Energy

Tesla is trucking kidding itself

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Tesla has bagged 55 orders for the semi so far. Although it is no surprise that no major truck hauling companies have signed up. Funny that. To expect trucking companies who operate under strict cashflow constraints (afterall they’re businesses not wealthy consumers) to give Musk a $200,000 upfront deposit (aka interest free loan) per ‘founder series’ truck is to put in Tesla lexicon – ludicrous. Truck companies, as CM wrote in its 30 reasons why Tesla is likely to be a bug on a windshield, are conservative. They want to see the technology proven in the field before just forking over $150-200,000 and hoping for the best. Were the technology or charging infrastructure to come up short then the whole economic proposition would come unstuck.

The Tesla trucks are roughly 30% to 70% more expensive than diesel trucks which have up to triple the range on full tanks. Many new 2018 diesel models are available now at $120k vs Tesla’s $150k (300mi range) and $180k (500mi range).

If we used the $60,000 more expensive Tesla Semi can to recoup the difference then it will need to be driven 240,000 miles using the $.25/saving per mile vs diesel Tesla number. Some estimates suggest payback in 3-4 years.

One former trucking company planner wrote,

I was surprised when I saw this “two-year” payback period quoted by Musk last week and repeated on the website. Two years? Really? He had just gotten through showing us an operational cost savings of $.25 per mile over diesel.

Well if I am going to pay back the truck I need those savings to equal the purchase price in two years. Well $180,000 divided by $.25 is 720,000 miles or 360,000 miles per year. That is not even physically possible. A truck would have to drive non-stop for 24 hours a day, 365 days a year at an average speed of 41 mph. Subtract out recharging time of 30 minutes every six hours or two hours per day and four hours per day for loading and unloading and the truck must average 54.7 miles per hour for every mile driven. It is impossible to do.

My big trucks ran long trips moving from coast to coast or north to south. I pulled out my records just for the fun of it and my trucks averaged 13,000 miles per month in summer months and under 10,000 in winter months because of weather and tougher loading and unloading conditions. Most trucks ran about 120,000 miles per year maximum even with driver teams. This was due in many cases to operational time limits of over-sized loads (half hour before sunrise until half hour after sunset is mandatory in many states for safety reasons).“

Whether the new Tesla Roadster or Tesla Semi this new deposit scheme is actually more telling than the vehicles themselves. This can be none other than a cash grab interest free loans to keep the thing alive. I salute Musk for his pioneering spirit but playing with the big boys is never easier done than said. Can’t wait to see the cashflow numbers in Q4 reporting early next year. If we get a worsening of this chart beware.

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Perhaps we can also find some amusement in Tesla’s competitor (Nikola) tweets

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The signals of true intentions on climate change…“don’t raise my fuel prices!”

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This was a poll last week in Australia showing the majority would prefer cheaper electricity than to save the planet. I recall a study before GFC and after it showing the relative rank of ‘climate change’ as a serious issue. It was a Top 10 concern for voters pre GFC and slipped to last place (out of 25) after it. Yes, human nature and the will to survive trumps everything.

So according to Rasmussen Reports,

The Trump administration is considering raising the gas tax for the first time in 24 years to help pay for a one trillion dollar infrastructure plan, but Americans unsurprisingly are not on board…A new Rasmussen Reports national telephone and online survey finds that 54% of American Adults do not think the government should raise the gas tax to help meet new transportation needs. Just 33% think the government should raise the gas tax, but 13%”

At least the $7,500 subsidies to buy EVs will be repealed next year. Not that it will save the government too much. A lot of people with Tesla Model 3s on order are banking on the tax break so if they don’t roll out quick enough their $25,000 car will soon be $32,500.

Tesla – 30 reasons it will likely end up a bug on a windshield

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Contrarian Marketplace ー Tesla – 30 Reasons it will likely be a bug on a windshield

Contrarian Marketplace Research (CMR) provides 30 valid reasons to show Tesla (TSLA) is richly valued. Institutional investors have heard many of the financial arguments of its debt position, subsidies, cash burn and other conventional metrics. What CMR does is give Tesla all the benefits of the doubt. Even when extended every courtesy based on Tesla’s own 2020 production target of 1,000,000 vehicles and ascribing the margins of luxury makers BMW Group (BMW GR) & Daimler (DAI GR) the shares are worth 42% less than they are today. When stacked up against the lower margin volume manufacturers, the shares are worth 83% less. There is no fuzzy math involved. It is merely looking through a different lens. We do not deny Tesla’s projected growth rates are superior to BMW or DAI but the risks appear to be amplifying in a way that exposes the weak flank of the cult that defines the EV maker- ‘production hell’.

