Rail & Highways

Buhahahahaha

In 1999, CM was told by the pro-EV lobby that electric cars would be 10% or the market by 2010. In 2019 EVs are struggling to nudge 1.3%. If EV’s have managed to achieve much more than 10-12% by 2035 it will be a miracle.

10 reasons it will be highly unlikely:

1) Australia sold just over 1.15m cars in 2018. In 2008, SUVs comprised 19% of total sales. Today 43%. So much for the unbridled panic about catastrophic climate change if consumption patterns are a guide.

2) Australian fuel excise generates 5% of total tax revenue. It is forecast to grow from $19bn today to $24bn by 2021. If government plans to subsidize then it’ll likely to add to the deficit, especially if it lobs $5,000 per car subsidies on 577,000 cars (50% of 2018 unit sales in Australia).

CM has always argued that governments will eventually realize that moving to full EV policy will mean losing juicy ‘fuel excise’. Point 16 on page 19 for those interested.

Cash strapped Illinois has proposed the introduction of a $1,000 annual registration fee (up from $17.50) to account for the fact EVs don’t pay such fuel taxes. Note Illinois has the lowest investment grade among any other American state and has to allocate 40% of its budget just to pay outstanding bills. It is also home to one of the largest state pension unfunded deficits per capita in the country.

3) cash for clunkers? If the idea is to phase out fossil fueled powered cars, surely the resale/trade in values will plummet to such a degree that trading it on a new EV makes no sense at all. False economy trade where fossil fuel owners will hold onto existing cars for longer.

4) Global EV production is 2.1m units. Looking at existing production plans by 2030, it is likely to be around 12mn tops on a conservative basis. Australia would need want 5% of world EV supply when were only 1.2% of global car sales. Many auto makers are committed to selling 50% of EV capacity into China. So Shorten will be fighting for the remaining pie. No car makers will export 10% of all EV production to Australia without substantial incentives to do so.

Don’t forget Alexandria Ocasio-Cortez also intends to get every fossil fueled powered car off the road in a decade. The US has 270 million registered vehicles, the overwhelming majority being petrol powered. The US sells 16-17mn cars a year (sadly slowing). Therefore in the US, 16 years would be required to achieve that target.

5) Ethics of EVs. To save the planet, the majority of cobalt to go into making the batteries comes from African mines which use child slave laborers. There is a moral scruple to keep a virtue signaling activist awake at night!

Not to worry, Glencore has just announced last week it is closing its cobalt capacity in DR Congo which will flip the market from surplus to deficit (at 1.2% global market share). Oops.

6) EV makers aren’t happy. In Europe there are over 200 cities with EV programs but none are alike. In the quest to outdo each other on the virtue signaling front, car makers are struggling to meet such diverse requirements meaning roll outs will be slow because there is no movement to standardize.

7) EV suppliers aren’t convinced. Because of the above, many EV suppliers are reluctant to go too hard in committing to new capacity because global car markets are slowing in China, US, Europe and Australia. High fixed cost businesses hate slowdowns. Writing down the existing capacity would be punitive to say the least. New capacity takes a minimum of 2 years to come on line from conception.

8) The grid! In the UK, National Grid stated that to hit the UK targets for EVs by 2030, an entirely new 8GW nuclear plant would be required to meet the demands of EV charging. Australia can barely meet its energy needs with the current policies and doubling down on the same failed renewables strategy that has already proved to fall well short of current demand ex any EVs added to the grid.

9) in 1999 automotive experts hailed that EVs would make up 10% of all vehicle sales by 2010. In 2019 EVs make up around 2.5%. So 9 extra years and 75% below the target. The capacity isn’t there much less consumers aren’t fully convinced as range anxiety is a big problem.

10) charging infrastructure is woefully inadequate. Await another taxpayer dollar waste-fest. Think NBN Mark II on rolling EV chargers out nationwide. The question then becomes one of fast charger units which cost 5x more than slower systems. If the base-load power capacity is already at breaking point across many states (Vic & SA the worst) throwing more EVs onto a grid will compound the problem and drive prices up and potentially force rationing although people look to Norway.

