From Yahoo Finance:
Why Jim Chanos is thoroughly unimpressed by Tesla
Influential short-seller Jim Chanos, who runs hedge fund Kynikos Associates, has been betting against two companies founded by billionaire serial entrepreneur Elon Musk — Tesla Motors (TSLA) and SolarCity (SCTY).Chanos, famous for nailing the collapse of Enron, said that shareholders view Musk as a “messianic leader.” In other words, he can do no wrong. While Chanos has no doubt about Musk’s intelligence, he does see serious problems with his companies, which he described as a “melange of publicly-traded and privately-traded science projects sort of gone awry.”“The fact of the matter is this is a company — in Tesla’s case — that’s now really going to need to step up the production. It’s going to be competing against Mercedes, Audi, VW, finally, who are bringing product lines as an OEM [original equipment manufacturer],” Chanos said at the Vanity Fair New Establishment Summit in San Francisco on Wednesday.According to Chanos, Tesla has been “leapfrogged” by most the other OEMs, making Tesla’s massive gigafactory it’s currently building in the Nevada desert “somewhat of a giant white elephant.”“This is a car company,” Chanos said.“This is not a high-technology company in that people forget that battery technology has been around a long time,” he continued. “It’s not subject to Moore’s Law. It’s basic chemical reactions.”Furthermore, he added that the battery technology Tesla uses is not proprietary, but rather belongs to Panasonic (PCRFY).“A lot of people are continually stunned to find that out.”...MORE
Chanos is being coy about the reasons for his shorts on SCTY and TSLA.
It comes down to fairly sophisticated cash flow and balance sheet analysis combined with an educated guess as to Tesla's ability to raise quite a bit of cash over the next six to eighteen months.
When he starts talking about the technology, he's mainly correct, but it's just the magician's misdirection to get the competition looking somewhere else rather than at the crux of the matter.
He's been doing this schtick for a while and he's a master of both the analysis and the 'hey look, shiny' explanation.
Here he is at CNBC yesterday addressing a slightly more knowledgeable audience:
Jim Chanos, Kynikos Associates Founder
CHANOS ON TESLA:
TO ME THE KEY IS NOT DELIVERIES. IT'S PRODUCTION. THAT'S THE REAL PROBLEM HERE IS GETTING GEARED UP FROM THE MODEL S AND MODEL X, WHICH ARE DOING ABOUT 100,000, A LITTLE LESS, UNITS A YEAR, TO WHAT THEY HOPE FOR IS AN INITIAL RUN RATE OF 500,000 OF THE MODEL THREE. THAT'S AN ENTIRELY DIFFERENT KETTLE OF FISH.
CHANOS ON SOLAR CITY-TESLA:
I'M JUST DUMBFOUNDED AGAIN THAT THE BOARD, AS I MENTIONED AT DELIVERING ALPHA, THAT THE BOARD WOULD WANT TO GO AHEAD WITH THIS DEAL, BUT YET REFUSE TO LEND MONEY TO SOLAR CITY OVER THE SUMMER ON A SENIOR BASIS. WHAT DOES THAT TELL YOU ABOUT THEIR VIEW OF THE RISK IF THE DEAL GOES THROUGH? THIS IS JUST COMPLETELY PERPLEXING THEY'RE GROWING INTO A BIZ THEY DONT NEED TO GO INTO, SOLAR CITY IS NOT A HIGH TECH COMPANY ITS A ROOFER AND A CONSUMER FINANCE COMPANY. AND YET THEY ARE GOING TO PRETTY MUCH DOUBLING THEIR CASH BURN BY TAKING THIS ON, IT MAKES NO SENSE OTHER THAN TO, WE BELIEVE, BAIL OUT THE INSIDERS.