Renewable 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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Tesla HK sales in July-Aug just 2 (yes, just two)

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Here we can see the progression of Tesla sales in HK after the subsidies were removed. Of course the 3,697 number is front loaded but the poor Tesla dealer must be twiddling his thumbs dreaming of a sports car that can do 1.9 second 0-100km/h times in heavy HK traffic. 2 sales in the July-August period. Indeed the incentives were generous but just goes to show that the true virtue signaling power of those living in HK is dictated by displaying the wise use of capital than frittering it away trying to save the planet.

Tesla asks for sub 1.9 week deposit to full transfer of $250,000

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While the new Tesla Founders Series Roadster will supposedly be the fastest car in the world (at least in 1.9secs 0-100km/h) if it ever gets built it remains to be seen whether those $250,000 deposits will disappear inside Tesla inside that the acceleration figures. While the company will charge $50,000 deposits for the base model roadster it remains to be seen how many people will line up to part with cash for a car to be delivered after 2020. I’m sure some will line up to part with the cash to be one of the first to buy one but with cash burn and dreadful production issues it remains to be seen whether that money is just on auto pilot straight into the nearest sink hole.

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!

Zero CO2 emissions at Tokyo Olympics for 4 days during ceremonies

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Fresh after her drubbing in the elections over the weekend Tokyo Governor Yuriko Koike is proposing zero CO2 emissions during the 4 days of 2020 Tokyo Olympic/Paralympic ceremonies. Presumably the trains to transport passengers to the stadium will be shut down as they’re powered by gas fired electricity while hepa filter gas masks will be distributed to every foreign visitor and Tokyo resident to ensure the goal can be met. People won’t be able to drive nor eat in restaurants that cook with gas or electricity and diners mustn’t eat because they’d be breathing CO2 between bites.

Hang on how is she going to justify the Olympic flame? Or the fireworks at the opening and closing ceremonies for the Olympics and Paralympics? More CO2!

More green madness.

For a supposed populist right winger she’s leaning to be a lefty in pretty short order. That is a great shame and for all the antiestablishment rhetoric she’s more mainstream than the establishment.

Sloppy senators who snigger at the seriousness of the situation

Regardless of whether one believes in climate change or not, surely even deniers should get access to transparent data, especially from taxpayer funded bodies. Just being told the science is settled is not acceptable. Indeed if the science is settled, what is there to hide? Allow all the ‘raw’ and ‘homogenised’ data to be independently scrutinized. Surely it will corroborate the facts and convert the heretics.

The argument that I am not a scientist is irrelevant. 99% of the people who are alarmists are not either. Yet, should one be vilified for questioning so many blatant acts of  fraudulent behaviour? As often in the world of ‘settled’ topics, the contrarian opinion is often laughed it. Yet, if 99% of people tell you one thing are you not curious to the counter arguments? So often the conventional wisdom has often turned out to be false.

What Senator Dastyari here has done is take allegations of data manipulation by the Bureau of Meteorology (BoM) as just a joke and an opportunity to cheap shot one of his fellow senators who is absent. It is willful behaviour to undermine a serious hearing. What is the constant faith that we are asked to put in government bodies that somehow they are above the law and beyond the scope of audit because we should trust them? That is like leaving candies on the table in reach of your kids but telling them they mustn’t eat any. The crack and eat some but when questioned swear they didn’t even though the blue M&M stain on the tongue proves they’re lying.

Former US Fed Chairman Alan Greenspan regularly spoke to the US Senate House Banking Committee. With the exception of Ron Paul, pretty much all other members used to hang off every word, not questioning anything that came from his mouth. It was nauseating to watch them heap praise on him. He was not held to account. Ron Paul used to ask questions about rampant monetary supply growth, asset bubbles and extreme borrowing to income ratios but his fellow law makers would gang up on him for having the hide to interrogate the ‘Maestro’. It is this type of unwillingness to question group think that is much more worrying. To all of the questions asked of Greenspan by Paul, we still got GFC – avoidable if the group thinkers in the Senate were prepared to challenge.

As CM has written frequently – so many bodies have been busted for data manipulation – the UNIPCC, NASA, NOAA and the BoM to name a few. Yes, even NASA, the people who have the brainstrust to launch man to the moon. Human greed is the issue. This discussion with President of the Sierra Club Aaron Mair who tells Senator Cruz there should be no debate as the science is settled yet can’t reliably argue his position even with a bench full of his flunkies pushing the same garbage.

In all seriousness, Dastyari wants to copy Aaron Mair. Shut down any plausible debate and avoid scrutiny that might upset his own constituents. People often use the argument that investing in renewables is like insurance. That we take it on the off chance we’re wrong. Well, in a sense what many scientists are doing is insurance fraud. Then again it is also an unanswered question. Why is it bankers get thrown into jail and fined exorbitant sums yet scientists riddled with conflicts of interest and deliberate ‘forgery’ of data to fit narratives escape scot-free even if caught.

National Bloody Nuisance

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If anyone is surprised about the cost blowouts of the National Broadband Network (NBN)  they must have been hibernating. For as much as $91,000 to connect one home this sum would probably cover one’s fixed line, mobile, internet, wifi and FOXTEL subscription for life. It doesn’t take a rocket scientist to work out that in this day and age of ‘health & safety’ that to put in underground optic fibre requires 8 people – 5 to supervise, 2 females with traffic paddle pops and one bloke in the ditch with a shovel. Then multiply by 100s of thousands. The economics could be written in crayon such is the elementary nature of the formula.

I recall listening to talk back radio around the time NBN was launched when the sunshades at schools program was underway. Not a word of a lie, the government was shelling out near as makes no difference $1mn per school. Dozens of builders were calling in to say they could erect these structures with all of the concrete, steel poles, roofing materials and labour for 1/10th the cost. So digging holes and inserting optic fibre which will rapidly become redundant across a country with such massive distances between places was only ever going to be a white elephant.

Yet as ever governments are only too happy to cost things on the back of an envelope and tell us all of the rosy scenarios as to how it will come in on budget. If the taxpayer asks for clarity on the math, they are conveniently fobbed off. It is not unreasonable for taxpayers to want to receive full disclosure on how things are to be funded. If a CEO told his shareholders to take a hike when they requested the costings of major capex spending they’d be summarily fired. Every citizen has the right to transparency. Yet why is it the South Australian government celebrates clearly failed renewable policy with an extra $600m bill quickly drawn up on a Friday night? Instead of accountability we are told to use electricity more sparingly (even paid to stay off the grid).

So the NBN is another abject failure. Better to admit defeat and cauterize the gaping wound than to keep filling it with more limited taxpayer funds. At least Turnbull can blame the former government on implementing it in the first place, just as the incoming government can blame him for the disaster that is the $50bn submarines programme which is already running intro huge production issues before the design is even completed. We deserve better.