Kynikos Associates founder and legendary short seller Jim Chanos has highlighted the disparity between the public perception and actual performance of Tesla Inc. TSLA.
What Happened: In an interview with the Institute for New Economic Thinking, Chanos pointed out a common misbelief held by many Tesla admirers. He said the electric vehicle giant is seen as a multi-faceted entity — an AI firm, an alternative energy business, and a robotics organization.
This image, Chanos argues, is a result of Elon Musk’s compelling portrayal of Tesla as a future-focused company.
However, Chanos maintains that a closer look at the company’s performance indicators reveals Tesla to be fundamentally an automaker with typical automotive industry returns and margins.
He went on to highlight the challenge of aligning the operation of a real global automobile company with the excitement generated by futuristic ventures such as Mars colonization or the creation of household robots.
“It’s better than we thought it would be six or seven years ago, but it’s a car company. Yet in the stock market, it’s the hopes-and-dreams company. If you talk to Tesla fans who own the stock, they’ll tell you it’s not a car company, but an AI company, an alternative energy company, a robotics company. Take your pick. Musk had been very successful in selling the image as a futurist, right?” he said, adding, “But when you look at the actual numbers, which is what we do, it’s a car company. His margins are car company margins, his returns are car company returns.”
“That’s the dichotomy: the challenge of running a real global auto company vs. the hype of going to Mars or selling you a robot to do your household chores,” Chanos stated.
The green credentials of Tesla’s vehicles were also under Chanos’s scrutiny. He observed that many customers are drawn to the Tesla brand, not necessarily to the concept of an electric vehicle, a trend reflected in the changing electric strategies of GM and Ford.
Regarding labor costs, Chanos observed that although Tesla’s workforce earns roughly half of what UAW workers do, the company’s labor cost per vehicle isn’t significantly different due to Tesla’s lower automation levels.
Why It Matters: Chanos has been vocal about his skepticism towards Tesla.
In September earlier this year, Chanos said that Tesla stock is “ridiculously overvalued” and criticized the company’s shifting narrative. He pointed out that Tesla’s story keeps changing every few months, with new themes ranging from batteries to robo-taxis and now AI.
In another instance, Chanos downplayed Musk’s enthusiasm over Tesla Cybertruck’s bulletproof testing results, saying, “I think you might have to worry about the summer sun on stainless steel before automatic weapons fire.”
This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
Image created with artificial intelligence on MidJourney and Jonathan Weiss on Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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