Norway is a poor example to benchmark against. It is 5% of our land mass, 1/5th our population and new car sales around 12% of Australia. According to BITRE, Australia has 877,561km of road network which is 9x larger than Norway.

Norway has around 8,000 chargers countrywide. Installation of fast chargers runs around A$60,000 per unit on top of the $100,000 preparation of each station for the high load 480V transformer setup to cope with the increased loads.

Norway state enterprise, Enova, said it would install fast chargers every 50km of 7,500km worth of main road/highway.

Australia has 234,820km of highways/main roads. Fast chargers at every 50km like the Norwegians would require a minimum of 4,700 charging stations across Australia. Norway commits to a minimum of 2 fast chargers and 2 standard chargers per station.

The problem is our plan for 570,000 cars per annum is 10x the number of EVs sold in Norway, requiring 10x the infrastructure.

While it is safe to assume that Norway’s stock of electric cars grows, our cumulative sales on achieving plan would require far greater numbers. So let’s do the maths (note this doesn’t take into account the infrastructure issues of rural areas):

14,700 stations x $100,000 per station to = $1,470,000,000

4,700 stations x 20 fast chargers @ A$60,000 = $5,640,000,000 (rural)

4,700 stations x 20 slow chargers @ A$9,000 = $846,000,000 (rural)

10,000 stations x 5 fast chargers @ A$60,000 = $3,000,000,000 (urban)

570,000 home charging stations @ $5,500 per set = $3,135,000,000 (this is just for 2035)

Grand Total: A$14,091,000,000

Swedish study on EV CO2 footprint will surprise

The IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective. Let’s not forget the left leaning pro-climate change Swedish government promoted the study.

The 2017 report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated extra emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

If we use those IVL metrics on the Tesla Type S 100D battery pack of 100kWh, the car has done 167,000km worth of CO2 before its left the factory. So that would mean 20 metric tons of CO2 per car without taking into account any charging from the grid which is largely fossil fuel derived in most countries.

A 2019 model year BMW 530d diesel emits 138g of C02/km. So it can travel 145,000km just to match a car with a 100kWh battery pack before it leaves the dealership floor.

Does Australia really want 50% sales in EVs if the metrics are this bad?

The irony is that despite the evidence provided by the study, PM Stefan Löfven wrote on a Swedish Government website, “No new petrol and diesel powered cars will be sold after 2030. So we reduce the large climate emissions from the transport sector.

So in order to stay aligned with the Paris Accord, promoted by a U.N. body that has been caught out in numerous climate data manipulation scandals and climb downs from countless hysterical claims, Sweden’s left-leaning government skips over reality.

Where have we heard this before? Martin Kinnunen, climate policy spokesperson for the Swedish Democrats said,

It is a very radical proposal and I think you should be careful about predicting technology development in this way. It is simply unrealistic to have a ban in place already in eleven yearsIt can be difficult for many people who live in some parts of the country to have a car, and it can be very costly for those who must have a car

Only goes to prove that virtue signaling ignores facts. Never mind that the industry can’t adapt that fast. Never mind the environmental footprint on a life cycle basis. Just change the starting point then promote themselves as one of the good guys saving the planet when all that is happened is to set in motion actions that will damage her more than they would have otherwise by allowing the industry to set the technological benchmarks instead.

Bill Shorten’s electric dreams are our nightmare

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When will politicians wake up? How can they honestly believe their targets are remotely achievable if the industry is not even in the ballpark to being able to supply those promises? Take the ALP’s plan to make electric vehicles (EVs) 50% of new car sales by 2030.

In 2018, 1,153,111 new automobiles were sold across Australia. This plan is so easily destroyed by simple mathematics, something CM did in 2017 when Macron waxed lyrical about 100% EV sales by 2040. The only 100% certainty is that Bill Shorten won’t hit the 50% target by 2030. Do we need the government to tell us what cars we wish to buy?

