By on November 14, 2014

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If you’re still waiting for your Model S to arrive in your driveway, you might not be too pleased to learn there could be 3,000 cars hiding in the back room, thanks to one man seeking knowledge about Tesla’s famed scarcity.

The Daily Kanban reports Merrill Lynch research analyst John Lovallo found that while the hype held up for the Model X — for obvious reasons — the same couldn’t be said for the Model S. Despite Tesla’s claim that they sold every car they had in Q3 2014 — even the ones in the showrooms — Lovallo saw a different story with the finished goods inventory. In short: Some 3,000 vehicles were either in transit or in a warehouse.

Merrill Lynch — who told its clients in its research note about Tesla that the automaker’s stock will remain labelled “underperform” for the foreseeable future — also noted that Tesla is facing difficulties in penetrating the Chinese market, “coupled with seemingly tepid European demand for the Model S.” Despite the Chinese government creating a separate pool for EV license plates, 70 percent of plate winners failed to cash-in by the end of last month, and even if everything worked out, lower-cost EVs like the Nissan-Venucia r30 and the 20-some models set to leave Volkswagen’s factories would hardly leave any money for a higher-end EV like those sold by Tesla.

The note concludes by pointing out that the automaker barely makes money from selling regulatory credits to other automakers, while not making a dime off of its vehicles, the latter an issue that “could ultimately prove to be the biggest risk for the company and the pure electric vehicle market at large.”

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126 Comments on “Merrill Lynch: Tesla Sitting On 3K Cars Despite Alleged Scarcity...”


  • avatar
    Detroit-X

    Tesla is just another expensive play toy for the rich, another random hobby for Elon Musk, and good for them. And ‘so what.’ I’d be more interested in media stories of company/human effort on how to make a very reliable, good performing car for $15k, with all the compromises involved, than how to make a Tesla at $100k, or stories on ‘what sneaky thing Tesla is doing.’ Tesla is the current automotive media ‘Kim Kardashian,’ and the automotive media way overestimates how much the world wants to know about it.

  • avatar
    Xeranar

    Well in transit is effectively sold if they don’t keep ‘lots’ and a warehouse after Q3 ended (you know…back in September) is a bit different from what was actually stated. I respect Merrill Lynch’s investment investigation but considering they’re publicly labeling it ‘underperforming’ they have some bias to present a case for it. I of course have a personal feeling on the matter so I recognize I’m a little more lenient on Tesla than the rest of B&B but I recognize a history of semi-truthful tellings from big firms like this. They have a history of painting their own counter images simply because they’re trying to game the system, Merrill Lynch in particular has been sued over it prior.

    So caveat emptor on this issue with Lynch, but feel free to blast away excitedly at Tesla.

  • avatar
    Vulpine

    Just because they’re, “In short: Some 3,000 vehicles were either in transit or in a warehouse,” doesn’t mean they are not sold. If they are in transit the odds are high they’re on their way to delivery and the rest are awaiting their train ride to wherever.

    Worse, this “analyst” doesn’t even consider the number of shops Tesla has been forced to close one way or another and litigation PREVENTING delivery of who knows how many cars.

    In other words, the odds are just as high that they simply are unable to deliver a portion of these rather than sitting on them to manufacture a shortage.

  • avatar
    Lie2me

    “If you’re still waiting for your Model S to arrive in your driveway, you might not be too pleased…”

    Aw, shucks and here I wait everyday for the UPS guy to bring me my new Tesla

    Tesla is losing it’s novelty, what a surprise

  • avatar
    Keef Wivanef

    That’s nothing…wait until the GREAT BATTERY SWAP SWINDLE and ZEV Credits Scandal is revealed.

    Google this “Tesla keeps ZEV scam alive…by building a fake swap station!”

  • avatar
    jaydez

    I fail to see where the problem with the inventory is. There was an article last week thought with all the car blog I read I forget where it was. The article was about how Tesla doesn’t report their sales on a monthly basis. The reason for this is because the way their cars are built and shipped to the US one month they may register 300 sales but the next they will see 2000 when they are delivered.

    The other reason for this is they are trying to build an inventory for when they can finally sell in China and other countries. These cars are also, for the most part, built to order. That takes time.

    • 0 avatar
      Detroit-X

      Yes. I agree a 100% possibility. Or alternatively, projected sales are dropping off.

      Just imagine if you were the 99th rich dude at a party looking over Hollywood to say: “Yo Todd! Put down that drink and let’s go drive my new Tesla on Mulholland!” People would stare at you. Stare… like at Kim Kardashian’s butt.

