A Rebuttal of Montana Skeptic's Autoline AAH #503 Tesla Misinformation Campaign

Introduction

Yesterday, Autoline released its weekly After Hours show, and they had a special guest, Montana Skeptic, whom I'm going to call Mr. Montana, and who spreads misinformation about Tesla on Twitter, and now apparently also through TV shows.

In this blog I will lay out why Mr. Montana doesn't know what he's talking about when it comes to Tesla, and why people would be wise to ignore the misinformation he is spreading. I've done so by quoting his anti-Tesla arguments from the interview, and breaking down in detail what's what with the help of facts and data.

The full interview

Subsidies (8:50-10:12)

"It's heavily dependent on subsidies. If you add up all the subsidies Tesla has received, directly and indirectly, including the indirect ones, federal income tax credits, ZEV credits, regulatory credits, regulatory payments made by others, the $960M New York spent on its factory, the $1.3B that Nevada offered in its subsidy package, the tax abatements it received in California, that it continues to receive in Nevada, the rebates that various states offer... or tax credits for state income tax offered to buyers of Tesla cars, you're north of probably $7B. And that doesn't even count the hidden tax on people who buy ICE cars, because they have to pay more for their car, because the regulatory credits are flowing to Tesla. So you say, with all of that have they made money? The answer is no, they've lost more than $6B. I don't see how this company can ever be profitable without subsidies. It certainly hasn't been with subsidies, the federal income tax credits going away here."

So in essence Mr. Montana's argument is that Tesla receives these subsidies:

1. Indirect subsidies given to buyers in the form of the US federal subsidy, US state subsidies, etc.
2. ZEV credits, regulatory credits, and monetary payments for selling these credits.
3. Tax benefits and abatements for factories.

And that Tesla's financials will suffer when these things go away. Let's tackle these one by one, starting with the US federal tax credits.

Here are the US midsize premium market's sales numbers for 2019 taken from goodcarbarcar.net.

Model	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Acura RLX	119	127	135	151	91	50	42	38	46	68	80	72
Audi A6	1,889	1,506	1,963	1,374	1,427	1,743	1,246	1,247	770	1,252	1,264	2,126
Audi A7	620	474	672	441	526	409	289	331	199	294	246	454
BMW 5-Series	3,679	2,976	3,690	2,857	3,242	6,259	2,521	2,534	2,606	2,837	2,775	2,733
Cadillac CT6	720	691	777	605	698	559	535	599	492	749	778	749
Cadillac CTS	799	767	863	794	916	733	371	416	341	318	330	318
Cadillac XTS	1,228	1,179	1,327	1,742	2,010	1,608	378	423	348	350	363	350
Genesis G80	473	533	475	632	708	532	520	544	446	625	820	787
Infiniti Q70	235	269	458	345	203	183	172	182	149	154	112	90
Jaguar XF	96	278	212	71	50	64	118	72	73	44	63	95
Lexus ES	3,144	3,324	4,922	3,499	4,741	4,350	4,960	5,636	3,320	3,870	4,545	5,025
Lexus GS	298	263	394	301	260	214	305	342	193	222	321	265
Lincoln Continental	446	428	481	484	559	447	624	699	574	608	630	607
Lincoln MKZ	1,410	1,354	1,523	1,519	1,753	1,402	1,541	1,726	1,418	1,344	1,393	1,343
Mercedes-Benz E / CLS-Class	3,258	3,424	3,712	3,372	3,372	3,346	2,750	2,892	3,523	3,177	3,689	3,343
Tesla Model 3	6,500	5,750	10,175	10,050	13,950	20,550	13,450	13,150	20,250	15,566	16,143	15,566
Volvo 90-Series	514	367	346	333	206	226	212	141	1,094	204	191	218
	∑ = 25,428	∑ = 23,710	∑ = 32,125	∑ = 28,570	∑ = 34,712	∑ = 42,675	∑ = 30,034	∑ = 30,972	∑ = 35,842	∑ = 31,682	∑ = 33,743	∑ = 34,141

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Besides the fact that the Tesla Model 3 sells about as much as all its competitors combined, here are the Model 3's numbers quarter by quarter:

Model 3 Sales per quarter 2019 US
Q1: 22,425
Q2: 44,550
Q3: 46,850
Q4: 47,275

Q1 was low because of EU deliveries, so let's do Mr. Montana a favor and ignore that, but even then you can clearly see that in spite of the US federal tax credit being reduced from $3,500 to $1,750 after Q2, Model 3 sales actually increased, not decreased.

