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Munro's Model 3 Teardown Spells Big Trouble For Tesla

May 01, 2018 9:05 AM ETTesla, Inc. (TSLA)857 Comments
Montana Skeptic profile picture
Montana Skeptic


  • Is Model 3 demand flagging? It may be, but I doubt Tesla will divulge the latest reservation number.
  • And in a sense, it doesn’t matter. Even if demand still remains strong, the car will be a huge negative for Tesla for two separate reasons.
  • First, Tesla will lose money making the Model 3.
  • Second, the corners Tesla cut in developing the car will bring great woe.
  • Munro & Associates’ teardown analysis of the Model 3 underscores both these points.

There’s a lot of buzz, at least among the bears, about what’s happening with Tesla’s (NASDAQ:TSLA) Model 3 reservation count. Here’s a recent example, outlining what Mark Spiegel hopes we’ll see Tesla disclose when it releases its Q1 financials:

What's the exact current number of net paid Model 3 reservations (and by "current" I mean as of now, not five weeks ago in March), and by "net" I mean net of those that have received OR requested refunds (as once a refund is requested it seems to take at least a month to get it), and by "paid" I mean excluding any reservations allowed to remain after a refund was requested, and (in line with Tesla's self-proclaimed policy) without crediting more than two reservations to any one person or entity?

While I too am curious about the reservation number, I’m not holding my breath, expecting big news. Instead, I anticipate Tesla will continue playing this close to the vest, claiming demand continues to be strong but declining to divulge an actual number.

Why so secretive? Because any significant decline in the Model 3 reservation number would be harmful to the Tesla share price and, indeed, might well undermine the entire Tesla narrative that the mass market Model 3 will catapult the company into sustained profitability. (I discussed this at some length in a podcast with Quoth the Raven, which you can find here.)

However, in a sense, I regard the Model 3 reservation number to be irrelevant. No matter whether the Model 3 reservation number is falling, rising, or staying the same, the Model 3 story is doomed, for two separate reasons, both illuminated by the work performed by Munro & Associates.

What Is Munro & Associates?

Munro & Associates has almost three decades of experience in what it calls “teardown engineering.” By disassembling

This article was written by

Montana Skeptic profile picture
I have a J.D. degree from Yale Law School, practiced for 30 years as a trial lawyer in commercial cases, and in the decade that followed managed a $1B+ portfolio for a family office. I have recently retired and am free to write about whatever I want. And so I will.The fellow in my icon is Galileo Galilei, who famously said: Eppur si muove.I say, less famously: Time is the only reliable solvent of folly.

Analyst’s Disclosure: I am/we are short TSLA. 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.

I am short TSLA via long-dated options.

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