    • 0 avatar
      cronus

      I agree, it’s not hard to have a couple thousand cars in transit to Europe and Asia. One week to get from California to an east cost port, two weeks crossing the Atlantic, one or two weeks for customs, shipping out of port, and delivery. Right there you have more then a months worth of inventory in transit to Europe, that’s maybe 1000 cars. Asia would take longer but they have fewer sales so maybe another 1000. Add in US deliveries and inventory being batched at the plant and there are no “warehouses full of cars” to be found.

  • avatar
    BMWnut

    Thousands of brand new cars stashed in warehouses – that sounds like the plot from a TV drama. Make the leading character a down-on-his-luck private eye. Have him scale a fence, pick a lock and take pictures of a bunch of cars in a huge shed, located in a seedy part of an unnamed city. For comic relief, have a bunch of dogs chase him when he leaves the warehouse. For extra drama there can be a car chase when he tries to evade the corporate thugs with his precious pictures.

  • avatar
    GoFaster58

    I know if I was waiting on a Tesla and found out 3000 cars are sitting in warehouses I’d be pretty upset. If Tesla is building a $100,000 vehicle and not making a dime off of them they won’t be in business long. Besides, it’s just a rich toy anyway. They are butt ugly!

    • 0 avatar
      stuki

      If you’ve got the government covering your back, you can make millions of underwater home loans; not making a dime on any of them. At least as long as there others out there to rob on your behalf. Just part of life in Dystopia…..

  • avatar
    DeadWeight

    I grow more convinced with each passing day that the only thing keeping Tesla afloat is another crack-up (debt based) bubble of the last 5 years.

    And that’s even in consideration of the fact Tesla makes a real product, but that Texas’s main revenue stream comes from selling what are essentially carbon credits.

    • 0 avatar
      Weapon

      Carbon credits only accounts for 1% of Tesla’s revenue. Tesla makes most of their money selling cars.

      • 0 avatar
        DeadWeight

        “Tesla LOSES most of their money selling cars.”

        Fixed.

        (Because Tesla has yet to turn an actual profit selling its vehicles).

        • 0 avatar
          Weapon

          No, Tesla makes money making cars. In Q2 they has 26.9% gross profit margin on MAKING CARS.

          They then take that money and reinvest it into growth and R&D. Tesla is the largest investor in R&D as % of revenue in the auto industry.

          • 0 avatar
            Pch101

            This is actually amusing.

            Tesla can’t afford to spend enough on R&D. Not only does the company keep delaying the new models, but there is no sign that anything is being invested in the next version of the Model S.

            With the long lead times in automotive development, R&D for the next Model S should have started some time ago, yet there is no indication that it has. R&D is what kills low-volume automakers, and Tesla has to juggle its cash to be able to support it.

            Ignoring the SG&A is also foolish. Of course Tesla has high gross margins — it sells cars at retail instead of at invoice. But it then loses the money below the line with high SG&A; selling the cars is not free.

          • 0 avatar
            mcs

            >> With the long lead times in automotive development, R&D for the next Model S should have started some time ago, yet there is no indication that it has

            Most of the R&D effort is going to be performed by their suppliers. The battery chemistry is Panasonic, updates to the motor(s) by whatever supplier they’re using, throw in some styling and safety updates and they’re good to go.

            An EV isn’t going to require the same amount of development effort as an ICE car. ICE power plant development is more complex (turbos, direct injection), transmissions are more complex, emissions testing, fuel consumption testing. How much time does it take just to get one of those double digit speed transmissions to figure out what gear it should be in?

          • 0 avatar
            Pch101

            R&D is needed to just to keep the product up to date and competitive. The motor is only one aspect of it.

            Tesla is not immune from the need to make styling updates, to improve NVH or to make all of the other incremental improvements that car buyers expect. You can keep making excuses for them if you want, but a stale product is a stale product.

          • 0 avatar
            Vulpine

            It has to become a “stale product” first, Pch. And so far the Tesla is far from stale. People are still ordering them faster than they can be built.

          • 0 avatar
            Lie2me

            Oh, now you did it…

          • 0 avatar
            Pch101

            He’s making a genuine effort to make BAFO look smart in comparison.

          • 0 avatar
            petezeiss

            Foghorn Leghorn and Barnyard Dawg. Over and over and….

          • 0 avatar
            Lie2me

            “He’s making a genuine effort to make BAFO look smart in comparison.”

            … no easy task

          • 0 avatar
            Vulpine

            Just remember, while Dawg was always at the wrong end of the stick, he always got the last laugh.