Follow social media feeds and Tesla’s fans bathe in the cognitive dissonance of ownership and their charismatic visionary, CEO Elon Musk. No-one can fault Musk’s entrepreneurial sales skills yet his business is at the pointy end of playing in the major leagues of mass production, which he himself admitted 18 months ago was a ‘new’ challenge. Let us not kid ourselves. This is a skill that even Toyota, the undisputed king of manufacturing, a company that has coined pretty much every industrial efficiency jargon (JIT, Kanban, Kaizen) has taken 70 years to hone. It might have escaped most investors’ attention but Lockheed Martin called on Toyota to help refine the manufacturing processes of the over budget F-35 Joint Strike Fighter. If that is not a testament to the Japanese manufacturer’s brilliance Tesla is effectively Conor McGregor taking on Aichi’s version of Floyd Mayweather.

Yet Tesla’s stock has all the hallmarks of the pattern we have seen so many times – the hype and promise of disruptors like Ballard Power, GoPro and Blackberry which sadly ended up in the dustbin of history as reality dawned. Can investors honestly convince themselves that Tesla is worth 25x more than Fiat Chrysler (a company transformed) on a price to sales ratio? 10x Mercedes, which is in the sweet spot of its model cycle?

Conventional wisdom tells us this time is different for Tesla. Investors have been blinded by virtue signalling governments who are making bold claims about hard targets for EVs even though those making the promises are highly unlikely to even be in office by 2040. What has not dawned on many governments is that 4-5% of the tax revenue in most major economies comes from fuel excise. Fiscal budgets around the world make for far from pleasant viewing. Are they about to burn (no pun intended) such a constant tax source? Do investors forget how overly eager governments made such recklessly uncosted subsidies causing the private sector to over invest in renewable energy sending countless companies to the wall?

Let us not forget the subsidies directed at EVs. The irony of Tesla is that it is the EV of the well-heeled. So the taxes of the lawnmower man with a pick-up truck are going to pay for the Tesla owned by the client who pays his wages to cut the lawn. Then we need look no further than the hard evidence of virtue signalling owners who run the other way when the subsidies disappear.

To prove the theory of the recent thought bubbles made by policy makers, they are already getting urgent emails from energy suppliers on how the projections of EV sales will require huge investment in the grid. The UK electricity network is currently connected to systems in France, the Netherlands and Ireland through cables called interconnectors. The UK uses these to import or export electricity when it is most economical. Will this source be curtailed as nations are forced into self-imposed energy security?

So haphazard is the drive for EV legislation there are over 200 cities in Europe with different regulations. In the rush for cities to outdo one another this problem will only get worse. Getting two city councils to compromise is one thing but 200 or more across country lines? Without consistent regulations, it is hard to build EVs that can accommodate all the variance without boosting production costs. On top of that charging infrastructure is an issue. Japan is a good example. Its EV growth will be limited by elevator parking and in some suburban areas, where car lots are little more than a patch of dirt where owners are unlikely to install charging points. Charging and battery technology will keep improving but infrastructure harmonisation and ultimately who pays for the cost is far from decided. With governments making emotional rather than rational decisions, the only conclusion to be drawn is unchecked virtuous bingo which will end up having to be heavily compromised from the initial promises as always.

Then there are the auto makers. While they are all making politically correct statements about their commitments to go full EV, they do recognise that ultimately customers will decide their fate. A universal truth is that car makers do their best to promote their drivetrains as a performance differentiator to rivals. Moving to full EV removes that unique selling property. Volkswagen went out of its way to cheat the system which not only expressed their true feelings about man-made climate change but hidden within the $80bn investment is the 3 million EVs in 2042 would only be c.30% of VW’s total output today. Even Toyota said it would phase out internal combustion in the 2040s. Dec 31st, 2049 perhaps?

Speaking to the engineers of the auto suppliers at the 2017 Tokyo Motor Show, they do not share the fervour of policy makers either. It is not merely the roll out of infrastructure, sourcing battery materials from countries that have appalling human rights records (blood-cobalt?) but they know they must bet on the future. Signs are that the roll out will be way under baked.

While mean reversion is an obvious trade, the reality is that for all the auto makers kneeling at the altar of the EV gods, they are still atheists at heart. The best plays on the long side are those companies that happily play in either pond – EV or ICE. The best positioned makers are those who focus on cost effective weight reduction – the expansion of plastics replacing metal has already started and as autonomous vehicles take hold, the enhanced safety from that should drive its usage further. Daikyo Nishikawa (4246) and Toyoda Gosei (7282) are two plastics makers that should be best positioned to exploit those forking billions to outdo each other on tech widgets by providing low cost, effective solutions for OEMs. Amazing that for all of the high tech hits investors pray to discover, the dumb, analogue solution ends up being the true diamond in the rough!

