Business ‘Savant’ Andrew Ross Sorkin Gets Elon Musk Very, Very Wrong

Actually, Elon Musk isn’t the Tony Stark of anything.  And the only person behind Tesla and Solar City is a government bureaucrat – writing Musk yet another government check.

So far, Musk has received FIVE BILLION DOLLARS in government money – mostly for his “green energy” business fallacies.  He is arguably the world’s largest welfare recipient.

And Musk’s ridiculous solar panel and electric car companies only serve as just two more totally unnecessary reminders that “green energy” is actually neither green nor energy.

Solar panels cost a ton of (government) money – and produce almost no energy for that money.  You’ll never get back the up-front coin in lifetime energy savings.  And the panels, once spent, have to be disposed of as if they are nuclear waste.

Electric cars also cost a ton of (government) money – and also cost way more up front than you’ll ever make up in energy savings over the life of the car.  Unless you drive the car roughly two thousand years.  And the energy it burns – is electricity.  Which is produced mostly by…coal – an energy source from which the Green Machine is supposedly trying to escape.

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TSLA Stock: Analyst ‘Increasingly Concerned’ at Tesla’s Ability to Hit Profit Objectives

Despite the broader market closing at all-time highs, shares of electric car maker Tesla Motors(NASDAQ:TSLA) slipped 11 cents on Friday to close at $192.18. TSLA hit an intraday low of $190.81 following a research note from JP Morgan (NYSE:JPM) analyst Ryan Brinkman writing that after meeting with General Motors’ (NYSE:GM) CFO Chuck Stevens and test driving GM’s new Chevrolet Bolt, he expressed concern about Elon Musk’s company being able to achieve its profit objectives.

Commenting on the new Bolt, the analyst said the electric vehicle (EV) represents “solid competition” for Tesla’s upcoming compact luxury sedan Model 3 and that GM is the first automaker to globally market a “modestly” priced battery electric vehicle with a range in excess of 238 miles. Additionally, and to illustrate the importance of Bolt, Brinkman points out that GM plans to extend its EV beyond sales to consumers and into ride-sharing apps, including of the autonomous variety.

Brinkman, who reiterates an ‘Overweight’ and ‘Underweight’ rating on GM ($37.66) and Tesla stock, respectively, also notes that Tesla will find it increasingly difficult to profitably compete in an increasingly competitive market for electric vehicles.

It should be noted that this is not the first time Brinkman has expressed skepticism about Tesla’s ability to hit its objectives. Back in May JPM’s analyst said he was doubtful of Tesla’s production plans for its upcoming Model 3 mass-market to build a total of 500,000 all-electric vehicles in 2018, two years ahead of schedule.

“We previously held some hope that, with improved execution, Tesla could prove relative skeptics such as ourselves wrong, by in fact ramping to 500,000 units by 2020. We think they stood an outside chance of doing this. But these new targets we think standstill less chance of being accomplished within the given more aggressive timeframe,” Brinkman wrote at the time in a note to investors.

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State Funded Tesla-SolarCity Factory Slips Into Outright Corruption

Tesla’s merger with solar panel provider SolarCity is getting off to a rocky start as the merged company must now deal with corruption charges plaguing one of its solar panel facilities in New York.

Contractors working on a nearly $1 billion ($900 million) project in Buffalo haven’t been paid for work they started in July – the lack of cash has forced the state to lay-off workers. Tesla-SolarCity hopes to use the completed facility as a one-stop shop to produce solar panels, battery chargers, and electric vehicles.

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Tesla Stock Target Cuts Due To SolarCity Deal Starting To Come In

It rather sounds like Osborne’s biggest concern is actually with Tesla itself rather than SolarCity, although he hasn’t made any changes to the Tesla side of the equation. He’s still modeling for a ramp of early Model 3 sales in the first half of 2018, but he’s starting to be concerned that this is too ambitious because of the lack of announcements regarding prototypes, suppliers ramping, or other details. Also he notes that the previous ramps and production delays on the Model S and Model X could mean that delivering the Model 3 by 2018 is just too ambitious of a target

The Cowen analyst added that the Gigafactory is a key piece of the puzzle and for Tesla to become cash flow positive, so he will be monitoring the factory’s ramp. So far, the automaker has spent $504.3 million in capital expenditures on the Gigafactory, which is only 25% of the expected total, so Osborne would like to see signs that the company’s partners are indeed ramping on the other $2 billion to $3 billion. He also warns that if battery costs remain at around $200 per kilowatt-hour when the company is targeting $100 per kilowatt-hour, he doesn’t see how it’s possible to reach a 20% gross margin for the Model 3.

