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Tesla's Continuing Crash

Jun. 02, 2022 10:44 AM ETTesla, Inc. (TSLA)SSNLF, STLA, GM, F, VWAGY, VLKAF, TM857 Comments
James Hanshaw profile picture
James Hanshaw


  • Since my first cautionary article on Tesla on November 16, 2021, the stock price is down 29.8%.
  • That is far worse than market declines generally, so it cannot be blamed on that.
  • The causes were in part self-inflicted.
  • More of those are now being programmed in that - together with external factors - will further lower Tesla's still excessive market value.
  • I shall expand on those internal and external problems that will worsen the crash.

Generic 3d car crash test. Car destruction. 3d rendering.

Pavel_Chag/iStock via Getty Images

In past articles on Tesla, Inc. (NASDAQ:TSLA), I have emphasized my like for the cars and my admiration for what Elon Musk has achieved, proving that a visionary can also put visions into practice. Others have

This article was written by

James Hanshaw profile picture
I am retired apart from managing family investments - mostly equities. I live near Zürich, Switzerland. I keep physically fit by walking and mentally fit by writing on philosophy, economics and politics. My writing is published internationally. My hobby is art - pencil on paper drawing. For those interested in my kind of art and political ideas I can be contacted at jbhanshaw@gmail.com.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (857)

James Hanshaw profile picture
The price is heading down towards $100 just as I predicted and many scorned in their comments
@James Hanshaw
"many scorned in their comments"
Well, sure, by those who don't focus only on a tiny slice of TSLA price history to support their obviously flawed narrative.
I could look at a single TSLA down day and make the same claims as you and be as wrong as you.
It's about the long term, and this has been explained to you.
TSLA will be multiple factors above what it is now in just a few years.
We just need to watch it play out. Minus a global calamity, it's inevitable.
Tdot profile picture
Yes the drop from $300 a week ago to $285 clearly extrapolates to $100 by the end of the year. Unless it is exponential or something...
Truthteller profile picture
@RealityMage global calamity, don’t you pay attention to the news. Don’t think the very short blink and you missed recession during the pandemic will be the norm. Free money is over.
James Hanshaw profile picture
There is much comment about Tesla’s margins being massively superior to other car makers thus justifying the massively higher market valuation. They are good but a point I overlooked mentioning and so do commenters is that they are only automotive gross margins and not Tesla’s overall ones.

If I am wrong would someone please give us another idea. This is what Tesla last published:
Automotive margins!! GM: 27%. Net: 14%.

The solar business is loss making so Tesla’s overall margins must be lower. Bitcoin is a huge loos maker too.

Tesla is an upmarket car maker. If I compare those automotive margins with upmarket BMW then the gap is not so great.
BMW’s GM: 18.3%. Net: 14.8%.

BMW is therefore better on the important Net margin number.
If we turn to how the market views the two companies it gives BMW a PE of 2.89 and Tesla a PE of 106!

That must surely show that something is wrong.
@James Hanshaw IMHO, Musk’s big achievement is that he sold the market on the idea that TSLA is “the future”; an all-BEV company connected to a green future. Companies like Toyota and Nissan made the Prius and Leaf, but these were little more than econobox compliance cars. TSLA was the “firstest with the mostest”; everyone else is playing catch-up. The market values TSLA as an advantaged disrupter; all the legacy ICE guys face all the risk of that disruption, with very uncertain reward profiles.

Best of luck to all.
@James Hanshaw
Comparing apples to oranges is SOP for Tesla fans.
James Hanshaw profile picture
Thank you all for reading and commenting on my article. We all - hopefully - can learn also from those who disagree with each other. For those that have not seen it my latest article maybe also be of interest: seekingalpha.com/...
ron2004 profile picture
@James Hanshaw
re: "Tesla's Continuing Crash"
Yup, all the way to the 3 for 1 split.
James Hanshaw profile picture
@ron2004 Since that split announcement the crash continued ....

Symbol Last Price % Chg

@ron2004 amen brother . Aaaaans then comes the CyberTruck $$
@James Hanshaw 6% is a crash 🤣🤣?? It will prob double that next week lol
Why go through a huge detailed article explaining why the stock fell, when the simple explanation is that it was overpriced due to hype, and not tethered to reality, so it did what every stock in that situation does.
Tdot profile picture
To be fair, the whole market fell, as did the other automaker stocks.