Highways to Hell. Railways to Ruin

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Zero Hedge has an interesting expose on a report that China is expediting the construction of a 6 lane highway toward North Korea’s border. It makes perfect sense and supports what CM has said about China taking action on North Korea and replacing Kim Jong Un with a puppet they can control. Forget the WW3 rhetoric. It is far cleaner to have China deal with the problem. The constant jaw-boning from Trump is to get China to hurry up. Of course there is a limit to the patience. The so-called G1112 Ji’an–Shuangliao Expressway is under construction. China’s Jilin province has even upgraded road infrastructure inside some parts of North Korea. It would be useful in getting tanks and troops to the border quickly. There is method in the madness and it is quite a common infrastructure to put in place for obvious reasons. North Korea is hugely strategic to China’s border security – a buffer from the US backed South Koreans.

Probably many are unaware that Mongolia which divides China and Russia has a railway developed by the Russians which runs on a Russian rail gauge. Mongolia is rich with resources so any raw materials exported to China must change bogeys at the border. It is the same with the Kazakh-China border. Russian rail gauges. So in the event of war, troops and supplies can be efficiently transported. Sure an enemy can bomb a railway but in terms of transporting lots of equipment and heavy armaments quickly rail is very efficient.

While the news looks startling it is nothing more than business as usual for the Chinese. Before the highway is completed the Chinese still have around 150,000 troops stationed near the border.

Austria proves again why the EU needs to listen more and talk less

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God gave us two ears and one mouth so that we’d listen more and talk less,’ so the old saying goes This is what the EU gets for trying to bully its member states. It wasn’t long ago that EU President Jean-Claude Juncker was telling Austrians that if they democratically elected Norbert Hofer of the right wing FPO then the EU would remove Austria’s voting rights and cut off any transfers. Well the Austrians have voted for a conservative anti-immigrant party (which wants a programme to get immigrants to assimilate with the local culture) with a 31yo leader, Sebastian Kurz. His People’s Party garnered 31.4% (+7%) of the vote with the far-right wing FPO coming in second at 27.4% and incumbent Social Democrat Party coming in third with 26.7%. The Greens will probably not make the cut off of 4% to make a party, So once again the EU has had yet another major repudiation of its totalitarian ideals.

CM has been making the point for ages that forcing one’s beliefs onto others must be done in a way that listens to the other side. Otherwise it delivers results like Trump. It seems the EU hasn’t learned a thing.

So what have we had?

-Le Pen garnered 1/3rd of the French vote (double the best ever achieved by Front National),

-the far right Freedom Party’s (FPO) Norbert Hofer still managed 46% in Austria farcical re-run presidential election),

-Geert Wilders’ 25% increase in seats for the anti-immigrant PVV in The Netherlands,

-the surge in the Sweden Democrats to the top of the recent polls, Elections in 2018.

-Italy’s referendum which turned into a backdoor vote to oust PM Renzi. Elections in 2018 likely.

Brexit (although PM May is handling negotiations in true British efficiency – Fawlty Towers ring a bell?),

the Swiss handing back a 30yr standing free ticket to join the EU,

-the AfD in Germany getting 13% of the vote (Merkel may have won but it was her party’s worse showing in 7 decades)

…these don’t look like promising trends for an EU which is already badly listing. Despite ample warnings the EU refused (and still refuses) to change its course or exercise due care. It just issues more threats.

While the left openly voices its rage at these ‘right-wing’ parties growing in support, they never bother to seek reasons why. The right are generally just dismissed as racists, bigots or worse.  Major party loyalty has never been worse. The fabric of the loyal party voter base is wearing thinner. Take Australia’s One Nation Party led by Senator Pauline Hanson. The popularity of the mainstream LNP and Labor Parties is at record lows. One Nation is now 10% of the vote from 2% several decades ago. While some parties may claim their loyal base has abandoned them the stronger case to be made is the clear shift of the parties away from their once faithful constituents. Why?

Incumbent governments seem to cower at receiving negative news from the 24-7 polling cycle that is social media. Being careful to avoid inviting attack, they pander to all of the socially acceptable agendas – climate change, gender fluid bathrooms, laws clamping down on free speech, open borders and afffirmative action.

