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Is that Tesla Theranos? – Vitaliy Katsenelson Contrarian Edge : INVESTMENT

This article is part 10 of an 11-part analysis by Tesla, Elon Musk and EV Revolution. You can read other parts here.
Tesla Bears – many of them are people I respect; Some of them are my dear friends – I would like to point out that Musk has another side, the (fraudulent) side of Elizabeth Holmes.
Holmes was CEO of Theranos, a startup from Silicon Valley with an incontrovertible board of directors, including two former US Secretary of State, Henry Kissinger and George Shultz. At the height of its hype Theranos had a private market value of $ 10 billion. Holmes graced the covers of business magazines, held a million-featured TED talk, was a role model for young women, and had the reputation of a visionary who would improve the lives of billions with a product that could run hundreds of medical tests with one small drops of blood through.
Holmes might have great ambitions, but the difficulty or impossibility (at least today) of what she was trying to do caught up with her and she had to resort to deceit and deceit. Theranos went down in flames.
Bears claim that we are blinded by Musk's Iron Man page and do not see the Elizabeth Holmes side: in addition to promises he does not want to keep, he actually plays a trust game. Bears points out that Musk committed securities fraud when he said on Twitter that he would take Tesla privately with "secured funding" for $ 420. This was a lie to scare off short sellers of Tesla shares.
In another such move, Musk personally called the employer of a short seller and threatened the employer with a lawsuit if the employer did not prevent the short seller from publishing negative research on Tesla on Seeking Alpha and Twitter. (Elizabeth Holmes had resorted to similar tactics).
Tesla bears also refer to Musk's rescue for SolarCity – a heavily indebted, money-losing solar company with a broken business model run by Musk's cousin. It would have gone bankrupt in a few months if the Tesla shareholders had not bought it. A SolarCity bankruptcy would have damaged Musk's reputation as the Iron Man, creating everything, strengthening Tesla's valuation and diminishing its ability to emit cheap equity. By rescuing SolarCity, Musk Tesla piled up money and billions of dollars of debt that was already struggling to break even.
The bears questioned Musk's state of mind when he described a British diver who rescued Thai children caught in a cave as Pedo in a tweet.
I would like to remind you that I started with this essay, quoting F. Scott Fitzgerald, and explaining that in our analysis of Tesla and Elon Musk, "we need to keep two opposing ideas in mind while retaining our ability to work ".
There are many conflicting ideas here.
Skeptics have a lot of substance in their arguments against Tesla. The story is on her side. Apart from Tesla, the last automaker founded in the US and still existing today, the company was founded in 1930. In the 2008 financial crisis, two automakers went bankrupt. Yes, Musk's stock manipulation with the tweet "funding secured" was simply immoral and illegal. We can think about it, but people's indignation about this behavior (yours really included) is irrelevant to Tesla's future. Musk has paid a fine to the SEC and continues to run the company. (Any other CEO would probably have been fired and could have gone to jail).
The problem, however, raises a more important question: is Musk an asset or liability for Tesla? Well, he can be both. On the one hand, he is a genius and a visionary who cares deeply about Tesla's success and is willing to sleep in the factory to get things done. He is also an incredible micromanager and a benevolent dictator who runs four companies. He is overworked and exhausted, and this explains to some extent (although he does not apologize) his unpredictable behavior and his tweets as well.
If anything happened to him or he was removed from Tesla, what would happen to the company? Would Tesla become Apple after Steve Jobs was fired in 1985 or Apple in 2011 after Steve Jobs died? The apple of 1985 withered because he did not have enough product diversity and depth of management to replace a charismatic visionary. Jobs left a vacuum on leadership and vision when he was fired, and John Sculley – a Pepsi manager – was no match for the job.
The Apple of the Year 2011 was in a much stronger position and on a much broader basis with a stronger leadership team. Tim Cook was hand-picked by Steve Jobs and nursed for years to replace him. And although Apple has flourished as a company since the death of Jobs, the company's subsequent innovation was not revolutionary but very evolutionary. Most of the product categories developed in Jobs have been improved, but no significant new product category (apart from the Apple Watch) has been introduced. In fact, it has tried and has failed so far in the manufacture of a car.
