Tesla Is A Rock That People Break Themselves Against

Mar.29.14 | About: Tesla Motors (TSLA)

Summary

NHTSA has tossed out any chance of defect causing Model S fires.

States are already starting to come around on direct selling.

Tesla has violently destroyed every problem that has stood in its way as a company thus far, with ease.

"Don't stand in Elon Musk's way" is starting to seem like the de facto Tesla motto. Maybe they'll print it on the backside of the floor mats, or somewhere else nuanced.

I wrote at the end of last week that it may have been time to enter back into Tesla (NASDAQ:TSLA), as the stock dropped closer and closer to the $200 level again. Fundamental valuation traders worldwide glared at my article angrily from behind their 14 monitor setups while adjusting their bow-ties and sipping imported Brazilian dark roast coffee. I could feel their glares through the screen.

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Speaking of phrases, how about the phrase, "a defect trend has not been identified." This is the phrase that Seeking Alpha is reporting was used by the NHTSA after looking into the Model S fires that were a major headline months ago, but that everyone has since forgotten. Remember? I told you this was coming in October of last year:

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Speaking of farcical reasons that shorts have brought up time in and time out, we have now found ourselves mired in the seductive sounding issue of states possibly preventing Tesla direct sales. Oh, brazen controversy, how you timelessly bind your loins to the Tesla shorts!

The reason this whole direct sales thing is also a farce, as I've said a couple times over now, is the fact that there's going to be rules that can be bent in order to make sales of Teslas legal, wherever it needs to happen.

Further, I've argued that for every problem Elon Musk has been able to face thus far, he's found a solution. So, why would this situation be any different? If most people that buy a Tesla need to do so online anyway - what are we really even arguing about? As John Malkovich said in "Burn After Reading", "who's ass didn't I kiss?"

USA Today first reported on the 25th:

Having been spurned by New Jersey Gov. Chris Christie, Tesla Motors may have found a friend in the state's legislature when it come to the issue of being allowed to sell its electric cars directly to the public.

A state assemblyman has introduced a bill into the New Jersey Legislature that would allow those sales, overturning a ban by the state Motor Vehicle Commission that brought howls of protest from Tesla.

Tesla, through its CEO Elon Musk, has alleged that Christie's administration engaged in a backroom deal that reversed a previous understanding, allowing Tesla to keep open its own stores in the state. Christie had said if Tesla doesn't like the commission's decision, take up the issue with the legislature.

I've been calling this situation a farce from my original article on the situation, "Can New Jersey Harsh Tesla's Mellow?":

Lest we forget the path that Tesla as a company has already blazed. Say what you want about the company's valuation and the multiple that it trades at, but Tesla could be a Harvard Business School case study on starting a business - setting lofty goals, meeting or exceeding every one of them, and making shareholders money while satisfying customers and third-party consumer reporting companies with a revolutionary product.

When I think about Governor Larry the Cable Guy trying to prevent Musk from direct selling his vehicles in New Jersey because Tesla obviously isn't playing ball with special interest groups and the government of New Jersey, that gets filed under "small talk" problems for me.

Further, there's no doubt in my mind that Musk and his team are significantly smarter than the constituency that makes up the New Jersey government - and I mean that in the nicest way possible. For every problem, there's a solution, and Tesla is no doubt going to find that solution - or at least an "end-around" - to this little problem that it's facing.

The point is that direct selling in New Jersey is so low on the list of concerns that both bears and bulls should have about Tesla, I almost want to go as far as saying this is a non-event. The fact that Christie is at the helm of this, without getting political, is equally as farcical.

Now, it's looking like the expected is happening, and just days after the "controversy" began, the rules are starting to be skirted for Tesla. Seeking Alpha reported yesterday:

  • Tesla Motors , New York Governor Andrew Cuomo and the state's car dealers have come to an agreement that lets the electric vehicle maker keep its five company-owned outlets open, so long as it doesn't open any more.
  • With legislative support, the deal is a bit further along than the one made in Ohio earlier this week, and may presage what's on the way in New Jersey.
  • Any new Tesla outlets in New York state would have to come under a "strengthened dealer franchise law."

"Strengthened dealer franchise law", by the way, is government speak, for figuring out a way to appease dealers and satisfy wherever the corruption is occurring so that Tesla owners and fans don't start to march on the governor's mansion. All the while, Tesla - as a business - continues to execute.

Did I mention that it's already being reported that Tesla has something in the neighborhood of over 12,000 pre-orders for its Model X?

Many people are sold on the concept and Tesla's ability to deliver. Barring China's reservations, Black Sheep Planet estimates that 12,133 Tesla Model X reservations have been made. Deposits range from $5,000 to $40,000, depending on which version is reserved. The fully-loaded Signature series that will go into production first requires a $40,000 deposit, while the regular version requires a deposit of "only" $5,000.

Elon has stated several times that a few Tesla Model X SUVs will roll out to early customers at the end of 2014, but production won't really ramp up until sometime in 2015. If you reserve a Model X right now, you have to wait until 2015 to receive your electric beauty.

So, demand still seems to elude production, which is good news for Tesla. The company could likely expand production, but as they stated on a conference call a few quarters ago, they like having a reasonable backlog of orders. I don't mind the strategy either - it keeps the vehicles as in demand commodities and makes sure that the company isn't blowing capex on things that they absolutely don't need. Gigafactory excluded, of course, as the company is going to need this asset once built - and other companies will likely benefit from it as well.

Investment Thesis

So far, Tesla's method of problem solving has been fun to watch. In some cases, like with the batteries, it's get bigger, better and build it yourself. For this direct selling farce, it's bend the rules until the inevitable happens and these states come around.

One thing is for sure, my main thesis as to being bullish on the company remains firmly intact. My contention was that I was going to trust Elon Musk until he gave me a reason not to, and that so far, Tesla has met or exceeded all of the goals placed in front of it ad infinitum as a company.

I remain bullish on Tesla for the long term, and believe the stock's recent dip to be an attractive entry point.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.