Nevertheless, the shorts were well fed, when Tesla shares fell from $1200 to $700. And some would argue that Tesla is still overpriced based on the fundamental realities of the business, one must assume that all the other automakers go out of business, and freely give their factories and assets over to Tesla, with Tesla taking more than 100% of the global auto market. Which is just not plausible.

Still, market pricing is often based more on what dreams may come, rather than what has actually been achieved. Sort of like when Major League Baseball pays $8 million to sign a 17 year old high school ball player to come play in the minor leagues, in hopes of some day promotion into the majors, or to use as trade bait.
@Ian5656 Or it's the fact that almost every stock experienced a substantial drop? What is tethered in reality is the strength of Musk, his technology and the Tesla brand.
James Hanshaw profile picture
@Take&run What are those strengths of his technology that others have not caught up with?
"Tesla's Continuing Crash"
You mean the crash of markets all across the world?
Truthteller profile picture
@RealityMage hey, it rose with the market and now it’s crashing with the market with a little help from the owner. Gravity sucks
TrendFox profile picture
Down 15% this month.
Down 39% this year.
Up 1400+% since 2017.

I suppose gravity has to play a part to shake out loose shares every now and then.
"Gravity sucks"
Call it gravity, call it the impact of macro-factors outside of Tesla's control but is really only of a temporary nature.
Whatever you call it, I call it a disassociation between Tesla fundamentals and execution and the Tesla share price.
Most importantly I call it an opportunity to buy into the best investment of a lifetime at a bargain price. I hope it stays at a bargain price until I get an expected August windfall.
Truthteller profile picture
For all the ones saying Tesla is the safest out there, here’s your sign. Most accidents per 1000 than other Av’s. Looks like fsd has a long way to go.

@Steff3 Maybe waiting for report would be wise.
James Hanshaw profile picture
@Steff3 None of that will help the share price go up!
Truthteller profile picture
@James Hanshaw no and it ruins their narrative about being the safest car which was always just an advertising tool anyway. It seems ironic they brag about acceleration from 0-60 but then say it’s safer than other 5 star rated cars
Steve Funk profile picture
“The figures look very good, especially the automotive gross margins at 32.9%. That is well above the gross margins achieved by traditional car makers.”

You are comparing apples and oranges. The OEM’s you are comparing are on wholesale new cars only. If you subtract from Tesla contributions of dealer activities, used car sales, warranty, insurance, and financing you will get a similar margin to other OEMs.
James Hanshaw profile picture
@Steve Funk I am comparing gross margins as published by all makers in their accounts. The other items you mention should show elsewhere in costs and provisions.
Tdot profile picture
It is fair point though - Tesla gets to sort of "double dip" on their gross profits by acting effectively as both manufacturer with "wholesale" profits, and as dealership with "retail" profits, combined into one transaction. If Tesla had independent franchise dealerships doing the retail sales, their gross profit margins based on wholesale prices would probably drop by half.

But this is because as a "small" niche manufacturer, Tesla finessed anti-trust exemptions from many states regarding longstanding retail franchise dealership sales for vehicles, claiming poverty and small market share in a worthy business.

That was maybe true during 2006-2017 with the Roadster and then the Model S selling barely 50k per year with less than 0.3% market share. But as soon as the Model 3 started "mass production" in 2018, those exemptions should have been taken down, since the automaker was no longer a small niche company, struggling to stay alive, and needing every possible life support from the government.

It is not a level playing field, and that is a problem.
@Tdot You make a good point. Farley just announced that Ford will be transitioning to an on-line ordering and fixed price system for their BEV's, and presumedly, for their ICEV's in the future. How do you think that is that going to work, given all of the state laws out there protecting independent dealerships?

