Monday, July 23, 2018

Musk to suppliers: return cash, make Tesla profitable

It's their duty to bail out Musk, keep him a billionaire
TSLA is dropping some 6% at the beginning of today's session

The Wall Street Journal broke a story – covered by everybody – that sounds as a joke but I think it's true. Elon Musk's company has asked a supplier – and most likely, very many if not all suppliers – to return some money (50-100 percent) that have already been paid by Tesla for the parts that Tesla bought since 2016 "in order to turn Tesla profitable".

It's incredible. After some $10 billion has been sucked from the pockets of the U.S. taxpayers, additional tens of billions were sucked from the pockets of the brainwashed Tesla fans among car buyers, investors, and lenders, the company still can't afford to pay the normal price of the parts – even parts that have already been delivered and paid. Crony capitalist Elon Musk has become so incredibly arrogant and "entitled" that he believes that his business partners are obliged to place his being a billionaire, or Tesla's profitability, above their own profitability or financial survival.

They would be complete loons to return any of the cash. But it's plausible that some of the supplier companies are managed by Tesla fans who actually are loons, so anything is possible.

When an agreement is reached about the delivery, it becomes very problematic for one side to unilaterally demand changes of the price – but it's happening. However, to "change the price" retroactively, one or two years after the parts were actually paid for and delivered, it's just plain insane. Why would a supplier reduce its own profitability just in order to make Tesla profitable? Why would a supplier or anyone else want to become a charity and if it became a charity, why would a billionaire be considered the needy?

Can I get back the money that I have paid for obsolete electronics years ago?

I think that the view that there may be a "game theory" explanation why this would be a good idea is just flawed. Tesla has been making a loss for 15 years and it hasn't been an existential problem for Tesla and the suppliers. Maybe if Elon Musk revealed that Tesla is facing imminent insolvency, that could make it meaningful for the suppliers to bail out Tesla and save their client who may buy the products in the future. But if the insolvency were really imminent, it would be a much better (and maybe important) plan for the suppliers to get as much cash from Tesla as possible.

It reminds me of a joke by Ivan Mládek that I will adapt. Elon Musk has realized that he needs some parts for his Tesla cars but they have both advantages and disadvantages:
  • The advantage is that they help the Tesla cars to be operational.
  • The disadvantage is that Tesla must pay some money which guarantees that Tesla makes a loss.
Elon Musk has found another incredible business innovation – namely an ingenious compromise. He takes the parts that he needs but he won't pay the money for them! ;-)

A commenter at the Wall Street Journal also posted another letter that may be sent in the near future – I had the same idea and it's roughly as follows:
Dear user of the Tesla car, a member of a community where the future is already the present,

we are sure that you are enjoying your Tesla. We figured out that those $138,800 you paid weren't quite enough to cover our expenses and the profit that the company that has built the future deserves. So we revised the figure and your car actually costs $419,900. The amount covers the higher expenses, profit, and interest that we calculated for you.

We believe that you will agree with a business innovation: the car price $138,800 that you have paid will be turned into a regular monthly fee. We recommend you to send the fee before 10th of every month. Just a friendly reminder, our Autopilot may kill the driver if the driver doesn't follow all the instructions from Tesla, Inc.

Sincerely Yours
Elon Musk and friends at Tesla, Inc.
The U.S. government will get a similar letter that mentions results of elections and blackouts.

In the history of the financial markets, lots of companies have run into problems but I think that no CEO has ever demanded similarly childish methods to improve the situation. Elon Musk is the ultimate spoiled brat of the corporate world – he's a product of the global warming hysteria, safe spaces, multi-billion subsidies for useless enterprises that have been turned into a human right, and a phenomenon on the border between the worlds of finance and religion that has allowed Musk's behavior and expectations to be increasingly insane because even when the insanity reaches the stars, he will always find members of the cult who will defend him.

Tesla has been a company that was producing an exponentially increasing loss in the 15 years of its existence. Every loss and every failure has been "compensated" by promises of an even greater revolutionary plan for the following years, and those were guaranteed to produce an even greater loss. The company wasn't able to reach the production target for a long time – and when it did, with a huge delay, it's losing the reservations en masse.

Lots of people start to regain their common sense – what they're waiting for is just an ordinary electric car, and not a terribly luxurious one, and basically every car company can produce such an electric car if a financial loss isn't considered a problem. Better electric cars already exist today and the chance for Tesla cars to be "special" is going to fade very quickly in the following year or two. The electric cars are inconvenient because the charging takes a lot of time (Porsche's network is expected to triple Tesla's speed) and requires you to be at a special place – the network of charging stations is very sparse. On top of that, all the Tesla car users are risking that when Tesla runs out of business, so will the charging network and their car will become unusable.

All these problems have been known from the beginning – well, not just from 2003 when Tesla Motors was founded but more or less for 100+ years when the electric cars existed. Elon Musk wanted to invalidate the reality and there's a whole religious movement that doesn't want to see some basic facts. In their efforts to defend the indefensible, they're willing to break many laws including the laws of common sense in finances – for example the law that a company (as well as an individual) wants to maximize its (or his) own profit, not the profit of another company. Why should this thesis be correct? It's so obsolete. ;-)

Every human should dedicate his or her life and assets to Elon Musk for him to be as wealthy as possible and to Tesla to be saved, right?

No comments:

Post a Comment