The first problem he will encounter is overall consumer demand for EVs. Few suit the diverse needs and utilities (e.g. boat enthusiasts who require towing capacity unmet by all current EVs or parents who need 7-seaters to ferry kids to footy) of individual buyers. If the types of EVs available don’t match the requirements of the users then few will see the point to buy one no matter what the subsidy. In 2008, SUVs were 19% of Aussie new car sales. It is 43% today. So much for the climate change fearing public voting with their wallets! That is the first problem.

Why is the government meddling in an industry they know next to nothing about? Having a zero emissions (ZE) target is one thing they might aim for, however why not tell auto makers they need to attain that goal but will be granted complete technological freedom to achieve it? If the auto makers see necessity as the mother of invention, who are regulators to dictate the technology? If an internal combustion engine can achieve ZE does that not meet the goal?

It stands to reason we should question those with the least idea on the technology to dictate the future. The ZE appeal of EVs is an ineffective virtue signaling device to voters.

If we look at Euro emissions regulations introduced since 1993, substantial progress has been made in the last 20 years. Euro 6 started in 2015. For diesel particulate matter, emissions are 97% down on Euro 1 (1993) and NOx down by 95% over the same period.

The irony here, is that governments have these thought bubbles and then consult the industry afterwards to see if those promises can be fulfilled. CM spoke to multiple global auto suppliers in the EV space at the Tokyo Motor Show in 2018 and this is what was said,

“So haphazard is the drive for EV legislation that 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 for makers to build EVs that can accommodate all the variance in laws without sharply 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 rental patches 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.

So the suppliers aren’t on board for a start. They know their car manufacturer clients rather well and if they aren’t buying it, auto makers can’t sell it. Slowing sales worldwide adds to reluctance to add to expensive fixed cost capacity at the top of a cycle.

We have proof of this. Note what we wrote in 2017:

It isn’t a big surprise to see national governments virtue signal over climate abatement. The UK swiftly followed French plans to ban the sale of petrol/diesel cars from 2040. However, let’s get real. Government proactivity on climate change may appear serious but the activities of the auto industry are generally a far better indicator of their lobby power. As a car analyst at the turn of the century, how the excitement of electric vehicle (EV) alternatives to internal combustion engines was all the rage. Completely pie in the sky assumptions about adoption rates…

…In 1999 industry experts said that by 2010  EVs would be 10% of all units sold. Scroll forward to 2019 and they are near as makes no difference 2.5% of total vehicle sales…talk about a big miss. 10 years beyond the prediction, they’re only 25% of the way there. Pathetic. 

CM also discussed in this report, 30 reasons Tesla would be a bug on a windshield;

“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. [Mr Shorten, will we have all these cars recharging overnight using renewables? Solar perhaps?] 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 by chasing unsustainable products?

The UK’s National Grid said that the extra capacity required just to charge EVs would require another new Hinkley C nuclear plant to cover it. Will people choose between watching  premiership football on Sky Sports or charging their car?

Car makers can’t produce at the desired speed and energy suppliers don’t have the excess capacity required to charge. Slightly large problems. We don’t need to look at failed EV policy to show government incompetence. Germany totally fluffed its bio-fuel promise back in 2008 that even a Greens’ politician ended up trashing it.

“The German authorities went big for bio-fuels in 2008 forcing gas stands to install E-10 pumps to cut CO2. However as many as 3 million cars at the time weren’t equipped to run on it and as a result consumers abandoned it leaving many gas stands with shortages of the petrol and gluts of E-10 which left the petrol companies liable to huge fines (around $630mn) for not hitting government targets.”

Claude Termes, a member of European Parliament from the Green Party in Luxembourg said in 2008 that legally mandated biofuels were a dead end…the sooner it disappears, the better…my preference is zero…policymakers cannot close their eyes in front of the facts. The European Parliament is increasingly skeptical of biofuels.” Even ADAC told German drivers to avoid using E10 when traveling in other parts of continental Europe.

Starting with the basics for Australia.

If we take 50% of total car sales in 2018 as the target by 2030, Shorten needs to sell 576,556 EVs per annum to meet his bold target.