The Apple example shows that replacing a benevolent dictator / visionary is very difficult, but not impossible. Success depends on the timing, competitiveness and financial strength of the company at the time, depth of management and luck. Tesla today seems to lack management depth Executives dismissed faster than I lose my hair. Today, Tesla is closer to the 1985 apple than 2011, and can barely afford to lose his overworked genius / benevolent dictator.
The success of Tesla is determined by the financial profitability of its business: Can the company finance itself? The success of Tesla as a stock will ultimately depend on the earning power of the company.
The Bears argue that Tesla has quality and service issues. Some model 3 models, which were rushed to achieve the production targets, were poorly put together. It appears that the issues with the Model 3 production quality have been resolved. Even one of Tesla's biggest critics, Bob Lutz, former CEO of GM, has enthused about the quality of construction and installation of the model 3.
Growing at the speed of a Silicon Valley startup, Tesla is also building gigafactories, a global supercharger network, service centers and stores, and developing its own self-propelled processor – and competing against companies, who are better capitalized and at the 50th iteration of their ICE products (and thus have a more consistent quality).
Every time Tesla has stumbled and stumbled a lot, it has risen, regrouped and gone forward. My personal experience with the Tesla service was excellent. But I have read that Tesla still has growing pain with his service today. This makes sense – the number of serviceable vehicles has more than doubled in the last year and a half. The Tesla technician, who repaired my Model 3 handsfree, told me that his planning software is still in the works as it is being sent on consecutive dates 50 miles apart. However, this does not sound like a permanent problem. A quick software fix should fix the problem.
One very important thing that Tesla has and Theranos did not do is an incredible product and people who are fanatical about it. Tesla cars are superior to other electric vehicles and even most of the other alternatives of today's competition. Talk to every Tesla owner and he (usually one he) will spend hours raving about how much he loves the car. I have not met a GM or Toyota owner who has the fanaticism of a Tesla owner.
Because of this, Tesla does not advertise (while ICE manufacturers spend billions), but has a larger sales team than all GM, Ford and Chrysler dealers put together. Tesla has passionate owners and his sales team grows with every car sold.
It is really hard to say today if Tesla will reach the speed of flight and become profitable before investors and capital markets lose their patience and willingness to finance their losses. With the purchase of SolarCity Tesla has certainly made his journey difficult. But the company does not sit still and tries to cut costs. Here is one example, Model S had two miles of electrical wiring, Model 3 "only" one mile, and Model Y was supposed to be only 100 meters long (if it could actually be implemented).
If Tesla can increase its production, the extra cost per vehicle should decrease. Let me explain. The cost of a car is made up of two components, one fixed and one variable. The variable costs include the battery, tires, engine, etc. These costs are not usually greatly reduced (although they decrease in part) as more cars are produced.
Fixed costs, such as the operation of a gigafactory and the development of software, decrease per vehicle as Tesla increases its production. Assuming that the demand for Tesla's cars continues to grow, the company's gross margin (how much it earns per car) should rise and thus achieve profitability.
But even in the worst case, when Tesla runs out of money and bond and equity investors lose confidence in the company, it's unlikely that the fate of failed automakers (think of DeLorean or Tucker) is being pursued. It is purchased from an ICE car manufacturer or a Silicon Valley comrade (Google or Apple). It would save them billions of Losses in research and development and bring them up to date. The investors would of course still lose money because the distressed purchase price at that time would be a fraction of today's price.

This is just one of eleven parts of my analysis of Tesla, Elon Musk, and the EV Revolution.

You can get a complete analysis as an e-mail series, PDF, EPUB or Kindle eBook Here or e-mail to (Email protected),

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