          • 0 avatar
            petezeiss

            I am the canonical authority on Foghorn Leghorn and I’m telling you: No, he didn’t.

          • 0 avatar
            Lie2me

            How do you write a Dawg snicker?

            Sneh, heh, heh, heh

          • 0 avatar
            Weapon

            @pch101 – Did you miss the fact that Tesla upped their R&D budget? And did you somehow miss the mid cycle refresh of the Model S with the D upgrade?

            Tesla sells all cars at invoice, not retail. The SG&A is not what takes it below the line, it is the increases in R&D spending.

            Tesla is profitable at making and selling cars. But they spend all their profit on R&D and on growth.

          • 0 avatar
            Pch101

            Increasing the R&D budget and having an adequate R&D budget are two entirely different things. Having a budget that is less inadequate still means that it is inadequate.

            “Tesla sells all cars at invoice, not retail. The SG&A is not what takes it below the line”

            That’s simply false. You fanboys have a lot to learn.

          • 0 avatar
            Weapon

            @pch101 – Tesla’s R&D budget as % of revenue is the highest in the auto industry. About 16% of revenue last quarter. Tesla is spending right now at a rate of half a billion per year on R&D. That is more than adequate.

            And oh please, keep spreading your auto dealer fud, no one is going to buy your BS.

          • 0 avatar
            Pch101

            “Tesla’s R&D budget as % of revenue is the highest in the auto industry.”

            Tesla has virtually no revenue compared to other automakers, which makes that a ridiculous comparison.

            The percentages are irrelevant. What matters is whether the company has enough money to fund its projects timely. Given all of the delays and the lack of development for the next Model S, the answer to that is apparently “no.”

          • 0 avatar
            Vulpine

            All of WHAT delays, Pch? You mean the delay of the Model X to make sure it is as perfect as they can make it? Or maybe you are talking about the slight slow-down in production as they upgraded their assembly lines to handle more than twice the capacity.

            As for development, what do you mean by “lack of development for the next Model S”? You do realize they’ve just upped the usable range by another 10% or so PLUS giving it all-wheel drive and some very sophisticated automation.

            I certainly don’t see any lacks in either of those two areas. I see them as significantly more advanced than any other car in their general class.

          • 0 avatar
            Weapon

            @pch101 – You are talking nonsense and have no clue what you are talking about. Half a billion dollars per year in R&D is quite a bit and will probably double next year with their revenue doubling, on top of that Tesla can do things more efficiently than other automakers due to centralized structure and EV drivetrain.

            Tesla does not work like other auto companies, they make improvements as they go along. The Tesla D is a major upgrade to the Model S platform. So as you can see they have plenty of funding and development working on improving the Tesla Model S platform. As Tesla continues to improve upon it. So again you prove how ignorant you are on the issue.

            The only delays have been to the Model X but the reason for the delay was to improve on it and iron it out. Since the Model X is their 2nd mass produced car, people are going to have higher expectations which Tesla wants to surpass. But that has nothing to do with money, but a matter of TIME to get things ironed out. On top of that, Tesla had overwhelming demand on the Model S and lack of battery supply through 2013 – 2014. Those were limited by Panasonic’s ability to expand fast enough and beyond Tesla’s control. They will have more control of it with the introduction of the gigafactory.

  • avatar
    danio3834

    I can’t wait for the Tesla fanboys to show up and proclaim that Merrill Lynch is wrong.

    • 0 avatar
      Lie2me

      Vulpine should be along soon…

      …and Pch to b*tchslap him

    • 0 avatar
      hubcap

      “I can’t wait for the Tesla fanboys to show up and proclaim that Merrill Lynch is wrong.”

      I don’t know whose right or wrong. But it seems you’re saying Merrill Lynch is right. I’m curious. What’s that based on?

    • 0 avatar
      Pch101

      Uh oh.

      I didn’t read the original source because I don’t want to give that other guy a click. But I did glance at the 10Q’s, and I would have to say that the Merrill analyst is wrong.

      Total inventory was higher at the end of Q3 than it was at the end of Q2.* But finished goods was lower from $250M to $226M.

      What really leaped was raw materials. That would suggest that there may have been some sort of production shortfall during Q3 and/or there is a planned boost in production. As it turns out, both of those things are true.

      I see issues with Tesla, but channel stuffing isn’t one of them. (God forgive me for giving information for Vulpine to abuse.)
      __________

      *Inventory consists of the sum total of finished goods, raw materials, work in process and service parts. So total inventory doesn’t just include completed cars.