However political correctness is clearly not the answer as these results across Europe and elsewhere show. People are sick of the brow beating by socialist activists. Tired of the constant protests and social justice bleating. The NFL might find that most of its fans are against police brutality but they aren’t wanting a weekly lecture in grievance politics with the price of entry or their cable TV channel. Growing weary of the idea that it is ‘free speech’ and anything against those ideals are deemed ‘hate speech’. It is not to deny some positions are not necessarily palatable but in the marketplace of free speech, ridiculous positions can easily be disproven. Better to give extremist voices a chance to talk and invite public opinion on them at their own peril. Shutting it down forces it underground., making it inherently more dangerous.

Too many mainstream political parties are moving off the policy reserve that defined them so their once loyal followers are actively seek ones that will. While Hanson’s One Nation or Senator Cory Bernardi’s Australian Conservatives may not tick every box to existing LNP voters, they cover enough of the positions that matter to them that they’ll tolerate some of the more out there ideas. It is not uncommon to hear the left complain at One Nation’s is growing popularity at the expense of the Greens but it is a devil of their own making.

So will the EU listen to the Austrian call? Will it pay attention to the Hungarians who voted over 98% against accepting forced migrant quotas? Think through the logic. If you were an asylum seeker, would you think your chances of unincumbered settlement would be best placed where 98.4% of the population doesn’t want you? It is irrelevant whether we think the Hungarians are insensitive brutes not to extend a welcome to those that are legitimately in need. It is their country and their democracy has spoken. If Brussels assumes to dictate to Hungary how it wishes to protect its culture and whatever it holds precious, why shouldn’t the EU have the same rights to enforce income tax, housing benefits and anything else it sees fit? Of course it is a preposterous notion.

It will not be long before the EU will be front and center on Greece. Let us not forget that the EU colluded with Goldman Sachs to ‘fiddle’ the accounts to make Hellas much prettier optically than it was. Was this pig without lipstick it wouldn’t have gained acceptance to the club. So the EU is not in a position to claim innocence over a deliberate ploy to ram-road the Greeks into its federal state yet have no qualms treating it with disdain. Talk about double standards.

In all seriousness the treatment of the Greeks by the EU is despicable beyond words. So for all of the left’s blind love for the EU and its socialist agenda, 36% of Greeks live below the poverty line and 58% of the youth are unemployed. So for all of the EU’s shared sense of purpose and equality, that means many can’t access affordable healthcare because it is generally provided by corporates and when you lose a job you lose the healthcare. This means many are forced to use A&E of major hospitals which are now overcrowded and understaffed as more doctors are leaving to seek better fortune for their services elsewhere.

If that wasn’t enough, mothers who had given birth were being restricted from taking their new-borns home if they couldn’t pay the hospital fees. While the government has banned this practice they have introduced new laws to allow the seizure of assets (e.g. homes) if debts are not settled.

Shortly, the Greeks are coming up for discussion over its debt position and austerity. With just months left before Greece’s latest lifeline expires, officials directly involved in the country’s bailout say they don’t have the stomach for contingent aid program when the current one expires in August 2018. While the EU and Athens are battle worn after 7 years of this knife edge rescue,  Greece will need to show it can go it alone but it’s eurozone creditors will be reluctant without further strings attached.

Here is betting that the EU doesn’t heed the lessons that have been ringing loud and clear for years. Sincerely hoping Greece leaves the EU and lets market forces revive its economy. Better to die on its feet than live on its knees.

Will Greenpeace Be arrested and charged with trespassing?

Greenpeace has disrupted a business which is already paying billions in fines. If only Greenpeace had the first clue about diesel emissions and the reality of the CO2 footprint of EVs at the production stage and charging.

Bureau of Meteorology also in on the junk(et) climate science

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Below is a piece from The Australian today on the woeful behaviour at the Bureau of Meteorology. The work of yet another one of these venerable institutions (e.g. NASA, NOAA) which we are told to respect without question. Turns out that last year the BoM spent $7.8mn on travel expenses or just shy of $5,000 per head. No doubt flying on taxpayer coin to exotic locations to fight the cause of global warming. As written yesterday a whistleblower at NASA claimed that climate change junkets are more important than the science. Why wouldn’t you fly around the world promoting baseless fear in order to keep your frequent flyer miles up?

Maurice Newman writes,

“Enough is enough. The Bureau of Meteorology yet again stands charged with fabricating temperature records.

This time, thanks to the diligence of scientist Jennifer Marohasy, the bureau has been caught red-handed regulating temperatures to keep them above a predetermined minimum — at least for two NSW automatic weather stations, one located in Goulburn, the other at Thredbo.

