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Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

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Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#261
post #132

Earlier quoted context omitted.

The statement "Tesla market value is the same as everybody else put together" means either Tesla is expensive or everybody else is cheap or the statement is inaccurate. It's a little bit of all three. All other car companies are primarily debt financed rather than equity financed. Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for…

>Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for a total enterprise value of $160B. I believe that's a bit misleading because it includes Ford's lending arm. They borrow money and lend it out at higher rates. So lots of Ford debt is lent back out to consumers at profit.

Wouldn't Ford then have assets, to cancel out of the debt?

I imagine that "120B in debt" means net debt, but I'm not sure.

[follow-up] yes, that's $120B net debt. They have a total $160B of debt, and ~$23B of that is from the automotive side of the business, not the financing side.

https://stockdividendscreener.com/auto-manufacturers/ford-to...

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#262
post #172

Earlier quoted context omitted.

> Climate change and the EV transition are going to be tough. That has to be depressing their valuations some. Does it have to be? I can imagine that going from 100 years[1] of internal combustion engines to an entirely different type of drive train is going to be jarring, to say the least. But neither are EV completely new at this point, nor is a car just its drive train. Surely other comparable transitions have bee…

> But neither are EV completely new at this point, nor is a car just its drive train. Exactly this. The EV drivetrain is also simpler than an ICE because a transmission is not needed[1]. I think the hardest part about vehicle manufacturing, which is the issue Tesla seems to run into repeatedly, is dependable mass production. The major auto conglomerates have a lot of experience with cranking out massive volumes of qu…

> I think the hardest part about vehicle manufacturing, which is the issue Tesla seems to run into repeatedly, is dependable mass production.

Musk agrees substantially. He says prototypes are fun and easy and it's the mass production scaling that is the most hell.[0]

[0]https://youtu.be/YAtLTLiqNwg?t=134

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#263
post #256
post #227

Earlier quoted context omitted.

> Even the SPEAKERS inside of the Model 3 and Y are designed by Tesla In this particular case, is this really a good thing? Porsche's high end option for example is getting the speakers, amplifiers, tuned filters etc. from Burmester. Since Burmester specializes on this kind of thing, and the sound system (not the head unit and interface) are pretty much entirely distinct from the rest of the car, except that it has t…

While I’ve no doubt the speakers in your Porsche example sound great, the German car industry LOVES to upsell a customer to a speaker with a designer label on it - every single brand in the VW group does it, BMW, Mercedes… I think the German manufacturers just understand their customers vanity, sadly, where being seen to have the brand matters. The label is practically more important than the sound beyond a certain p…

In this case, the Burmester system sounds really great. I'm saying that as someone who has no such thing, so I'm less biased to like it. The example came to my mind because when I heard it, I was amazed that this was in a sports car.

But you may have a point anyway: The Bose system in the same car (a vastly more popular option because it is much, much cheaper) sounds worse than the cheap sound system in my old Ford.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#264

Earlier quoted context omitted.

he was not wrong though, just too early

"That's the same thing"

That was a great little scene in that movie, Lawrence's advisor buddy made the most of his 4 or 5 lines of dialogue.

https://www.youtube.com/watch?v=pLLgNi5UmB0 (4 minute clip from the movie, warning, spicy language gets used when rich dudes worry they might end up a little less rich.)

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#265
post #132

Earlier quoted context omitted.

>Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for a total enterprise value of $160B. I believe that's a bit misleading because it includes Ford's lending arm. They borrow money and lend it out at higher rates. So lots of Ford debt is lent back out to consumers at profit.

Wouldn't Ford then have assets, to cancel out of the debt? I imagine that "120B in debt" means net debt, but I'm not sure. [follow-up] yes, that's $120B net debt. They have a total $160B of debt, and ~$23B of that is from the automotive side of the business, not the financing side. https://stockdividendscreener.com/auto-manufacturers/ford-to...

They do, but the GP was talking about the enterprise value. Kind of like taking the value of your home and subtracting the mortgage to get your equity. They're doing the reverse and adding equity + Deb to get the total value of the enterprise.

That works if the debt is for things like building factories or designing cars. But when's it's borrowed and then lent straight out it doesn't make sense.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#266
post #239
post #229

Earlier quoted context omitted.