      • 0 avatar
        DeeDub

        I would guess that the jump in raw materials is related to the beginning of Model X production, not a jump in Model S production.

        • 0 avatar
          Vulpine

          As Pch pointed out ahead of you, DeeDub, Tesla had a planned reduction in production capacity in the third quarter to modify the plant in preparation for an over 100% increase in capacity over the next few months. Much of this increase will be taken up by the Model X when its assembly line starts up, but some of it is intended for an increase in Model S production as well.

  • avatar

    It will be interesting to see how this plays out. I like the Tesla but I always thought it was a small market. I think they can keep selling them but not at the volume the have managed over the last 18 months or so. The also need new models to get more people in the showrooms and to give current owners something to trade up too.

  • avatar
    Fred

    I have allways had a problem with the way Mr Musk does business. He reports a profit here, then to someone else he say it’s a loss. He says there is a shortage of cars but is there. Then there is his Hollywood lifestyle, all of which adds up to a suspicious man. I might buy his cars but never would I invest in his business.

  • avatar
    Master Baiter

    Tesla and SpaceX are merely front operations.

    MI6 has determined that Musk is the new head of SPECTRE.

  • avatar
    APaGttH

    Market forces are pushing hard on Tesla.

    This is avehicle for the top two percent, the market is narrow.

    Apparently if you’re in the top two percent in Seattle this is the car to own. They are EVERYWHERE here. Which points to me a saturating market. There are only so many people that will buy one, and these early adopters tend to chase the next bright shiny object.

    Did you see Bob’s new car in Building 42? He got a S-Class…

    • 0 avatar
      DeeDub

      Yes but they’ve only filled half of each 2 percenter’s garage. The Model X will be the car of choice for every Mrs. Twopercent in the country next year.

    • 0 avatar
      Xeranar

      Base price is 69,900.

      X5 – 53,200
      GL – 63,600
      A8 – 77,400

      So the top-2 percent? Give me a break, Tesla is squarely in the upper-end of the luxury pool but no where near 2% territory.

      • 0 avatar
        28-Cars-Later

        All of those cars are well outside the reach of normal people, leasing does not mean you can afford to own it.

        • 0 avatar
          Xeranar

          Today, right now, I could buy a Tesla on a 3-year loan if I really wanted to. It would be stretching my budget but it wouldn’t be wholly out of my reach. It’s more like a car for the top-30% of incomes, not the top-2%. I merely pointed out that Tesla is playing in the same field that sells atleast 200K+ units a year in the US. There is serious room to grow up there never mind that they’re working on a crossover which will get more of those upper-third sales.

          • 0 avatar
            Lie2me

            Can I go with and help you pick out the color?

          • 0 avatar
            Xeranar

            Sure, I have to say I never want to own a white or silver car though. I prefer Jaguar Grey that is near impossible to get on modern cars. But I would be satisfied with a blue or green perhaps…

  • avatar
    Ron

    Merrill Lynch is making a mountain out of a molehill.

    Per generally accepted accounting principles, GM counts a car as a sale, and removes it from its finished goods inventory, when “the rubber leaves the road” (i.e., when it is loaded on to a carrier). Because Tesla does not have independent dealers, it counts a car as a sale when a contract is signed. This is required by law and is a more conservative way of reporting sales.

    Having 3,000 vehicles in transit or in dealer inventory is no big deal.

    • 0 avatar
      MarkySparky

      Shhh, you’re interrupting the anti-Tesla circlejerk…

    • 0 avatar
      krhodes1

      Tesla’s method is not more conservative. Tesla has to report sales that way because, as you rightly point out, they have no dealers. The dealers are GM’s customer, not the end buyer of the car, so GM sells a car when the *dealer* buys it.

      Relative to their sales, 3000 cars is a lot of cars. That would be like GM having 1M cars sitting around unsold, while telling people their cars are scarce.

      The more interesting points to me are that they still lose money on the cars, and are still making it up somewhat selling credits. And that they are making little headway in China and Europe.

      Does anyone know what speed Tesla actually uses for their range estimates? I assume it is not the 120 or 130mph that they are capable of.

      • 0 avatar
        Pch101

        “Relative to their sales, 3000 cars is a lot of cars.”

        No, that’s about five weeks worth of inventory. Automakers usually carry more than that.

        • 0 avatar

          From cursory reading(esp the WSJ flap) it appears Tesla counts a car as sold when a customer orders one and puts down his/her deposit.
          If I’m right on this-and I won’t be offended if I’m completely wrong:)-the 3,000 cars in “stock” are ones produced,sold and waiting for final delivery to their buyers.
          Thus everybody’s got a touch of the elephant-Tesla counts the car as sold when it’s ordered,there are thousands built in transit/storage per ML but they’re already assigned and customers are still waiting for “their” car to be built and told it will be a while.