Further, he’s concerned about the many EVs from competitors that will be landing on the market within the next one to three years.

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Stop Elon Musk’s Tax Money Gravy Train

From Enron to Bernie Madoff, at the end of every great American financial scandal, the totality of the perpetrators’ greed seems to be matched only by the public’s incredulity at how such a thing could be allowed to happen.

And thanks to Elon Musk, there’s a good chance we may all be asking this question again soon.

The Senate Finance Committee and the House Ways and Means Committee have launched a probe into tax incentives paid to solar companies, according to the Wall Street Journal. The committee probes, led by their respective Republican chairmen, Rep. Kevin Brady of Texas and Sen. Orrin Hatch of Utah, have found an appropriate and disturbing target to begin this work.

SolarCity, a solar installation company set to be purchased by Tesla Motors Inc., is one of the seven companies named in the initial investigation.

Renewable Crony Capitalism

Already grossly subsidized, Musk’s SolarCity has become an albatross of waste, fraud, and abuse of taxpayer dollars. As legitimate earnings and cash become even scarcer for SolarCity, its entanglement in the Tesla empire suggests that a drastic reckoning is not only imminent but emboldening Musk to become more outlandish and reckless.SolarCity has been doubling down on the failed model of taxpayer support.

Notably, SolarCity is run by Musk’s cousins, Lyndon and Peter Rive. During his chairmanship at SolarCity, Musk’s family enterprise has taken in billions of taxpayer dollars in subsidies from both the federal and local governments. But the subsidies and sweetheart deals were not enough, as losses and missed projections continued to mount.

Ultimately, rather than endure the embarrassment of collapse and further damage to the public image of Musk and Tesla, the cousins conspired to have Tesla simply purchase SolarCity this year. The conditions of the deal screamed foul play.

To say nothing of what sense it might make for an automaker to purchase a solar installation company, Tesla stockholders were being forced to absorb a failing, cash-burning company and pay top dollar to do so.

While cost-cutting and corporate restructuring should have been the priority for a company swimming in debt and burning through available cash, SolarCity, in fact, has been doubling down on the failed model of taxpayer support. The desperate thirst for handouts has manifested itself in some of the murkiest political waters imaginable.

Thanks to Musk’s cozy relationship with New York Gov. Andrew Cuomo, a Democrat, the state has granted at least $750 million of its taxpayers’ money to SolarCity, building the company a factory and charging it only $1 per year in rent.

It would be hard to imagine such an operation would not be lucrative for its shareholders. And yet, somehow, SolarCity has never made a profit.

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Tesla’s Earnings Potential For Solar Roof Shingles Is Actually Pretty Small

The size of the target addressable market (TAM) is a key question for investors considering Tesla or any other prospective stock in the space.

Starting with the basics, the average U.S. house is about 2,600 square feet. Assuming that the average house is 1.5 stories (that is 1 single story house for every two-story house), then that leaves a 1,300 square foot footprint, probably in something like a 24’x54.5’ box (smart builders generally build in increments of 16” so they can maximize efficient use of studs which is the standard construction skeleton in most markets).

Next, given an average roof pitch of 8/12, implies a roughly 14.5 foot rafter length. Adding a 2” overhang takes us out to about 17 foot giving a total roof area of about 1,870 square feet – or about 19 squares.

Elon Musk recently declared that his solar roof will be cost competitive with traditional roofs which one has to interpret to mean shingles. Certainly, wood shakes, terra cotta tile, and slate are all used on roofs, but they are a lot less common (and a lot more expensive) than shingles. So how much does a shingle roof cost?

Roof shingles are sold in bundles with 3 bundles to a square, and a typical bundle usually costs anywhere from $25-$40 depending on shingle quality and style. That means the material cost for an average roof covering 57 bundles (19 square), is anywhere from $4,275 to $6,840. Of course that does not count labor, but it’s unlikely Musk was including labor cost in his estimates either.

So the average roofing material cost of perhaps $5,500 for a single house. Assuming, a roof is good for about 20 years, that’s the equivalent of about $275 per house per year. And about 100 million homes in the U.S. means that the total TAM in a given year is about $27.5 billion.