I would say there are three main hurdles: * Convincing the public to spend 50-70K on a car * Convincing the public to buy an EV * Convincing the public that Tesla can be trusted for long term repair costs/reliability Right now Tesla is squarely in the luxury vehicle market, competing against Lexus/BMW/Mercedes, rather than against Mazda/Honda/Kia, and it's a new automaker, so we don't have good long term reliability…

>Convincing the public to spend 50-70K on a car The Model 3 SR+ starts at $39k. For a while, the Model 3 SR was available by special order for only $35K [1] but it did not include autopilot (Autosteer+TACC) and other things. For $39K it's actually a tremendous value. If you plan on keeping it for more than 5 years. It will actually beat a comparable Accord/Camry Hybrid in terms of TCO. "Calculating insurance, mainten…

When big companies change the subject from the cost of their products to TCO, that's when you check your wallet. Particularly when you are calculating TCO by assuming the car is under warranty and trying to sell that to a used car buyer who has no warranty and is forced to service their car at predatory dealerships and may be facing a 20K battery replacement cost. TCO needs to be calculated over the entire life of the vehicle, otherwise your plan is to sell the car to a sucker at the end of your ownership period, which may work for a short period of time, but not over the long term.

Rear drive standard range model 3 starts at 40K. There is simply no universe in which this is either affordable or a bargain. This is entry-level luxury car pricing. If you are buying an out of warranty used Tesla for 20K, say 5 years old, then your TCO is going to be far higher than if you buy a 5 year old out of warranty Camry or Toyota. It is also foolish to include temporary government subsidies when determining the long term viability of a company. Those will all go away shortly at which point your TCO will also go up, and used car buyers do not benefit from these subsidies.

And the Camry is the more expensive sedan, with the cheaper Corolla outselling it regularly.

That's kindof the point. If you want Toyota style volumes, be prepared to have Toyota-style reliability, repair costs, parts eco-system, independent mechanics, and selling prices.

The weighted average retail price for new Toyota cars sold is 34K, and 2/3 of cars purchased each year are used cars. The weighted average selling prices of Teslas is ~60K, nearly double the price of Toyotas. And remember that Toyota is a premium brand due to their legendary reliability. Let me know the lifetime service costs of a Tesla and then we can compare that to the Toyota. Include battery replacement costs in that figure and get back me to me with a real TCO.

For Tesla, there are real question marks about out of warranty cost of ownership and battery replacement costs for purchasing used Teslas. For example, I've never paid more than 13K for a car, always have it serviced at independent mechanics I have a relationship with, and I have always kept my car for at least 7 years, with relatively cheap maintenace cost -- the biggest repair ticket item I ever needed to pay was a clutch replacement. So I am not willing to eat 5-7K in depreciation+maintenance per annum that Tesla buyers will pay. I've only ever suffered at most 1.5K per annum in depreciation+maintenance over the life of cars I've purchased. So don't talk to me about the great deal of paying 40K for a tesla that will lose 20K in depreciation over 5 years. I don't care how much cheaper electricity is than fuel, there is no universe in which this is a cost effective form of car ownership for the majority of the public (2/3 of car sales are used car sales).

I buy reliable used cars that are 5-7 years old that are easy to service. So do other cost-conscious purchasers. For this demographic, there are too many question marks for me to dip into the EV market now, but wait 10-20 years for more reliability data to come out and to see if a cost-competitive third party aftermarket springs up for Teslas that has replacement parts and service costs comparable to what you can get with a good local mechanic working on Toyotas or Hondas, as well as battery replacement costs that are less than the price of the car when the battery dies -- unless the plan is to sell disposable cars, at which point the value proposition is even worse for cost-sensitive purchasers, and Tesla will have a hard time competing if their intention is to sell disposable cars for a higher price than cars that can be maintained for 30 years.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#267

Not sure Burry priced in TSLA's cryptocurrency play, which (imo) was a giant volatility hedge that will help them make their numbers, and also, oddly, an inventory liquidity hedge that could be used to bludgeon shorts trading on sales data. Burry is probably right about the market for electric cars and TSLA's exposure to raw materials prices and china, but he's wrong about the strategic ability of its leadership.

Not to self-reply, but this idea of having an opaque and highly volatile basket of cryptocurrencies on your balance sheet might be important. It's not cash, and it's not inventory, it's something more powerful.

It means you can sell tranches of it to make your quarterly numbers do what you want them to, with a crypto-hammer you can use to shore up numbers wherever you want. As an accounting device, their liquidity and volatility means you could use them to obliterate shorts by uncloaking a realized massive "profit" just before an earnings call.