          • 0 avatar
            Pch101

            Tesla reports “deliveries,” which are the number of units delivered to the end user. Every automaker does that, except Tesla doesn’t provide that data monthly, and it doesn’t break out US deliveries from international.

      • 0 avatar
        MarkySparky

        I assume the range is calculated from a mixed cycle of driving, similar to the calculation of MPGe. I am not aware of any consumer automobile that has a reported range of the vehicle at top speed. Maybe that is appropriate for a Formula 1 car or Top Fuel dragster… My car reports an “instant mpg” of <5 when I merge onto the freeway.

        • 0 avatar
          krhodes1

          I assume the same as you.

          But I would love to know what that cycle looks like. How far can a Tesla actually go at 70mph average on a strictly highway run? How far at 105mph average (with a good bit of time at 130)? I know both of those figures for my car, but it is a LOT more critical for a car that takes the best part of an hour to “refuel”, under the best circumstances, at limited locations.

      • 0 avatar
        Xeranar

        This is a serious misnomer because regardless of the distribution network the dealership has a buyback agreement along with a complex contract that makes them effectively middle-men, so while they may ‘own’ the car in a relative sense they are by no means on the hook if they can’t get rid of it as GM still effectively has to take it back or offer a discount at some point to unload it.

        If car makers really did just push cars out to dealers with no repercussions we would have far fewer dealers and no-debt automakers. Well…ok, we would be working in a Tesla direct-sale model if it actually worked like that.

      • 0 avatar
        Weapon

        3000 cars is not a lot of cars relative to their sales. Tesla in Q4 is planning on selling over 13,000 cars. 3,000 cars being in transit to China, Australia, Japan, and Europe is not exactly surprising.

        To compare to GM is silly because GM having 1 million cars sitting unsold would still count as sales. As they sell the cars to the dealers.

        Actually, GM probably has over 1 million cars unsold. Add up all the cars on the dealer lot.

        Tesla makes cars on demand, so all the cars are already presold. Just in transit.

        Their range estimates are based on EPA range (law requires them to quote EPA range). The new 5 cycle EPA range test is based on 65mph.

        Tesla actually makes money on every car they make, and they are not making it up selling credits. The credit market has pretty much dried up.

        Tesla is also making good headway in China and Europe. In Norway Tesla hit the record for #1 cars sold in 1 month in Norway history of any car maker (gas or electric).

      • 0 avatar
        Pch101

        (wrong place)

  • avatar
    Rod Panhard

    If the Merrill Lynch analyst is even 50 percent wrong, meaning that Tesla has only 1500 cars stuck in storage, this is still a bad thing. The whole point of Tesla is “We’re not going to turn the automobile business on its head.” Warehousing cars is not really any different than channel stuffing, except that you don’t have the dealers taking up your slack and putting the product on their books.

    There’s a lot wrong with Tesla’s statement. The Chinese are used to product shortages. People who spend six figures on a car want it exactly how they want it. The whole point of Supply Chain Management in the 21st Century is to conserve capital by reducing inventories, and the costs of inventory (warehousing, damage in storage, keeping inventory from being stolen, etc.)

    But hey, like somebody said, I can’t wait until the Musk fanboys show up. I hope they all get a chance to blow him before his halo tarnishes.

    • 0 avatar
      Pch101

      Unless the buyers are standing with bags full of money at the end of the production line waiting for their cars to roll up on the factory floor, there will always be a delay between the creation of finished inventory and its delivery. That inventory will sit on the balance sheet until keys are swapped for money.

      Tesla has its issues, but this is not one of them.

      • 0 avatar
        krhodes1

        @PCH101

        Not necessarily true. Maybe BMW runs things differently from every other car company on the planet, but pretty much every BMW is bought and paid for by *someone* before it is built. That someone could be me, some random European ordering a car, or it could be a dealership ordering cars for stock, but BMW doesn’t build the car until they get paid. In the case of US orders, you sign the papers and pay for the car about 2 weeks before the scheduled start of production, which is when the VIN is assigned.

        My previous understanding was that Tesla was producing cars using a similar model.

        • 0 avatar
          Pch101

          Go look up “revenue recognition.” It isn’t what you think it is.

          When the customer puts down a deposit, it goes onto the balance sheet. That isn’t revenue and it isn’t a delivery.