The BOM initially admitted it had set an arbitrary limit of minus 10C for the Goulburn station, but then changed the story to the equipment being “not fit for purpose” — because it got too cold — even though the same instruments are used in the Antarctic. The actual temperature measured was a record July low for Goulburn, at minus 10.4C, so why, if the equipment was faulty, didn’t the bureau leave a blank instead of rounding up to minus 10C?

Allowing the bureau to defend itself, Environment Minister Josh Frydenberg called for an internal review.

In 77 pages, it acknowledged that, indeed, Goulburn and Thredbo were governed and, minimum limits were set. This was blamed on a filter being installed into these weather stations 15 and 10 years ago respectively. No limits were imposed on maximum temperatures. Yet implicitly, we are asked to believe that the historical temperature record has not been compromised.

Before filters were installed, Goulburn recorded minus 10.9C in August 1994 and, in that cold winter, Thredbo went down to minus 13.6C and nearby Charlotte Pass to minus 23C on June 29, a record low for Australia. Charlotte Pass weather station was decommissioned in March 2015.

Ironically, the bureau’s newest location, near White Cliffs in NSW, home to some of the nation’s hottest temperatures, last August recorded minus 62.5C, due to a “hardware fault”.

A BOM-friendly technical forum, part of former minister Greg Hunt’s plan to buy time and “kill off” a proposed Abbott government probe, has foreshadowed “the need for a major revision of the dataset”.

Predictably, though, it did not address specific claims by Marohasy and others, and seems satisfied the bureau’s dataset is well maintained. Really? This may fool ministers, but for a sceptical public, time has run out.

British author and journalist Christopher Booker says: “When future generations look back on the global warming scare of the past 30 years, nothing will shock them more than the extent to which the official temperature records — on which the entire (global warming) panic ultimately rested — were systematically ‘adjusted’ to show the Earth as having warmed much more than the actual data justified.” He says this practice has been observed by experts around the world and “raises an ever larger question mark over the entire official surface temperature record”.

He is joined by John Theon, retired chief of NASA’s Climate Processes Research Program and responsible for all weather and climate research, who testified before congress that “some scientists have manipulated the observed data to justify their model results. In doing so, they neither explain what they have modified in the observations, nor explain how they did it.”

Take the article NASA published in 1999 showing 1934 was the US’s warmest year. Across the ensuing decade, by cooling the past and warming the present, 1998 jumped five places to become the warmest. Whistleblower John Bates, recently retired principal scientist at US National Oceanic and Atmospheric Administration, described how his agency manipulated data to manufacture a non-existent increase in global temperatures.

Why should Australia be any different? We remember the Climategate emails from despairing programmer Ian Harris: “Getting seriously fed up with the state of the Australian data, so many new stations have been introduced, so many false references”.

Science writer and blogger Joanne Nova has raised scandal after scandal concerning the BOM’s record-keeping.

She refers to historic data being destroyed, and the influence of adjustments on Australia’s warming trend. She reports private auditors advising the bureau of almost a “thousand days where minimum temperatures were higher than the maxes”.

Taxpayers outlaying $1 million a day for reliable temperature data deserve better than this.

When Australia’s bureau transitioned from mercury thermometers to electronic sensors more than 20 years ago, to ensure readings from these devices were comparable with the old thermometers and complied with World Meteorological Organisation guidelines, parallel studies were undertaken at multiple sites.

A key conclusion was that readings from the new electronic sensors needed to be averaged over one to 10 minutes. However, rather than implement practices consistent with their finding, the bureau records one-second extremes (or noise), which can be announced as new record highs.

Inherent inconsistency aside, this calls into question whether Australian data is WMO compliant. Marohasy discovered this as part of her investigation and believes it is more damning than even the imposition of minimum limits, as it affects the recording of temperatures from all 695 automatic stations.

Marohasy is a respected scientist, known for her forensic work. While attempts will be made to dismiss her evidence as an arcane academic skirmish over recording methodology, it is a smoking gun that threatens the integrity of global temperature records.

It affects every Australian. It strikes at the heart of renewable energy policies. Globally, trillions of taxpayer dollars are at stake.

The government has a duty to inform the Intergovernmental Panel on Climate Change, should it have sufficient grounds, that the bureau is not complying with WMO guidelines. Sooner or later, closed eyes must open.

Now, with Marohasy’s evidence adding to the credible findings of other experts, there can be no confidence in any future official assurances. Further delay of a proper independent audit, which includes dissidents, can be interpreted only as a cover-up. One way or another, the truth will out.