More Evidence Tesla Is In A Death Spiral

Reuters  report in which the news service discovered that almost all of the solar cell production at Tesla’s solar factory in Buffalo, New York is being sold overseas, primarily to a large Asian buyer.  Tesla’s Solar City business was given $750 million in State subsidies to build the plant in NY in exchange for employing at least 1,460 people and spending $500 million per yer in the State over 10 years.

The factory employs far less than the 1,460 required and the State has no hope of ever seeing the $500 million per year. The factory has become little more than a solar cell production facility for Panasonic paid for by U.S. taxpayers.

Panasonic produces the solar cells in the factory that were supposed to be used in Solar City’s solar panels.  The problem is that Solar City’s sales are approaching zero.  In California only 21 Solar City roof systems are connected to the State’s three investor-owned utilities as the end of February.  Panasonic is seeking to use the Buffalo plant to fulfill demand for U.S. made solar sales from foreign buyers (foreign solar manufactures can then export the solar panels back the use duty-free).

Earlier this year Panasonic announced that it was suspending plans to expand capacity at Tesla’s Gigafactory. It also suspended planned investment in Tesla’s Shanghai Gigafactory. The decision to curtail investment in Tesla’s U.S. Gigafactory was based on declining sales in the Models S and X and on Model 3 sales which are running below plan.   Panasonic’s Tesla EV battery business had losses exceeding $181  million in its fiscal year that ended in March.  Panasonic was likely not interested in repeating that experience as a “partner” in Tesla’s Shanghai operations.

What’s interesting about the two situations described above is that, more than anyone outside of Tesla’s corporate suite, Panasonic has an up close inside look at the truth behind Tesla’s operations and financials.  It’s quite clear that Panasonic is in financial loss containment mode with respect to its relationship with Tesla.  In this regard, Panasonic is signaling that Tesla is in deep trouble operationally and financially.

Panasonic’s withdrawal from its relationship with Tesla reflects the same critical information about Telsa as the steady stream of high level executive departures over the last year, the rate of which accelerated over the last 4-6 months.  Clearly the message is that Tesla is now in an irreversible death spiral.

Just for the record, I believe that Goldman Sachs and Morgan Stanley used the recent stock and convertible bond offering to suck fees out the deal that would help offset the likely losses the two banks will incur when Musk inevitably defaults on loans he owes to both firms.  It cost Tesla $300 million to purchase derivative protection against the potential shareholder dilution affect if Tesla’s stock were to rise the conversion price of $309 in the new converts.

But those two firms know that Tesla is going to hit the wall and that the stock has no chance of sniffing anywhere close to $309 from now to eternity. It’s highly likely that Goldman and Morgan Stanley forced this hedge structure on Tesla to rake in the $10 to $20 million in fees skimmed on the derivatives used for the hedge.  It was nothing more than vultures who are closest to the carcass grabbing the choicest cuts of meat.

Ironically, Morgan Stanley’s analyst issued a ”worst case” $10 valuation on Tesla. Unless the analyst is a complete idiot with little experience in distressed situations – which is possible – the $10 dollar valuation is Morgan Stanley’s “code” for, “the stock is worthless if Tesla has to file” (which it will sooner or later).

5 thoughts on “More Evidence Tesla Is In A Death Spiral

  1. Existing home sales down again, 04 per cent month on month, now -4.4 per cent year on year. Lumber prices are down too. ½ in. CDX are at $16.95 that is a 50 per cent drop from last year. Last year Two by Fours were at $4.29 and they are now at $3.13. But don’t be fooled. We have the strongest economy ever and the strongest labour market ever. The US consumer has the pockets so full of money that he struggles to turn up in time for the realtor’s appointment. It is Russian agents that hide the house keys and it is Chinese agents who manipulate street signs to disrupt house viewings.

    Dave please delete my previous post. It said prices instead of sales.

  2. I guess one pertinent question now is who, if anybody, is lining up to buy assets of Tesla in liquidation. Or will it be a rummage sale.

    Whatever happened to the orders/depositis on Class 8 trucks and some sort of sports SUV based on the 3.
    I also kind of remember a sports car in Teslas future–what else has been kicked around over the years?

    1. That’s the point. Anyone looking to pick up any of Tesla’s assets would like do so out of bankruptcy. The asset value
      of this pig is worth a lot less than the total amount of debt. I guess Panasonic would likely just be awarded
      control of the Buffalo factory. I would not be surprised if the Nevada Gigglefactory is a possible superfund site.
      Regardless, any OEM looking to produce EV batteries would have to spend several hundred million or more re-doing the
      factory. Tesla stock is a bagel and overall the company is fraudulent pool of financial nuclear waste.

  3. Dina:
    I am afraid to put a trickle charger on my car if on vacation; no way I put a Tesla in garage anytime, charging or not.

    HBR some day will write about Tesla and Boeing, and their CEOS (The Boeing CEO, McNerney, who from 2005-2015 who made the decisions on 747MAX and fusalage, and as well buybacks and then moving 787 production to NC to avoid union costs.

    Musk is in a league by himself.

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