          When the car is delivered, then the purchase price is recognized as revenue and the deposit is converted into “cash” and becomes part of the stream that is recognized as revenue.

          This is standard accounting. Go read the 10-K or 10-Q if you’re interested.

    • 0 avatar
      Xeranar

      Or you know, Merrill Lynch may just be lying as they’ve done in the past to support their own prognostications. As others have stated that 3000 cars is unlikely to be ‘unsold’ but actually waiting transit or atleast booked for sales. Even if it was ‘unsold’ stock that isn’t a great deal of it looking at their year-to-year numbers.

      But again, B&B anti-tesla fanaticism continues to march on without a clue of what is actually going on.

      • 0 avatar
        Lie2me

        If you have first hand knowledge please share it with us. The whole Tesla thing gets a little testy because there are a lot of investors here and they get a little nervous when something is askew. Elon sneezes and the stock drops 10%

        • 0 avatar
          Pch101

          As I pointed out, the finished inventory declined from Q2 to Q3. What increased were raw materials and work in process, not finished inventory.

          So the entire premise of the claim is wrong. I didn’t read the original article, but I presume that BS wrote the original story and that he got it wrong — he has a channel stuffing fetish (even though he doesn’t quite understand what it is) and has gotten this kind of thing wrong in the past.

    • 0 avatar
      Weapon

      Tesla has 0 cars in storage. Merill Lynch is playing a deflection game. Effectively they are saying 3000 cars are in transit and in storage. But in reality, 0 cars are in storage and 3000 are in transit.

      Tesla custom builds cars. They only build the car when a person already bought it.

    • 0 avatar
      WheelMcCoy

      This story is nothing new. Recent headlines rate Tesla as a junk bond. Most financial analysts grade Tesla stock as under-perform and high risk.

      Those who buy Tesla stock are in it for the thrill of speculation or are firm believers that electric cars are the future or just want to support something green. Add to that these same analysts didn’t see the 2008 recession coming, and taking a chance on Tesla doesn’t seem all that crazy.

      The cynic in me thinks Merrill Lynch is repackaging and publishing this news to punish Tesla for not playing the Wall St. game — that is, report monthly sales.

      P.S. — Tesla stock is up 6.98 points today.

      • 0 avatar
        Pch101

        This inventory story is wrong. But the company still generates losses, the debt is rated as junk (and deservedly so), and there are reasons to be skeptical about it.

        • 0 avatar
          WheelMcCoy

          >> This inventory story is wrong

          Thanks. It did sound fishy to me.

          Just to remind readers, “junk” in the financial world does not mean worthless. Junk bonds are a useful tool with a high risk high reward ratio.

          Yes, Tesla has problems to solve. But I think Musk can make electric cars viable.

      • 0 avatar
        highdesertcat

        WheelMcCoy, “Those who buy Tesla stock are in it for the thrill of speculation or are firm believers that electric cars are the future or just want to support something green.”

        Had a chance to talk to a Tesla owner this past June at the Overland Park Convention Center in Kansas. He loves his and he’s not a green weenie. He does a lot of work for the oil and coal industry, making TV ads.

        He owns a hi-tech video production and ad agency in the area. Makes commercials for TV and does infomercials for big name clients.

        He told me the Tesla was his “Toy” to scoot around in, but he never goes far in it. Just around the city, and to/from home in Missouri. Plugs it in when he’s at the office – never at home.

        For social appearances with his wife he arrives in a Mercedes-Benz E-class. The day I met him, they both arrived separately in their respective cars and parked next to us. Turns out, his wife and my wife know each other from the real estate business. Small world.

        • 0 avatar
          WheelMcCoy

          @highdesertcat

          I agree, Tesla owners are very different from Leaf owners. There is a tongue-in-cheek article somewhere on the internet that describes the personalities of each. What stuck in my mind was while a Leaf owner would hug a tree, a Tesla owner would hug a lap-dancer. :)

          • 0 avatar
            highdesertcat

            WheelMcCoy, my brother in Manhattan, NYC, owned a Leaf at one time, but he’s no tree-hugger. Very married with a possessive wife so hugging lap-dancers is also out.

            What I found comical about him owning a Leaf in NYC was that he also owned an F150 and a Camry, and had to pay extra for a parking space in his high-rise that had a 110v outlet so he could charge the Leaf overnight.

            But the Leaf never fully charged up overnight. They sold the Leaf and now live happily ever after without it.