"That includes the fact that he believes the company’s future ADAS subscription revenue will be “massive,” that he wants to move toward a 100 percent online sales model with fixed pricing, focus on “passion brands” on the ICE side of the business, and won’t be investing in traditional methods of advertising such as Super Bowl commercials. Additionally, Farley believes that the forthcoming EV pivot will drive prices down and force consolidation in the industry."

stickster profile picture
3 for 1 split 10% pop Monday
Truthteller profile picture
@stickster even I thought you might be right cause that trick worked before with Tesla. Instead fell almost 8%. I guess no news is good new right now. Even an analyst got burned but he’s got a negative 14% return currently so I’d take his advice sparingly

stickster profile picture
@Steff3 whole market was wrecked Monday Tesla is the only show in town at the moment GM and ford lose money on every EV they make years behind Tesla
Truthteller profile picture
@stickster you got burned when it went the other direction but let’s blame everyone else. Yawnnn, getting old having to defend such a blazing company huh? Tesla is almost half the price is was in nov. Such a shame. I’m only down 20% on my portfolio
James Hanshaw profile picture
One week on:
Price at publication
S&P 500 change
@James Hanshaw now how can you compare one stock can the S & P avg lol . Why don’t you compare the auto sector for a more realistic perspective ? You are reaching big time here
James Hanshaw profile picture
@Take&run If you check the auto sector I doubt you will find a major maker that has fallen as much as Tesla.

Checking against the S&P 500 was done for the reason I mentioned; Tesla's crash is bigger than the general market decline
@James Hanshaw "If you check the auto sector I doubt you will find a major maker that has fallen as much as Tesla."

You know that this isn't true. I've already pointed this out to you before.
Joseph S. Bohrer profile picture
The other issue with having significant operations in Indonesia on the part of a foreign company is that you will never win any litigation. They will be happy to have a nice long trial but the foreigners always lose.
James Hanshaw profile picture
@Joseph S. Bohrer And you have to bribe your way at every level to get those significant operations operating in the first place and to keep them operating afterwards.
maykiljil profile picture
Dear James,

Very good article... I like it....

You wrote that " A P/E comparison with those shows that means there is a long way down still to go.

Toyota's (TM). PE: 10

Volkswagen's (OTCPK:VLKAF) PE: 4.3

Ford's (F) PE: 4.8

General Motors's (GM) PE: 6.4

Tesla's (TSLA) PE: 102

Of course there will be some bounces up, but the decline over recent months is part of Tesla’s continuing crash trend. I can also be wrong, but the known threats would suggest that new Tesla investors should stay away and existing ones should sell. "

I think . You are correct.... in P/E values very very big gap... That's show a big bubble... It is terrific... new Tesla investors should stay away is certian.

Best Regards,
@maykiljil "I think . You are correct.... in P/E values very very big gap... That's show a big bubble... It is terrific... new Tesla investors should stay away is certian."

Tesla's P/E ratio is about as low as it has ever been (current 96.42 currently vs 90.08 at its lowest). Are you saying that it was never a buy?

Truthteller profile picture
@microsk96 GuruFocus has detected 1 Warning Sign with Tesla Inc TSLA.

Be careful what you reference . That popped on the screen when I clicked the link.
I know you didn’t ask me but a good time to have bought was in 19’ or early 20’ when it had negative p/e. Ever since it’s been hugely overpriced including a p/e over 1200 but it’s a growth company so who cares , right?
@Steff3 Thank you! I appreciate the heads up on that.

On P/Es, my point was just that it isn't that simple and yes, I do believe that growth companies should be looked at differently. However, I don't believe that you are growing than P/Es don't matter.
What are people's thoughts on future potential PE compression for TSLA?
James Hanshaw profile picture
@Moomauden456 I have not worked that out but think the share price will be down to $250 by year end and maybe down to $100.
@Moomauden456 PE is not a fundamental metric for growth stocks. Never has been, never will be.
Jacob Scott profile picture
@James Hanshaw I think if the market takes a dive anything is possible, but if you could get TSLA for $100 a share you'd be robbing the store.
WelshWB profile picture
@James Hanshaw

My issue has never been with the product of Tesla rather the obscene valuation. Despite the numerous virtue being outlined it comes down to blind faith i.e. Tesla is on the cusp of greatness, which is not how one should invest you need facts.

Investment is always forward looking but a good indicator is the returns of the sector itself. Unfortunately when it comes to cars and electronic hardware the returns are decimated eventually due to the emergence of competition. Tesla will face the same headwind as previous car makers and electrical device.

However if Tesla changes its business model i.e. license its software and self driving system to other car makers this would change the nature of the company and one could argue a higher valuation because it would become like Microsoft of the automobile industry unfortunately Tesla is through and through car company and as such should be given such valuation not for a tech company. Even Ferrari a premium car maker has a PE ratio of 37 and this is a car company which is impossible to compete within its segment.
@WelshWB "Even Ferrari a premium car maker has a PE ratio of 37 and this is a car company which is impossible to compete within its segment."