Clearly that’s a significant figure, but the question is how much market share could solar tiles really capture? That’s a harder determination to make. There are about 5 million houses worth of solar panels in the U.S. as of late last year, so it might be that solar tiles could never capture more than about 5 percent of total roof share. That’s total speculation of course, but it’s a reasonable place to start.

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Tesla, SpaceX, SolarCity, and the Cancer of Cronyism (Plus Post-Election Humor)

The vision is appealing, but in the short run it looks challenging. Tesla may have surprised investors by turning a narrow — and rare — profit in the third quarter, but the vast bulk of its current $28 billion market capitalization is predicated on Mr. Musk’s turning the company from a niche supplier into a truly mass manufacturer of electric vehicles. Tesla’s shares have fallen about 16 percent since the company unveiled its SolarCity bid in June, reducing the value of the all-stock deal to around $2 billion.

Hitting a self-imposed target of cranking out 500,000 cars per year by 2018, from a current run rate of around 100,000, already looked daunting. Tesla, after all, has a history of missing production and sales targets; its Model X S.U.V., for example, was delayed by problems with its falcon-wing doors.

Now Mr. Musk and his team also have a major acquisition to worry about. Throw in his continued role as chief executive of the rocket venture SpaceX, and he has a lot up in the air. Moreover, to deliver on its promises, Tesla will probably need to ask investors for fresh capital at some point next year.

For most chief executives, all this would make 2017 a make-or-break year. But Tesla investors’ overwhelming support of the SolarCity deal suggests that Mr. Musk is in a different category. Even if the wheels start to come off, he will probably be able to persuade the faithful to keep him in place and to hand over more cash. That may make Mr. Musk’s all-electric vision a self-fulfilling prophecy, no matter the cost.

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Donald Trump and Subsidies: New Wrinkle for Elon Musk’s Tesla-SolarCity Plans

Analysts expect the company to post another net loss for this year. The company posted a third-quarter net loss of $225 million, 4% less from a year earlier and less than analysts had expected. However, it also cut its forecast for the volume of panels it expects to install this year to the equivalent of 900 megawatts from 1,250 megawatts earlier this year.

Shareholders will decide the merger’s outcome in a meeting at 1 p.m. Pacific Time or 4 p.m. Eastern on Thursday in Fremont, Calif.

Cowen & Co.’s Mr. Osborne expects Tesla and SolarCity shareholders to approve the deal.

Two shareholder proxy services have differing opinions about the proposed merger. Institutional Shareholder Services Inc. endorsed it earlier this month, saying it was needed to create an integrated sustainable energy company. But rival firm Glass Lewis & Co., urged shareholders to vote no, calling it a “thinly veiled bailout” for SolarCity. Mr. Musk is the chairman and largest shareholder of both companies.

Shares of Tesla closed Wednesday at $183.93, off 23% this year. SolarCity shares closed at $19.83, down 61% this year.

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Elon Musk Faces Epic Juggling Act After Tesla-SolarCity Deal

The vision is appealing, but in the short run it looks challenging. Tesla may have surprised investors by turning a narrow — and rare — profit in the third quarter, but the vast bulk of its current $28 billion market capitalization is predicated on Mr. Musk’s turning the company from a niche supplier into a truly mass manufacturer of electric vehicles. Tesla’s shares have fallen about 16 percent since the company unveiled its SolarCity bid in June, reducing the value of the all-stock deal to around $2 billion.

Hitting a self-imposed target of cranking out 500,000 cars per year by 2018, from a current run rate of around 100,000, already looked daunting. Tesla, after all, has a history of missing production and sales targets; its Model X S.U.V., for example, was delayed by problems with its falcon-wing doors.

Now Mr. Musk and his team also have a major acquisition to worry about. Throw in his continued role as chief executive of the rocket venture SpaceX, and he has a lot up in the air. Moreover, to deliver on its promises, Tesla will probably need to ask investors for fresh capital at some point next year.

For most chief executives, all this would make 2017 a make-or-break year. But Tesla investors’ overwhelming support of the SolarCity deal suggests that Mr. Musk is in a different category. Even if the wheels start to come off, he will probably be able to persuade the faithful to keep him in place and to hand over more cash. That may make Mr. Musk’s all-electric vision a self-fulfilling prophecy, no matter the cost.

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