Let’s deal with the elephant in the room – note that petrol excise is currently around 4.7% of total federal tax take (c. $19bn) and likely to grow to c.$23bn by 2021. Even if we were to assume that we achieved Shorten’s targets based on a flat overall car market by 2030, Shorten’s tax receipts from the fuel excise would collapse and only be amplified by subsidies paid on 576,556 EVs. Throw the global average of $6,000-10,000  in incentives per EV and we’ve quickly racked $3-5bn per annum in subsidies.

Then will he offer cash for clunkers (C4C) for the poor owners of fossil fuel cars? Many car owners would require a hefty slug of C4C to offset the massive depreciation that would ensue on a trade in of a fossil fueled powered car. People are going to want decent trade ins, not 5c in the dollar of what they would have got had the government not attacked car owners. The changeover price matters. Shorten  may well get his 50% by halving the industry.

Should we also consider whether fuel taxes should be replaced by electricity taxes? If that ends up all we drive who is to stop it? Surely the maintenance of roads and related infrastructure which we’re told our fuel taxes pay for the upkeep will still need to be funded by heavier EVs.

Take the Tesla Model X 100D. It weighs 2,509kg, 49% heavier than an equivalent BMW 5-series. The heavier the car, the more damaging to the road. Such is the progress of the Nissan Leaf that the kerb weight has risen in the new model to 1,538kg on the original, or 400kg heavier than a petrol Toyota Corolla. EVs are fat.

Global EV sales units were 2.1mn last year. Total car sales were 79m odd. Let’s assume auto makers could conceivably increase capacity by 2m every 2 years (plants take 2 years to build and those poor Congolese child slave laborers will be run off their feet digging for cobalt to go in the batteries) then conceivably 30mn cumulative EV units could be built by 2030. Unfortunately VW gave the real answer on how they view EVs.

“Volkswagen makes an interesting case study. After being caught red handed cheating diesel emissions regulations (a perfect example of how little VW must believe in man-made global warming) they were in full compliance at the 2017 Frankfurt Motor Show telling the world of their $80bn investment in EVs out to 2030, 300 new EV models comprising 3 million units in 25 years of which 1.5mn would be sold in China. 3 million cars would be c.30% of VW’s total output today.”

However auto makers are faced with a conundrum. Chinese car sales are slowing. US car sales are slowing. European car sales are drifting and Aussie car sales are weak. Capex into EVs will be a very gentle process. They don’t want to plug in massive investments into new capacity if end demand is likely to remain soft. That is basic business sense. Note parts manufacturers need to be convinced that building new plants alongside makers is sustainable. Many are gun shy given the OEMs sent many parts suppliers into receivership the last cycle.

Ahh but EVs are less harmful to the environment. Are they?

The IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective.

The report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

Another study by the International Council on Clean Transportation (ICCT) showed that depending on the power generation mix, an all EV Nissan Leaf in the US or China was no better than a 2012 Prius. Countries with higher relative nuclear power generation unsurprisingly had lower CO2 emissions outcomes for EVs. By deduction countries with higher shares of coal or gas fired power negated much of the ‘saving’ of an EV relative to gasoline power.

So pretty much on all measures, Bill Shorten’s misadventure on EVs will be a complete dud. If only he’d consulted with the industry before celebrating how “woke” he is. He’s simply not.

Is Musk losing it?

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Is Tesla CEO Elon Musk losing it? More senior resignations from accounting and HR this week  reveal more cracks in the automaker. He emailed a journalist, calling him a “mother f*cker”. He went further to say he hoped the cave rescuer he called a “”pedo” sued him because a UK man who is single and spent so much time in Thailand must be a child rapist.

He rattled off he had “secured” funding of $420/share to go private and then all of a sudden he didn’t, prompting the SEC to investigate. He was then on radio with comedian Joe Rogan toking what is reportedly a mixture of tobacco and marijuana. Are these the actions of a man running a $50bn market cap company?

Clearly his board can’t control him.  With the shares collapsing and bond prices falling, refinancing will become problematic. Chief  Accounting Officer Dave Morton quit the company after revealing his concerns about the various obstacles Tesla faces.