Do you think that rate of growth is not important to consider when comparing PE ratios?
WelshWB profile picture

Rate of growth is important but so is the nature of the industry as returns always revert back to sector average. This itself determines the value of a company as few companies exceed the returns of the industry on a long term basis.

The question is what kind of company Tesla is? A car maker or a software firm? Amazon is a good example it started off as a online retailer and transformed into a tech company. If Tesla remains a car maker and then competition will eventually decimate its return and therefore it should be valued as such.
There are many competitors in self driving too. And several have more advanced systems.
TrendFox profile picture
Checkmate: “I have a really bad feeling about the economy.” -E. Musk

If things tank - Elon holds the advantage over the FED, etc. thinking that rate hikes would be a solution to economic distress. Tesla continues to widen the gap over non-profit producing EV companies, as Dojo amasses data from 100k FSD users, from which Tesla Vision powers Optimus.

If the FED pulls back - Elon looks like a hero by foreshadowing potentially ominous events. Tesla continues upon its path, reducing battery and manufacturing costs, providing a clear path to high margin solutions for all classes of consumer (Model S, 3, X, Y, CyberTruck and RoboTaxi)

If the FED continues their reckless rate rise and the economy collapses. People are pissed. Elon is proven right. And only the strong survive. GM likely gets bailed out, because our politicians decided that “Even the weak deserve to live, and it’s only taxpayer money — and our grandchildren can make up for our mistakes.”
Truthteller profile picture
@TrendFox hey, while your singing his praises, remember that Tesla struggled at one time too. It’s hard for all businesses when there’s a downturn. Tesla is going to have a hard time also , so they’re not really better than anyone. People usually hold back on high end consumer purchases during times of uncertainty
TrendFox profile picture
To a degree, I agree. Sometimes people with money will buy physical assets so that they don’t lose to inflation
Truthteller profile picture
@TrendFox that’s true, usually why gold goes up. I’m sure the fur and diamonds crowd will continue purchasing so it probably won’t hurt Tesla currently, but if they want to grow they have to get the middle class. Even 100k wage earners are living paycheck to paycheck
You make an interesting case, with which I agree for the most part. Thank you for your thoughtful insights.
James Hanshaw profile picture
@Skipper 6 '71 Thanks for the compliment.
TrendFox profile picture
@Skipper 6 '71
‘Preciate that Skipper.
Tesla is not only overpriced, but it's seriously overhyped. The quality of the cars is bad, very bad. Problems with practically every vehicle sold, interior quality is not futuristic, it's as simple and cheap as possible and claimed futuristic. People should get tired with that soon. They have done smart move by giving full power models at the getgo with little extra price. What Tesla has disrupted is not being the only EV maker, everybody can do that if they want to, but they disrupted the BMW/MB etc MO of sucking money from customers with 10 different performance level cars and optional gadgets.
TrendFox profile picture
Flat out lies.
People don’t want at EV, they want a Tesla.
You can pay more and get a decent EV (Like Kia’s EV6), or you can get the best EV, which has the potential to become an AV over time.

Tough call.
Truthteller profile picture
@TrendFox how is that flat out lies when he’s giving his opinion that you don’t like? Tesla interiors are not that luxurious even though they are futuristic and kinda cool but basically a big iPad on a dashboard. Some people enjoy driving too so self driving isn’t an issue
TrendFox profile picture
“Quality of the cars is bad, very bad.”
It’s just wrong.

And I also enjoy driving — but there are a lot of times, I’d rather just let the car drive. So, it’s a choice. One that you have with a next-gen teched car, but not with a simple EV.
I agree with almost every point the author makes- on fundamentals TESLA is overpriced compared to other tech stocks and certainly other carmakers that earn a lot more and have bigger market share.

Fundamental analysis is useful when the price of the stock matches up with it nicely or shows it is undervalued. Then you should absolutely buy. And if the fundamentals don’t match up, then that investment might not suit your risk profile.

It was more than a decade ago, when I first started trading, that I soon realized that fundamentals don’t matter that much to the market and that a stock is simply the price people are willing to pay for it and that is speculation, hope and belief. Plus there is a wall of money that has to go somewhere.