If Mr. Montana wants to play the seasonality card and compare Q4'19 to Q4'18, rather than getting into an argument where I try to explain why Q4'18's numbers were inflated (pent-up demand from reservations, and no overseas deliveries yet), I'll counter him in a different way that cannot be refuted in any way:

Midsize Premium sales per quarter 2019 US
Q1: 92,263
Q2: 105,957
Q3: 96,848
Q4: 99,566

Midsize Premium sales ex-Tesla per quarter 2019 US
Q1: 69,838
Q2: 61,407
Q3: 49,998
Q4: 52,291

Whereas Tesla sold more in Q3 and Q4 compared to Q2, the rest of the market actually shrank in the second half of 2019. I think this can likely be attributed to people choosing to buy a Model 3 instead, but regardless, this shows that the Model 3's second half of 2019 sales weren't inflated because of seasonality, because then the rest of the market's numbers would've been higher in the second half of 2019 as well.

As for the Model S:

Model	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Audi A8	284	242	261	187	190	166	114	164	109	245	465	536
BMW 6-Series	161	315	149	96	150	80	65	51	31	20	13	8
BMW 7-Series	454	851	988	567	1,071	744	760	762	625	611	627	763
Genesis G90	155	176	159	129	158	162	161	198	242	289	194	216
Jaguar XJ	172	109	128	93	105	74	116	74	59	65	77	-
Lexus LS	508	439	457	474	462	357	396	509	346	468	529	583
Mercedes-Benz S-Class	886	1,061	1,204	958	958	1,063	919	926	778	1,211	1,452	1,087
Porsche Panamera	487	508	703	992	521	529	476	423	377	360	657	592
Porsche Taycan	-	-	-	-	-	-	-	-	-	-	-	130
Tesla Model S	875	800	2,275	825	1,025	1,750	975	1,050	1,100	1,235	1,280	1,235
	∑ = 3,982	∑ = 4,501	∑ = 6,324	∑ = 4,321	∑ = 4,640	∑ = 4,925	∑ = 3,982	∑ = 4,157	∑ = 3,667	∑ = 4,504	∑ = 5,294	∑ = 5,150

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Model S Sales per quarter since Q4'2018 US
Q4'18: 7,700
Q1'19: 3,950
Q2'19: 3,600
Q3'19: 3,125
Q4'19: 3,750

I can't argue with hard data that the Model S has not been affected by reductions in the federal tax credit. In fact, although there were other factors in play (discontinuation of cheapest variant), there's no denying that the $7,500 to $3,750 reduction in the US federal EV subsidy after Q4'18 likely did have an impact on Model S sales.

However, the Model S is still atop of its class alongside the S-Class, and I doubt this is going to change when the tax credit goes away entirely. You can't convince me that people who buy a $90k+ car care much about an $1,875 tax credit.

Lastly, here are the Model X numbers:

