars, and I think the end user experience is pretty abysmal. Which is par for a car manufacturer, of course, but I had other expectations given their Silicon Valley heritage. Get Apple involved already! They don't seem to be going anywhere with their own car investments anyway...

There have been 250K Nissan Leaf cars made already.

https://en.wikipedia.org/wiki/Nissan_Leaf

And Renault have delivered over 100k all electric cars (spread over 4 models, though most of them are the Renault Kangoo Z.E. and the Renault Zoe Z.E.)

I wish Nissan would import the Kangoo Z.E. into the US. Hell, I wish Nissan would import the Twingo into the US.

Having followed the industry closely, I can assure you the likes of Honda and Toyota are not laughing at Tesla anymore.

As the saying goes, "first they laugh at you, then they fight you, then you win".

The laughing stage is far gone.

Tesla's sales are a rounding error for Toyota. Even if Tesla somehow delieved 100% off their Model 3 preorders in 2017, that would be less than 5% of the number of cars sold by Toyota.

They are indeed a small number compared to the total number of cars produced by Toyota, but they are all-electic. How many all-electric cars does Toyota build? Of course, Tesla won't be taking over the car market by numbers any time soon. But they are about to take a huge slice of a profitable segment of cars, with models Toyota at the moment cannot compete with. They are working busily to change that, but right now, Tesla has no competitor in their segment.

All-electric cars are not "a profitable segment". They might be in the future, but it's a bet.

Do you have any numbers to back up your statement? How is the revenue of Renault and Nissan from their electric car programs? At least they sell well, so I would assume they are profitable.

And of course Tesla is not really profitable as in the quarterly revenue, but according to their statements, they do get above 20% profits from selling cars which get eaten up by their aggressive reinvestments - the company is growing by about 50% year over year.

To sell cars in California manufacturers need to get credit for selling a certain number of electric or hybrid cars. I believe Nissan sells leafs at a loss to meet those quotas. BMW and Fiat certainly do. Most of the other big manufacturers are buying credits from Tesla to meet their quotas. The credits were the only reason Tesla made a profit on a recent quarter.

I still would like to see the numbers backing up the thesis that especially Nissan and Renault, who are selling a lot of electrical vehicles here in Europe too where there are no ZEV credits in play, and lose money at that. Yes, the credit business helped Teslas profitability as a company in the last quarter, but that is a statement about Tesla as a company. They are making strong profits on the production of the Model S/X, but are spending all proceeds from that into the expansion. This means: building the Gigafactory, expanding the Freemont plant, setting up dealers and repair centers, running and expanding the supercharger network. At a year over year growth of more than 50% this is an amazing feat. I don't think that supports the statement "you are not making a profit selling electrical cars".

You will not see hard numbers because companies don't show them. Nissan Leaf became profitable about two years ago, if ever (their boss said "We're getting there" [1]) - but that means cost of production of a single unit got below cost of sell. It's still a long road before the RnD and other upfront costs will be returned.

The same goes for BMW. They recently announced they expect lower profitability of the entire make due to cost of production of the electric cars.[2]

Each Fiat 500e is sold with $14000 loss[3].

Besides, I'd argue that Tesla make money on their cars not because they are in a "profitable segment of electric cars", but because they are in profitable segment of luxury sedans (and SUVs). Sure, all-electric is part of their appeal, but they are no more profitable than luxury sedans with combustion engines.

[1] http://www.torquenews.com/2250/nissan-leaf-now-profitable-so... [2] https://www.bloomberg.com/news/articles/2016-11-04/bmw-third... [3] http://jalopnik.com/sergio-marchionne-doesnt-want-you-to-buy...

Toyota(and Daimler) invested in Tesla 7 years ago when things were more dicey.

http://www.ft.com/cms/s/0/433ddb64-653a-11df-b648-00144feab4...

> Once their ducks are all lined up their size will allow them to produce electric cars at an insane scale.

For Elon Musk, that would be the "Mission. Fucking. Accomplished." moment[0]. His point all along is to make cars electric, not to be the one who sells most of them in the long run.

[0] - https://xkcd.com/810/

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