Tesla’s Chief People Officer, Gabrielle Toledano, took leave in August and said she wouldn’t be returning to Tesla.

Musk has been a genius and visionary to get Tesla where it is today. Yet he is a direct victim of his own hubris. Sleeping under boxes with Tesla bankrupt written on them to living on the factory roof to rattling off about production hell while accusing families of drivers dead due to over reliance in a system he aggressively promoted.Tesla was technically asking for suppliers to refund a portion of the monies they were paid since 2016 to the EV maker so it could post a profit which is borderline accounting manipulation in an attempt to give the impression of an ongoing concern.

He also complained at the lack of support in the media despite being called out on this nonsense.

Musk’s compensation is also linked to a $650bn market cap, which is effectively saying to the market that his company will be worth more than Daimler, BMW, VW, GM, Ford, Toyota, Nissan, Honda, Renault, Fiat-Chrysler, Ferrari and Porsche combined. Just read that last sentence again. Do investors honestly believe that Tesla which consistently misses and is going up against companies that have been in the game for decades, seen brutal cycles, invest multiples more in technology and forgotten more than they remembered will somehow all become slaves to a company which has no technological advantages whatsoever?

The Tesla story is on the ropes. Expect more mega-releases on new products to try to keep the dream alive and the disciples faithful. I guess ‘Lucy in the sky with diamonds’ worked for The Beatles…

Indian Motorcycles upbeat on 2018 outlook at 2Q stage

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Indian Motorcycles – owned by Polaris Industries –  saw a mid single digit bump in unit sales in 2Q18. Gross profit was up 17% in the m/cycles segment although some funnies in the like for likes with the wind down of the Victory brand. Slingshot soft. Polaris Off Road Vehicles strong. Group 2Q ahead of market expectations, even factoring in the buyback and retirement of around 2.2% of outstanding shares in 2Q.

Exciting new launches like the Indian FTR1200 flat tracker next year will keep the registers ticking over. Scout series continues to do well. Heavier Indians finding it tougher going which is in line with market trends. Doing well with limited editions.

Polaris see the Indian brand performing strongly in international markets and expect momentum to improve over the year. Indian market share growing in domestic (at the expense of H-D) and international markets including Europe. Expect a $40mn impact from tariffs across all Polaris lines.

Share Buyback Activity: During the second quarter of 2018, Polaris repurchased and retired 1,429,000 shares of its common stock for $177 million. Year-to-date through June 30, 2018, it has repurchased and retired 1,562,000 shares of its common stock for $192 million. As of June 30, 2018, the company has authorization from its Board of Directors to repurchase up to an additional 4.9 million shares of Polaris common stock equivalent to c.10% of outstanding.

Indian had a contrasting set of results vs Harley. Both complaining of sluggish domestic market in big bikes but Indian remaining the more agile of the two with innovation. FTR1200 will hit it out of the park.

Tesla’s Autopilot beta testing means customers are crash test dummies

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Back in April 2016, we wrote about the dangerous legal ramifications facing Tesla due to its overzealous promotion of the auto-pilot function. What people tend to forget is the issues surrounding liability. An insurance company often covers a driver with respect to accidents – wet road, poor visibility or being hit by another driver. The insurer covers that type of damage. Yet the death of a Tesla driver in California last week was found to have had the auto pilot function on. Why should an insurer pay for damages that result from willful negligence promoted by the manufacturer itself? This is a design fault. Moreover how could Elon Musk’s legal team not suggest that he refrain from such promotion? Accidents as a result of Tesla’s auto pilot are becoming so numerous that it is hard to fathom why people put so much faith in the system, as this video highlights. They are willingly becoming crash test dummies.

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Tesla’s own website notes, “Build upon Enhanced Autopilot and order Full Self-Driving Capability on your Tesla. This doubles the number of active cameras from four to eight, enabling full self-driving in almost all circumstances, at what we believe will be a probability of safety at least twice as good as the average human driver. The system is designed to be able to conduct short and long distance trips with no action required by the person in the driver’s seat.”

