Coyote Blog

It is hard not to be conflicted about Elon Musk.  On the good side, he is pursuing fabulous and exciting goals  - space travel, high speed transportation, cheap tunnels, ubiquitous electric cars.  Listening to Musk is like riding through Disney's various Tomorrowland visions.  As a consumer, I love him.

As a taxpayer, I am not so thrilled.  Many of his companies (SolarCity and Tesla in particular) seem designed primarily as magnets for government subsidies.

But it is his shareholders I really have to wonder about.  I can't remember anyone in my lifetime who was so good at serving his shareholders Spam and convincing them they were eating filet mignon from a Michelin three star restaurant.  He announces quarter after quarter of failed expectations and greater-than-expected losses and then stands on stage and spins out all new visions and his fan-boys bid the stock to new all-time highs -- in fact to market valuations higher than GM, Ford, Nissan, or Honda.  Tesla's debt priced in the last offering well above what it should have given its rating and risks.   I thought his purchase by Tesla of his near-bankrupt other company Solar City had no strategic logic and was borderline corrupt, but my brother-in-law who is arguably a more successful entrepreneur than I thought it was brilliant, an example of Musk playing chess when everyone else is playing checkers.

So last week Tesla announced a really bad third quarter.  They lost a lot more money than they said they would, and produced a lot fewer of their new Model 3 cars than they promised.  Their manufacturing operations are in disarray and they are burning cash like crazy, such that the billions of funding they just raised will get burned up in just a couple more months.

But Tesla needs to stay hot.  California is considering new vehicle subsidy laws that are hand-crafted to pour money mainly into Tesla's pocket.  Cash is burning fast, and Musk is going to have to go back to the capital markets again, likely before the end of the year.  So out came Musk yesterday to yell

Tesla's main current problem is that they cannot seem to get up to volume production of their main new offering, the Model 3.  The factory appears to be in disarray and out of production and inventory space.  They can't produce enough batteries yet for the cars they are already making.  So what does Musk do?  Announce two entirely new vehicle platforms for tiny niche markets.

A workhorse truck and a new super car are in the works for Tesla, after founder and CEO Elon Musk introduced his company's latest effort to widen the U.S. market for electric vehicles Thursday night. Musk called the Roadster "the fastest production car ever made, period."

Musk unveiled the Roadster toward the end of an event that was supposed to be all about Tesla's new Semi trucks. Taking a page from Apple and other tech companies in using showmanship to wow crowds, Musk surprised the crowd by announcing there was one more thing to add — and the new car rolled out of the truck's trailer.

After touting the utility and efficiency of what he called a game-changing truck, Musk welcomed the Roadster to cheers from those attending the event at the Hawthorne Municipal Airport near Los Angeles.

You have to hand it to Musk -- no other car company could get a good bump in their stock by displaying what essentially are two concept cars with infinitesimal revenue potential.  Expect Tesla to have a bond or stock offering out soon while everyone still has stars in their eyes from these new vehicles and before anyone can refocus on production and profitability issues.