#porsche

Is BMW hurting bad enough to offer 10yrs free servicing?

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10 years? Sounds a bit desperate. A bit like the Korean makes a few decades back using monster incentives to lure customers by a value to good to refuse proposition. Have luxury car sales become so hard to get in Australia that the prestige make has to offer 10 years of free servicing and 1yr free insurance?

BMW sales in Australia fell 12.2% year on year in August 2018. Audi crumbled 25.8%. Benz did better at -3.4%. Land Rover fell 32%, Lexus down 11.7%. Porsche crumpled 25.4%.

It is likely the fine print in the 10 years free servicing basic package isn’t transferable between owners so if most buyers hold their BMWs for 5 years the total incentive is much less to roll out. If the fine print allows transfers it only adds to the desperate state of having to hurl freebies to shift metal. Dealers tend to make less on the sale of the car but plenty on gouging customers for service and spares.

Seems the tyres are going flat. Total car sales in Australia were down 1.5% in August. Passenger car sales fell 13.4% while those eco conscious Aussies bought 8.3% more SUVs. Medium and large sedan segments fell 24.1% and 60.3% respectively. Every SUV segment rose except upper large. Toyota finished up 1.7% for the month with 19.8% share.

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…

Tale of the gold coin chocolate & a warning for Tesla Disciples

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It hadn’t really hit until going back to read the conditions of Musk’s new executive compensation package but the first thing that struck me was the risk of the old adage of paying too much attention to the share price. The collection of all 12 tranches for CEO Elon Musk only kicks in when his company hits $650bn in market cap. The first thing to pop in the head was that of Japanese mobile phone retailer Hikari Tsushin back during the tech bubble. The rather eccentric CEO Yasumitsu Shigeta had gold coin chocolates made embossed with “Hikari Tsushin: Target Market Cap Y100 trillion.” One could only conclude he believed in his own BS.

It was at that moment where the only thing that crossed the mind was ‘this spells trouble’. There were magazines like Forbes touting how Shigeta was one of the richest men in the world and analysts fell hook, line and sinker for this unrealistic dream forecasting he’d be #1 before long. The only rational conclusion for the Contrarian Marketplace was to tell them that “bet he won’t be in the top 100 next year.”  Low and behold the tech bubble collapsed and Hikari Tsushin – that believed it was worth 2x the market cap of then highest valued corporation in the world, General Electric – fell over 95%.

While Musk may not yet have printed target market cap $650bn gold coin chocolates, what the incentives are saying to the market is that his company needs to 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?

Once again, this compensation package screams of gold coin chocolates in mentality. Instead of running the business and letting the share price do the talking, the mindset is focused on launching convertibles into space and distracting investors from increasingly dreadful financial results which eventually must come full circle if the results continue to miss. Broader Tesla report here.