And You’d Be Insane to Buy One Now
Tesla is clearly a company on the road to imminent bankruptcy. But there are two ways that people look at Tesla. The fact-based group looks at the business model and stats, crunches the numbers, and sees that Tesla won’t survive another year. The emotional group is like your uncle Bernie who predicts that the Detroit Lions are going to win the Super Bowl every year. We all know it’s not going to happen but he’s following his heart. And he wants it to be true so badly.
Everything that I’ve predicted in my book The Tesla Bubble, has come to pass. The stock peaked with the launch of the Model 3 and skipping the Model 3 line validation has led to an avalanche of quality problems. Also, Tesla’s has added to the brand destruction by means of poor service and support for their customers.
But the big problem for Tesla car owners is resale value. We are a mere months away from word on the street getting wind of the fact that Tesla’s downward spiral is soon to be fatal. Unless you’re independently wealthy you rely on getting some value out of your current car in order to get into your next one.
Already, Tesla car owners are starting to suspect something isn’t quite right due to the lack of availability of parts and service. Tesla derives no revenue for warranty repairs and replacement parts. And Tesla can’t afford to dump money into that area while their stock price is fighting to stay afloat. Despite Musk’s promises to improve service, Tesla has actually been closing service centers left and right because they can’t afford to keep them open. They’ve also cut back on producing spare parts because they can’t afford it.
Earlier this year, It looked like Tesla was days away from collapse until they scored an emergency ABL credit line increase. Shortly thereafter, they staged another capital raise with horrendous credit terms. And now it’s looking like Tesla will be broke again by the end of the year.
It’s important to note, that every time Tesla stages a capital raise, they’re facing bankruptcy. They can’t pay their bills. Investors have forked money over on the promise that with enough volume, Tesla will turn the corner and be a money-making machine. That hope will die a spectacular death in the 2nd half of 2019. That’s why you must sell your car now. And you’d be insane to consider buying a Tesla now, just before the company collapses.
Tesla was able to eke out a tiny profit in 2018 because they cherry picked the cream of the crop from their backlog of orders. Now, they are left with the bottom of the barrel in the 2nd half of 2019. That means producing mostly low-margin cars. Plus, demand has dropped to the point that Tesla is heavily discounting its cars. It’s going from bad to worse for Tesla.
Tesla already threatened to close every single showroom in March of 2019 because they were so low on cash. Only after their emergency credit line increase did they say they’d leave “some open in high traffic areas”. When Tesla reports horrific losses for Q3 and Q4 the last vestige of hope among investors will die out.
The stock price will crater and so will resale value on all used Teslas.
Tesla just reported a record number of deliveries. Never mind that Tesla gave away the store via heavy discounting, the order mix was full of the low margin dogs, and fleet sales will boomerang on them in Q3. The thin veneer on this record delivery number is enough cover to allow you to get out while you can.
There is a short golden period in between the release of the Q2 deliveries yesterday and the release of Q3 earnings in about a month. Just enough time to sell your car. Once those Q3 numbers come out, it’s all over. There will be no more good news out of Tesla. There are no more big product launches and no more profitable quarters.
Once investor hopes die, there will be no more capital handed over to Tesla to keep the machinery running. Tesla will cease to function. How long that will be from now depends on much they can mitigate their cash burn.
If you own a Tesla you need to sell it before those Q3 earnings are released. You’ve been warned.
But the big problem for Tesla car owners is resale value. We are a mere months away from word on the street getting wind of the fact that Tesla’s downward spiral is soon to be fatal. Unless you’re independently wealthy you rely on getting some value out of your current car in order to get into your next one.
Already, Tesla car owners are starting to suspect something isn’t quite right due to the lack of availability of parts and service. Tesla derives no revenue for warranty repairs and replacement parts. And Tesla can’t afford to dump money into that area while their stock price is fighting to stay afloat. Despite Musk’s promises to improve service, Tesla has actually been closing service centers left and right because they can’t afford to keep them open. They’ve also cut back on producing spare parts because they can’t afford it.
Earlier this year, It looked like Tesla was days away from collapse until they scored an emergency ABL credit line increase. Shortly thereafter, they staged another capital raise with horrendous credit terms. And now it’s looking like Tesla will be broke again by the end of the year.
It’s important to note, that every time Tesla stages a capital raise, they’re facing bankruptcy. They can’t pay their bills. Investors have forked money over on the promise that with enough volume, Tesla will turn the corner and be a money-making machine. That hope will die a spectacular death in the 2nd half of 2019. That’s why you must sell your car now. And you’d be insane to consider buying a Tesla now, just before the company collapses.
Tesla was able to eke out a tiny profit in 2018 because they cherry picked the cream of the crop from their backlog of orders. Now, they are left with the bottom of the barrel in the 2nd half of 2019. That means producing mostly low-margin cars. Plus, demand has dropped to the point that Tesla is heavily discounting its cars. It’s going from bad to worse for Tesla.
Tesla already threatened to close every single showroom in March of 2019 because they were so low on cash. Only after their emergency credit line increase did they say they’d leave “some open in high traffic areas”. When Tesla reports horrific losses for Q3 and Q4 the last vestige of hope among investors will die out.
The stock price will crater and so will resale value on all used Teslas.
Tesla just reported a record number of deliveries. Never mind that Tesla gave away the store via heavy discounting, the order mix was full of the low margin dogs, and fleet sales will boomerang on them in Q3. The thin veneer on this record delivery number is enough cover to allow you to get out while you can.
There is a short golden period in between the release of the Q2 deliveries yesterday and the release of Q3 earnings in about a month. Just enough time to sell your car. Once those Q3 numbers come out, it’s all over. There will be no more good news out of Tesla. There are no more big product launches and no more profitable quarters.
Once investor hopes die, there will be no more capital handed over to Tesla to keep the machinery running. Tesla will cease to function. How long that will be from now depends on much they can mitigate their cash burn.
If you own a Tesla you need to sell it before those Q3 earnings are released. You’ve been warned.
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