Model	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Acura MDX	2,968	3,833	3,982	3,339	4,425	4,087	4,788	5,976	3,833	4,368	4,784	5,636
Audi Q7	2,061	1,965	3,091	2,752	3,241	2,923	2,751	3,408	2,357	2,971	3,162	3,967
Audi Q8	807	900	1,469	1,280	1,319	1,185	1,123	1,214	987	1,051	1,210	1,711
BMW X5	3,092	4,360	4,460	3,781	4,204	4,473	3,804	4,522	4,339	4,444	5,359	7,757
BMW X6	595	859	646	424	351	170	113	72	45	26	382	557
Cadillac XT5	4,368	4,193	4,717	4,263	4,919	3,935	4,051	4,537	3,727	3,677	3,814	3,677
Cadillac XT6	-	-	-	-	-	74	1,420	1,590	1,306	2,361	2,448	2,361
Infiniti QX60	4,188	4,117	4,525	2,773	4,100	3,133	2,859	3,495	2,431	3,604	3,824	4,113
Infiniti QX70	4	-	2	-	-	-	-	-	-	-	-	-
Jaguar F-Pace	1,465	1,345	1,730	1,038	903	828	862	1,169	1,021	1,325	1,787	2,018
Land Rover Discovery / LR4	819	1,039	1,185	572	589	548	597	560	509	451	1,081	1,234
Land Rover Range Rover Sport	2,004	2,148	2,317	1,986	1,922	1,755	1,748	1,716	2,288	2,584	2,474	2,826
Land Rover Range Rover Velar	1,353	1,434	2,162	1,244	1,355	1,174	1,139	1,306	1,242	1,540	1,591	1,547
Lexus GX	1,508	1,630	2,291	1,786	1,809	1,947	2,094	2,604	1,707	2,161	3,188	3,220
Lexus RX	5,508	7,054	10,967	7,522	8,782	8,228	9,247	11,700	7,162	9,271	11,526	14,069
Lincoln Aviator	-	-	-	-	-	-	625	700	575	2,115	2,193	2,116
Lincoln MKT	409	392	441	405	467	374	206	230	189	91	93	91
Lincoln MKX/Nautilus	2,477	2,474	2,783	2,661	3,070	2,456	2,619	2,933	2,410	2,545	2,638	2,544
Mercedes-Benz GLE-Class	2,142	2,197	2,196	2,566	2,566	4,843	5,301	5,370	4,862	4,782	6,052	5,787
Porsche Cayenne	2,150	1,762	1,647	1,645	1,680	1,147	1,334	1,454	1,512	1,216	1,972	1,482
Tesla Model X	950	1,100	2,175	1,050	1,375	2,725	1,225	1,825	1,675	1,811	1,878	1,811
Volvo XC90	1,427	1,996	3,236	2,700	3,201	3,475	2,776	3,163	2,935	2,720	3,522	4,609
	∑ = 40,295	∑ = 44,798	∑ = 56,022	∑ = 43,787	∑ = 50,278	∑ = 49,480	∑ = 50,682	∑ = 59,544	∑ = 47,112	∑ = 55,114	∑ = 64,978	∑ = 73,133

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Model X Sales per quarter since Q4'2018 US
Q4'18: 8,050
Q1'19: 3,235
Q2'19: 5,150
Q3'19: 4,725
Q4'19: 5,500

For some reason goodcarbadcar.net lists the Model X as a midsize SUV, even though it should be in the large SUV segment, at least in terms of price. The other vehicles in this list are significantly cheaper than the Model X:

Base Prices
Tesla Model X: $85,000
Audi Q8: $67,400
Porsche Cayenne: $66,800
BMW X6: $63,550
Volvo XC90: $48,350

So comparing sales numbers between these models is not be very useful, because they attract somewhat different customers.

However, we can look at the Model X numbers in isolation and see that, although numbers were likely impacted by the reduction from $7,500 to $3,750 at the end of 2018, the reduction from $3,750 to $1,875 after Q2'19 had minimal impact. Furthermore, sales numbers are still solid and are unlikely to change going forward now that the last $1,875 has fallen away.

As for US state EV incentives and other EV incentives around the world that Mr. Montana didn't explicitly mention, there isn't any data available to point out what would happen if they went away, but I'll admit that if they went away tomorrow, of course EV sales and also Tesla's sales would be negatively impacted.

However, most of these incentives are here to stay for the foreseeable future. Some (misinformed) people may not agree that all vehicles will be electric in the not all that distant future, but it cannot be denied that many governmental bodies (especially EU and China) want to transition away from ICEVs to EVs, and have proven a willingness to incentivize as long as necessary. This means that a lot of these incentives are here to stay until the EV market no longer needs them. I'd argue that although Tesla benefits from them, it's not reliant upon them, but it doesn't matter if you disagree, because these kinds of incentives are here to stay anyway.