      • 0 avatar
        Weapon

        Tesla was rated junk bond rating long ago. It is not recent by the S&P. But the rating was an unsolicited rating. (Which is S&Ps way of saying, give us bribe money). The S&P is a joke, they are the guys who rated AIG and Lehman Brothers with the highest AAA rating prior to bankruptcy.

        As far as stock goes though, most rate as buy. No one rates risk.

        http://www.nasdaq.com/symbol/tsla/recommendations

        5 say strong buy
        3 say buy
        4 say hold
        1 say underperform
        0 say sell

        But yes, Merill Lynch is upset their predictions are wrong and they tried to punish Tesla for their wrong predictions.

        Forbes already called them out on their BS.

        http://www.forbes.com/sites/markrogowsky/2014/11/14/merrill-vs-musk-taking-apart-the-brokerages-takedown-of-tesla/

        • 0 avatar
          Pch101

          The junk rating was appropriate. It’s a company that generates losses, lacks scale and breadth, and faces uncertain demand. It would have been malpractice to rate it anything but junk.

          Of course the rating was unsolicited: Tesla didn’t float rated bonds because it knew that the bonds would be rated junk if they had.

          It seems that you’ve just regurgitated Tesla’s press release on the subject. You make the very same points that Tesla wants emphasized, and ignore everything that it doesn’t. This is what one would call being a shill.

        • 0 avatar
          WheelMcCoy

          @weapon – “Tesla was rated junk bond rating long ago.”

          Long ago was sometime in May this year. I’m bordering on geezer, so time-wise, that’s recent. If you are young, then 7 months could be considered a long time.

          That said, I must remind readers that “junk” in the financial world does not mean garbage. Junk bonds are a useful tool that carries a high risk high reward ratio.

          Supporting @Pch101, Charles Schwab recently (11/07/2014) gave Tesla an overall D:

          Fundamentals: D
          Valuation: F
          Momentum: C
          Risk: C

          But sometimes, it’s better to ignore analysts. Microsoft’s IPO in the mid 1980s was around $16 and analysts thought it would max out at $35. Based on the hard numbers available, that was a reasonable conclusion. But hard numbers do not capture the whole picture, and the rest is history. I think Marvel got dissed similarly when the primary heroes — Spiderman, Iron Man, X-Men — made their movies and all that was left was secondary characters. But Thor, Hulk, The Avengers. Captain America did fine.

          I think Tesla has a place in history and Elon Musk is capable enough to make electric cars viable. Yes, there are problems to be solved. I don’t recommend betting the farm on anything, but a small amount of Tesla stock in one’s portfolio would spice it up. Disclosure: I am an investor.

          • 0 avatar
            Weapon

            When talking about headlines and news. 7 months is a long time ago. Especially a car company like Tesla which grows rapidly.

            Charles Schwab is not the only rating firm though.

            FBN securities – 11/9 – BUY
            MLV & co – 11/7 – BUY
            Deutsche Bank – 11/6 – BUY
            Goldman Sachs – 11/6 – Neutral
            JP Morgan – 11/6 – Neutral
            Robers W Baird – 11/6 – outperform
            Dougherty & company – 11/6 – BUY
            Morningstar – 11/6 – hold
            Northland Securities – 11/6 – outperform
            Barclays – 11/6 – equalweight
            Credit Suisse – 11/5 – outperform
            Pacific Crest – 11/5 – outperform

            Consensus Rating
            Buy: 56.5%
            Hold: 34.8%
            Sell: 8.7%

            Though I don’t disagree that innovation and disruptors are hard to measure.

  • avatar
    HerrKaLeun

    Is there any evidence? This article didn’t provide any….

    And Tesla is secretly hidin these cars in order to not get the money and in addition pays for storage and has to bribe a lot of people to keep quiet? Whete do you hide 3K cars without anyone noticing?

    This sounds like the 911-inside job stories, but with even less “evidence”.

    Some investigation and fact checking would be appreciated. I can repeat someone else’s rumor myself.

    • 0 avatar
      highdesertcat

      Way back in the ’70’s I visited the BMW factory in Munich while stationed in Germany with the US Air Force. They had hundreds of brand new cars on the factory lots, as far as I could see!

      When I asked the tour guide about them, she said, “Those are for export.”

      • 0 avatar
        krhodes1

        Not surprising, given BMW exported the majority of their production back then. Probably still do – I’m pretty sure even the US factory exports more than half of its production.

        • 0 avatar
          highdesertcat

          krhodes1, never owned a new BMW, but the used ones I did manage to pick up from GIs around my area were pretty nifty, among them a 1982 2-door 320i with the five-speed stick. Hauled @ss! Handled tight.

