Anyone who follows the ever-growing legion of my contacts on LinkedIn (here) has heard me use the phrase "peak stupidity". It is usually, although not always, relating to some kind of scaremongering hocus-pocus related to climate change. With the COP26 conference kicking off in Glasgow on Sunday, I expected to be barraged with this tripe. I am in Europe now, and that makes it even worse, as this is clearly the most "green" of the seven continents.
But this morning I read something from my hometown paper, the New York Times, that made me quite literally stop eating my Muesli. The NYT managed to find some crazy woman - I believe her name is Margaret Renkl, I will not link to the story here - that suggested that the solution to the world's problems in to ban leaf blowers. Yes, leaf blowers. What is wrong with these people? But it's not just the ultra-leftists at the New York Times that spout this nonsense. Gavin Newsom, governor of California, recently introduced a ban on gasoline powered yard equipment like lawnmowers, and, yes, even leaf blowers.
Thank you, woke mafia for saving us from the scourge of leaf blowers. Mind you that we are about to hit the five millionth casualty from COVID (based on worldometers.info data, that milestone will be reached today) and are very close to hitting the 250 millionth case. But, those damn leaf blowers!
That's what is wrong with the media today. They just mindlessly regurgitate nonsense without even bothering to check it -not versus so-called facts, but versus a little old thing called common sense.
That brings me to the valuation - or misvaluation - of Tesla (TSLA) . No doubt this company has made progress on the profitability front. Management's long-term profitability guidance of a "low-teens" operating margin was indeed achieved in 3Q21 and, even excluding revenues from tax credits, TSLA was solidly in the double-digits in its car business, although barely break-even in both solar and energy storage at the operating profit level, which does dilute things.
With all the hagiography granted to Elon Musk, let me give him credit where credit is due. China is a good place to make "stuff" - Steve Jobs knew this decades ago - and clearly the margins from Tesla's Lingang facility in China are superior to those produced at its older, tent-reliant facility in Fremont, California. Every company that manufactures anything does it in China, and Elon was smart to join that wave. Volkswagen (VLKAF) opened its first facility in China in 1983,and began locally producing the Santana in 1984.
So, wait? Does that mean that Tesla is just doing what forward-looking companies like GM (GM) and Volkswagen started to do more than 30 years ago? Yep.
You know what else those companies also started to do 30 years ago - or at least in 1992 when I started following the sector? They started to deemphasize sales to daily rental fleets. Daily rental is thought of as the worst of the worst in Detroit. Discounting is rampant and nobody wants that business.
Enter Hertz (HTZZ) , which recently re-emerged from bankruptcy, and its 100,000 car order from Tesla, which has added about $200 billion to Tesla's market share this week. I have no reason to dispute Elon Musk's tweet that stated that the cars were sold without discount - many are imputing a $4.2 billion revenue figure to the contract, implying a $42,000 value per Model 3 - but here's the thing. Elon has everyone all lathered up with the prospects of generating recurring revenues from cars (using a handset/app model to sell things like insurance, FSD, etc.) and once those cars are delivered to Hertz, that will not happen. Let's face it, we have all beaten the hell out of a rental car in our lives. God knows, I have.
It just boggles my mind that Elon wouldn't politely rebuff Mark Fields (whom I've met in my decades following the auto industry and who was an absolute disaster as CEO of Ford) and say, "No thanks, but our retail customers love our product. And we plan on upselling them throughout the life of the vehicle."
Add to that, the idiotic piece that I read on MarketWatch (again, I am not linking) this morning that stated no fewer than three times, "Tesla will sell a million cars this year." Not even close. Even the most bullish analysts, like those at Piper Sandler and Wedbush, have been trimming 2021 Tesla delivery estimates to account for the semiconductor shortage - 850,000-875,000 seems to be the sweet spot right now. As a sell-side auto analyst for 11 years, I learned the game of sandbagging well, but I just don't see TSLA delivering more than 900,000 this year. Daily registration data from Norway (yes, I am a nerd) indicates that TSLA's October delivery numbers will be awful, as they are in the first month of any quarter. December will be strong, as the final month of every quarter is for TSLA deliveries.
So, those are facts. Your leaf blower isn't ruining the world, and your Model 3, as fun as it may be to drive (EVs have a huge advantage over ICE vehicles in throttle response/straight-line acceleration and they always have) will never be able to drive itself without Lidar and, in models made recently, with no radar as well.