Analysts often like to give verdicts in hindsight. Or they have their own religion in the rationality in markets. Certainly in a downturn people get more risk adverse and picky.

But the simple truth is Tesla is worth whatever people are willing to pay to buy it. $100? $500? $1000? $5000? And a lot of that will not be down to profits or FCF but on Tesla PR and whatever side of the bed Elon Musk gets out on.
James Hanshaw profile picture
@Yakspeare Good points but the last one has over reached what many are now wiling to pay and I think that trend will continue.
@James Hanshaw I’m cautious to make such a prediction. Tesla was $350 and expensive with no hope of $500. Then it was “funding secured 420”..after it ran up. It went to $800 and started to fall, I bought at $710 and then at $680. Then went to $650 and I was underwater…finally it climbed to $720 and I said okay I’m out with a vey small profit. It then went to $1200 in a few weeks, dropped to $1000, went up again, plummeted to $550ish then climbed up over $1000 again then Twitter etc happened and she has come down. The closest correlation to such swings I can think of is Bitcoin. Which is dead and buried, soaring, finally ending, going to the moon etc ( according to all the experts). Certainly fun for traders on both(which I am not) but your prediction on price is basically a coin toss. And it has nothing to do with your analytical skills, as Tesla isn’t following fundamentals and probably technicals are a basket case too. It’s more like a meme stock or crypto.
Truthteller profile picture
@Yakspeare agreed with everything you said, except you left out the stock split. Some kind of retail and meme driven speculation got Tesla in the thousands before it split 5/1 and that’s why Tesla longs brag so much about its high returns. Since then it’s vacillated between 400 to 1243. So really, it’s been a bad investment since nov of last year unless your a day trader that caught a good bounce
This article captures the one GIANT truth about TSLA. The stock price is set up to fall hard. There are too many pitfalls and trapdoors. The BIGGEST:

1) The UNKNOWN---the economy? The stock market in general?
2) The REGULATORS---SEC coming for Musk? what about all the fires? Can a massive recall send TSLA stocks to $200?
3) The competition is coming.
4) MUSK is a wildman dividing up his base and now siding with the right wing politically and turning off the left side. Very few business play the political game because why?
5) CHINA---lockdowns and other issues are coming for Q2.

---I am SHORT and will add to my shorts. COIN will be my short #2.
@YO long-short

Well played.

The last two assets I would own today:

1.) Tesla
2.) Crypto


These are the last two hyper-bubbles. Both are deflating, but neither has popped.

That's about to change.

Both assets have > 70% downside.
@Amos Tuck When I do a DCF for Tesla I get a fair price of around $500. Of course, I think its pretty obvious that its CEO is both a conman and a criminal. And also leads a cult.

Given the shareholder dilution so that the con man CEO can spend shareholder money on narcissistic ego projects like buying a failing social media company...I'd want a pretty significant discount to fair value.

At $350 or so, I think Tesla is too good to pass up. At $450, I might take a winger if there are no better options in the market. But I don't think theres anywhere close to 70% downside unless some of the OEMs totally crush Telsa in EV sales...which I don't really see happening.

We agree on everything, except the extent to which OEMs will steal market share from Tesla.

I think fair value is $250.

If there's been accounting fraud, fair value is much lower. A troubling number of CFO / Chief Accounting Officers / Treasurers quit Tesla right as it started to gain traction.

If Musk quits or implodes personally, fair value is also lower.

The current share price is unsustainable.
CR Spencer profile picture
With every move one makes, they take a risk. Tesla has made one huge number of moves. Does this mean that they are doomed? Hardly. It's a sign that they are so much more competent than those around them. This article suggests that Tesla is walking through minefields with it's eyes closed. Ridiculous! Like those mines in the property that Tesla built it's German plant in, they simply figure out how to go forward and do it as quickly as possible. The author suggested that China might destroy SpaceX's Starlink satellites. Is there any other adult that actually thinks that that would happen? The article is barely more intelligent than simply saying that because Musk and Tesla have so much wealth and power they might lose it. Many of the situations it describes are only so very remotely possible.
James Hanshaw profile picture
@CR Spencer I made no such suggestion about SpaceX except to link in information that did so.
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