Saturday, May 14, 2016

Is the Tesla Motors dream a nightmare?

A good item on Tesla Motors Inc. by Toronto Star columnist David Olive - - “Is the Tesla excitement just magical thinking?” Olive hammers home some valid problems with mounting losses, production questions and the debt levels.

Olive then loses credibility when he forgets to say that Tesla cars just use energy from somewhere else – perhaps from that local gas or coal fired power utility. Olive also makes a big mistake when he claims “the auto industry has not changed its essentials since the advent of the internal combustion engine in the 1880’s.”  .

Wow – today we have radial tires, modern suspensions, lighter weight, fuel injection, direct injection, variable valve timing, turbo-charging, seamless shifting auto transmissions, disc breaks – airbags – I could go on. By the way today’s internal combustion engine has almost zero emissions.

Last January auto retailer AutoNation Inc. (NYSE-AN) - said it will trim marketing costs and vehicle inventory by about 10 percent from year-end levels. The nation's largest new-vehicle retailer already has cut jobs in light of increased discounting, plateauing sales and declining vehicle margins, which combined to reduce its fourth-quarter net.

Our chart – weekly bars of Tesla above the weekly bars of AutoNation displays a reasonable price correlation – so there is a relationship and the January 2016 negative warning by AutoNation did impact the Tesla share price. Note the recent Model 3 price rebound which is likely a selling opportunity.

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