Crypto can absorb loose cash that creates other liabilities, while carrying the value of that cash over calendar years in a super liquid asset. I'm not a corporate accountant at all, but I would wonder if these properties of crypto could be used as a superweapon against shorts.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#268
post #229

Earlier quoted context omitted.

I would say there are three main hurdles: * Convincing the public to spend 50-70K on a car * Convincing the public to buy an EV * Convincing the public that Tesla can be trusted for long term repair costs/reliability Right now Tesla is squarely in the luxury vehicle market, competing against Lexus/BMW/Mercedes, rather than against Mazda/Honda/Kia, and it's a new automaker, so we don't have good long term reliability…

Fair enough. Especially the third one. Especially outside US. I've been joking to my wife for years now that we should get a Tesla eventually. Over that time, I've seen her going from "what's up with these EVs anyway?", through "that's a really expensive car", to "sure, but if anything breaks, IIRC the closest shop that can repair it is in Norway ".

Yeah, I think Tesla is just shooting themselves in the foot here. They should be sponsoring a healthy third party aftermarket, they should be adding easy to use ODB ports, they should be publishing service bulletins. And if indeed Munro and other EV enthusiasts are right that maintenance costs will be 90% lower, Tesla should be offering 20 year warranties on their car to give potential buyers, especially used car buyers, ease of mind when purchasing their cars. It's a new tech, there are lots of question marks about long term reliability, so if Tesla is so confident that these are non-issues, they should step in and insure car buyers from these risks. If indeed these cars are incredibly cheap to maintain, it wont cost Tesla much and will open a floodgate of new buyers.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#269
post #268

Earlier quoted context omitted.

Fair enough. Especially the third one. Especially outside US. I've been joking to my wife for years now that we should get a Tesla eventually. Over that time, I've seen her going from "what's up with these EVs anyway?", through "that's a really expensive car", to "sure, but if anything breaks, IIRC the closest shop that can repair it is in Norway ".

Yeah, I think Tesla is just shooting themselves in the foot here. They should be sponsoring a healthy third party aftermarket, they should be adding easy to use ODB ports, they should be publishing service bulletins. And if indeed Munro and other EV enthusiasts are right that maintenance costs will be 90% lower, Tesla should be offering 20 year warranties on their car to give potential buyers, especially used car buy…

> They should be adding easy to use ODB ports, they should be publishing service bulletins

Both of these have been happening for years now. You can even look up parts/diagrams and order directly from Tesla if you provide your VIN here: http://epc.tesla.com/

Maybe these are not obvious to non-owners. But it's silly to assume things where you have incomplete/false information.

You can talk to actual owners here: https://teslamotorsclub.com/tmc/. I lurked around and asked questions to owners for years there. When I was researching if owning a Tesla is even viable. I own 2 now and never looked back.

Also on your reply above. There are already 10 year old Model S's out there.

My old neighbor just sold his Toyota 4Runner and got a 2012 Model S with 75K miles for $25K that still runs like new. He has it for almost two years now with ZERO maintenance/issues and spends $15-20 a month on electricity.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#270
post #266
post #239

Earlier quoted context omitted.

>Convincing the public to spend 50-70K on a car The Model 3 SR+ starts at $39k. For a while, the Model 3 SR was available by special order for only $35K [1] but it did not include autopilot (Autosteer+TACC) and other things. For $39K it's actually a tremendous value. If you plan on keeping it for more than 5 years. It will actually beat a comparable Accord/Camry Hybrid in terms of TCO. "Calculating insurance, mainten…

When big companies change the subject from the cost of their products to TCO, that's when you check your wallet. Particularly when you are calculating TCO by assuming the car is under warranty and trying to sell that to a used car buyer who has no warranty and is forced to service their car at predatory dealerships and may be facing a 20K battery replacement cost. TCO needs to be calculated over the entire life of th…

>Rear drive standard range model 3 starts at 40K

Even if you round up $39K to 40K. It's still a far cry from your initial $50k assumption. $10K is not even close to being a rounding error and makes it seem like you're reaching.

You also made quite a bit of other assumptions here. You should actually fact check some of your claims. You can do the math yourself. Numbers don't lie.

If you can somehow show that the articles and data is wrong. I genuinely would love to see how. Because I put a high value on facts/data vs opinion and that will be news to me.

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