          Had no problem selling them for a handsome profit to some sucker after doing only minor work on the BMW cars, like new tires, steam clean the engine, Nu-Finish the paint job, etc.

          During a trip to Gotheborg, Sweden, where a buddy of mine went to pick up his new Volvo 262, he and I noticed the same glut of Volvo cars there, apparently for export as well.

    • 0 avatar
      Xeranar

      The short answer is ML found some paperwork from Tesla that suggests on paper there are 3K cars floating around out there that are ‘in transit or warehoused’ which doesn’t mean anything for their position on being sold or not.

      The simplest answer is ML is talking out of their rear as per the norm, they have an underachieving rating and they’ve been sued previously for lying to customers on their information reports. It wouldn’t be the first them they were wrong and simply claimed ignorance to avoid facing looking foolish.

      • 0 avatar
        HerrKaLeun

        ML, the people that brought us the financial crash….

        I don’t know Tesla factory throughput. but normal car factories produce several hundred cars a day and between transport, daily storage, waiting at dealer etc. 3K cars isnt really much.

        shame on ML for that BS without any fact. shame on someone else for just repeating this story without any research or providing any more facts.

  • avatar
    Silverbird

    I’m curious how they treat the Cars that are heading for the European final assembly shop. If sales are strong in Europe, that could cause an increase in inventory, due to transit time across the US and then the Atlantic.

  • avatar
    NN

    isn’t it possible that those 3k cars could be waiting to be loaded onto a ship for export (they don’t do that one car at a time, folks)? Most of what I’ve read has indicated that the Chinese problem is that they haven’t gotten enough cars over there yet.

    • 0 avatar
      bimmermax

      Depends on where the cars are physically. If they are in a warehouse in Long Beach, then they may be awaiting shipment.
      I think the auto analysts are Merril Lynch are smart enough to know that.
      It does sound like demand for Tesla’s is dropping off.
      Given that Tesla is yet to make a dime, this is disturbing.

    • 0 avatar
      05lgt

      How would a freighter worth of S’s headed to China look in this analysis? It’s a B$ number with no supporting information to relate it to. If it’s more than normal for Tesla but there’s a big shipment in transit to fulfil those mentioned Chinese orders, or if it’s a normal number for the current sales rate, or a disasterous overproduction… It’s all left to the readers imagination. ML would be burning my trust with this B$, but there’s nothing left to burn.

  • avatar
    nickoo

    I’m short tsla so good hit piece. In reality its probably a non story. I just don’t think Tesla is that great as a business right now. The car is awesome when compared to other electric cars on the market, compared to conventional cars, there are a lot of downsides, namely price point. The model 3 probably won’t get here until 2019, that’s a long time to try to hold on when competitors are about to hit back in a big way. Voltec in a real full sized luxury mobile will be very bad news, so will next gen leaf, sonic ev, etc.

    • 0 avatar
      DeadWeight

      Don’t forget that China has an electric car/vehicle industry that they will do anything to protect at all costs (BYD is one), that this is one way they hope to curtail serious air pollution at a future date (though they need to use a cleaner source than coal burning plants to generate electricity to do so).

    • 0 avatar
      mcs

      >> Voltec in a real full sized luxury mobile will be very bad news,

      Voltec is a PHEV architecture and if you look at EV sales numbers, that’s not what EV buyers are purchasing. 1,439 Volts vs. 2,589 Leafs in Oct 14 for example. If pure EV range increases and the number of Level 3 DC chargers keeps increasing, there will be even less people that will want to haul around a lump of metal they don’t need.

      The biggest threat to Tesla would be something like a large full electric Infiniti or if BMW adds a luxury sedan to it’s i Series.

      Working in Teslas favor are some of Nissans dysfunctional dealers (doing stupid crap like displaying used ICE cars in charging spaces and ICEing their own customers) and BMW and GM’s adoption of the almost non-existant SAE DC fast charging standard – the betamax of DC fast chargers.

  • avatar
    Weapon

    Forbes has already proven Merrill Lynch is wrong:

    http://www.forbes.com/sites/markrogowsky/2014/11/14/merrill-vs-musk-taking-apart-the-brokerages-takedown-of-tesla/

  • avatar
    AJ

    A mall in my town has a Tesla store setup. I walked in recently and was looking at a large picture on a wall of the drivetrain, as I thought it was interesting. A salesman walked up to me and asked if I was an engineer, which I’m not I replied.

    He told me that the only people that pay attention to that picture are engineers, which I thought was strange being that it’s the technology that makes the car interesting, at least to me.


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