No one can say that analyst Adam Jonas of Morgan Stanley did not really believe in Tesla. For years he has been one of the company's largest cheerleaders, an evangelist of his technology and an advocate of Elon Musk's vision for the auto industry.
But when Jonas phoned private Wall Street customers on Wednesday, there was little hope that the company would soon be back to the growth story he loved. Business Insider has received a copy of the call.
Jonas opened the call by telling two companies – one company that investors saw in the late fourth quarter of 2018 and another that they are seeing now. In the fourth quarter of 201
Now everything has changed. Here's how Jonas puts it.
"Today supply exceeds demand, they burn money, nobody cares about model Y, the company has capital close to lows, no strategic buy-in … It would have a strategic stake in the capital increase give someone the blackboard to provide some know-how … "
But there was none, Jonas complained. And now Tesla is not a growth story, "it's a desperate credit history."
The most basic problem is debt. Jonas still believes that Tesla's technology is unsurpassed. For example, he told the audience that he spoke to people all over the world about the company's autonomous driving technique, and experts say it's incredible.
"Does that mean the company is worth more than its debt, no," he said.
According to Jonas, Tesla holds gross debt of $ 8.4 billion and net debt of $ 13 billion after the first quarter. That's fine, if you grow, it's death if you are not. Jonas believes it is possible that Tesla could deliver only about 70,000 cars in the second quarter, which is equivalent to selling 250,000 cars for the year – 100,000 fewer cars than the company predicts.
That would send Tesla down, Jonas explained. And by 2020, the company would need massive capital injections or "look for strategic alternatives for the business."
The market already knows that. For one thing, the prices for insuring Tesla's debts are higher than ever. On the other hand, Morgan Stanley's industry specialist Mark van der Pluym was on duty, and he said that 3/4 of the Tesla shares he sold last week went to short sellers.
"It's the first time that I remember the mood in Tesla that matches the more general mood in the automotive sector," said van der Pluym.
The questions that followed Jonah's complaint centered around what Tesla might be saving.
- Could Tesla advertise to save itself? Jonas responded that the company already had an excellent brand awareness and that advertising was "a disturbing development".
- What about selling credit for electric vehicles to other automakers? Jonas believes that will only bring in around $ 100 million per quarter.
- What about price cuts to save the company? These levers have not been pulled, Jonas said.
- What about leasing? Jonas answered with the question of where Tesla would find the financial partner who is willing to put on the shortage of the company to information about the residual value of his cars.
- Update Model S and X? Would that help? "We will not have that call in December and say that the S / X update this year has really saved demand," Jonas said. "It has to be Model 3. That's the focus." He also said that the update would only mean a 50% drop in S / X sales to a 30% decline.
- What if Tesla could be bought by another technology company like Apple? Jonas does not see it either. He does not believe companies are willing to take the risk of buying an automaker that sometimes sets the cars on fire. "Maybe these big technology companies do not want to put up with that from the start … and they realize that the autonomous race is more like a marathon."
- What about the new China factory? Jonas said, "Could there be a worse time for China to sell robot cars?" He also noted that, apart from the trade tensions between the US and China, the Chinese car market is currently in a difficult position and it would take enormous efforts to achieve this Overcoming obstacles and "we do not think investors are willing to pay for it," said Jonas.
Jonas made it clear that this story is about debt, if someone could get Telsa's assets under control "Cut the company's workforce and get rid of the debt." "It's a tremendous value," he said.
But that does not help in a world that Jonas now fears is just not ready for electric vehicles.
"Perhaps retail customers are not ready to enter the segment, as Elon has thought.
Tesla did not immediately respond to Business Insider's request for comment.