The video on the autopilot webpage highlighting the autopilot function on the makes no reference to ensure drivers pay attention to the road even when the system is in use. Sounds to me like the ambulance chasers have plenty of ammunition to launch a class action. It only cost Toyota $1.2bn for the runaway accelerator issue. For a company deeply in debt with such heavy losses, rising interest rates, falling credit rating and senior departures, Tesla should be careful not to get carried away with signaling the virtues of systems that are clearly flawed.

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Tesla’s FY2017 – cashflow stunts bigger than a roadster in orbit

TESLA CF VS ONETEL

No beating around the bush. Tesla’s cash-flow situation resembles that of One.Tel in Australia before it became insolvent. Rocketing financing and investing cash-flow with troubled operating cash which in Tesla’s case was flattered by some accounting trickery.  The Q4 2017 earnings release spoke of fairies and magic pixie dust for the most part. Q1 deliveries to date look to undershoot.  Once again a promise to hit production of 2,500 Tesla Model 3s by the end of Q1 and 5,000 a week by end of Q2 2018 (i.e. 6 months away). Note that Tesla had about 860 undelivered Model 3 cars at the end of Q4. That is a high ratio given 1550 were shipped in Q4.

While the company claims a cash balance of $3.4bn which many will pop champagne corks over, Tesla has accrued liabilities, accounts payable and customer deposits totaling $4.975bn at quarter end. This also excludes the $608mn in extra ‘residual value guarantees’ on the books YoY.

The company expects to break even during the year. However with gross automotive margins about to suck up the Model 3 in larger numbers that will take some doing despite claims it can do 25% vs the existing line-up’s 18% range. As at January, Q1 sales in the US are at 2016 levels and European registrations are down around 14% in aggregate across Norway, Holland, Italy, Belgium, Sweden, Austria and Switzerland. Lots can change but it doesn’t read well to kick off 2018’s challenge to break even at an operating level. The Model 3 is on average two-thirds cheaper than the average selling price on existing products so to even hold margins constant will take the mother of all cost cutting all the meanwhile facing new competition over 2018 which will weigh on pricing.

Interesting within the operating cash-flow statement is a term “Changes in operating assets and liabilities,net of effect of business combinations” which shows a quarter on quarter swing of $746.8m pushing net operating cash to +$509mn achieving a new quarterly record. This was achieved mainly by improved collection of receivables (believable), inventory reduction of finished vehicles (were incomplete vehicles that left the factory to parking lots yet to be delivered due to a lack of parts counted?), improved working capital from the ramp of Model 3, and growth in customer deposits (this was only  $168m QoQ vs expectations of $400m) from Semi and Roadsters that were announced with fanfare during Q4. Cash burn appeared lower because the company included customer deposits for the upcoming Semi and Roadster in its operating CF. That is slightly deceiving because deposits aren’t supposed to be drawn from current operations. The Roadster is supposed to be ready by 2020. This seems odd.

Tesla wrote “Despite the delays that we experienced in our production ramp, Model 3 net reservations remained stable in Q4.” Strange there was no mention of progress on Roadster and Semi orders in Q4. Was the $250,000 deposit within 10 days for the Founder series Roadster a bit steep? Truck orders seem around 600-700 at this stage and at $5,000 a deposit, generously speaking $3,500,000 isn’t a swing. As mentioned earlier the +$168m in customer deposits could only reflect how poorly orders for those vehicles are tracking such is the need to avoid talking about them in the statement (surely something to crow about) other than projected performance stats.

Capital expenditures in 2018 are projected to be slightly more than 2017 according to the statement. Tesla also mentioned “quarterly operating income should turn sustainably positive at some point in 2018.” That is a hugely optimistic target for the company which has failed so many times to deliver on promises. As CM always argues, the ‘cult’ following of Tesla is a dangerous vixen which can keep the ‘dream’ floating in orbit when reality is that “Nevada, we have a problem”.

The market can stay irrational longer than you can stay solvent. The 3% bounce in the shares reflects that blind optimism. Our study shows that even if it made margins similar to mainstream makers it is grossly overvalued.