American Consequences - August 2017

By American Consequences staff


Andrew Left tells us he’s “laying low for a while”... So we’re taking our own deep dive into one of his latest short targets, electric-car maker Tesla (TSLA). The company is one of the biggest beneficiaries of the investor mania for zero-profit corporations... and the grotesque, mutated form of capitalism in today’s market. While Tesla has fallen about 15% from its recent highs... it remains more richly valued as a company than American auto giants General Motors (GM) and Ford (F). And on “cars manufactured,” the comparison is even more extreme... Investors currently value Tesla at more than $800,000 per car it makes. That compares to $25,000 per car for BMW, $6,000 per car for Ford, and $5,000 per car for GM. Tesla is a pioneer in electric automobiles and its cars have a cult following. But what Tesla doesn’t have, unfortunately, is a business model that makes sense. It’s losing money on every car it sells... It also has a CEO who has used company funds to bail out his other business (SolarCity) and talks about living on Mars. Today, investors believe this means he’s a “visionary.”

Of course, as we’ve detailed in this issue of American Consequences , capitalism is about capital – how much you make and how much you keep. Tesla destroys capital better than almost any other publicly traded company. Tesla’s equity value is a perversion of capitalism. Even Musk seems to know it. Earlier this year, he told the Guardian , “I do believe this market cap is higher than we have any right to deserve.” Tesla faces competition on all fronts. Jaguar, Mercedes-Benz, Volvo, Hyundai, Volkswagen, and Porsche all plan to have fully electric vehicles in production by 2020. And competition inhibits profits. Making matters worse, the businesses Tesla competes in require enormous capital expenditures. Tesla’s total debt has increased from just $366 million five years ago to nearly $8 billion today. Tesla’s acquisition – really a de facto bailout – of SolarCity added around $3.4 billion of debt. Tesla issued the rest of its debt to finance its huge spending needs.

Behold the massive expenditures needed to achieve Musk’s vision:

86 | August 2017

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