This brings us to the ZEV and regulatory credits. Yes, Tesla benefits from these credits to the tune of $500-600M a year. However, even though Mr. Montana uses this as an argument against Tesla's success, it's actually an argument for Tesla's success, because these credits are not going to go away in the next 5 years. On the contrary, government regulations, especially in EU and China, are going to get much stricter in the coming years, and Tesla is rumored to financially benefit from these to the tune of $2B in the EU alone in 2020 and 2021, although details surrounding this deal are still scarce.

Mr. Montana could correctly argue that a huge, sudden change in the worldwide regulatory landscape is a potential risk to Tesla's business, but it's very unlikely to happen in the near term, and ZEV/regulatory credits cannot be used as an argument as to why Tesla's business is unviable.

Lastly, let's talk about the tax benefits/abatements Tesla is receiving for various factories. This argument is just straight up bull****, because it's not unique to Tesla and every large company receives huge tax breaks when they heavily invest in a location and create thousands of new jobs. A few examples:

Boeing's $8.7 Billion Washington State Tax Break

Amazon's more than $1.2B in incentives from state and local governments

Amazon's $2.2B in incentives for creating three new sites in New York, northern Virginia, and Nashville, Tennesee

Google's $1B for a New York City expansion

Apple's $208M in state and local tax breaks in return for creating just 50 permanent jobs

I could go on, but these kinds of incentives are widespread, and cannot be used as an argument against the viability of Tesla's, or any company's business.

Competition (10:12-12:10)

"And now it faces something it's never faced before, especially in 2020. And that is just an onslaught of competition. The EV makers in Europe held back. They had incentives to hold back until January 1st of 2020, because of the way the European Union regulatory emission standards work. That's no longer happening. If you look at 2019, Tesla increased its revenues by $3B. It ran Fremont full-out all year long. It had to slash prices on its two highest margin cars, and then it burned through an order book that it had spent 4 years building on the Model 3. And you get to the end of all of that, and you had a total of $27M extra gross margin, and losses were $862M. So it's like, I did all these things and all I get is that crummy t-shirt, and that's as good as it gets. Because now this year, Tesla doesn't have Europe to itself anymore. It's really facing intense competition from so many people. Audi, Jaguar, BMW, Polestar, Volvo, Volkswagen, they're all introducing EVs over there this year, and because of those EU incentives and the regulatory system, those people can sell their EVs and lose 20k per car and it still makes sense to do it. Tesla can't afford to lose on the car. The other ones do so they can sell their more profitable cars that consumers actually more want to buy. So that's a terrible position for Tesla to be in. That's among the reasons why to me it appears structurally unprofitable."

Mr. Montana's argument is that due to the EU's regulations, the competition was incentivized to wait until January 1st 2020 before getting serious, and now that they're going to finally get serious, Tesla is in a terrible position. Basically it's the age old "Competition is coming. No, it's really coming now! No, just wait for it. You'll see next year. Next year competition is really coming." argument.

Watch Out, Tesla, Audi's e-Tron Is Coming - October 2009

Tesla Motors faces rough road in the electric-car business - July 2010

Fisker Charges Up With $150M for Luxury EV - February 2011

Watch Out Nissan and Tesla: EVs from Chevrolet, Fiat, and BMW take off at the LA Auto Show - Novermber 2012

BMW, Cadillac Aim to Pull Plug on Tesla With Pricey New Cars - Novermber 2013

Tesla: Competitors To Look Out For - August 2014

Tesla might soon face a Chinese competitor inspired by "Knight Rider" - July 2015

Luxury automakers to Tesla: We're coming for you - September 2016

Tesla is getting some legitimate competition in the market for affordable electric cars - March 2017

Tesla's toughest competition ever was on display in Geneva - March 2018

5 Tesla Competitors That May Just Make It - January 2019

"Tesla faces an onslaught of competition in 2020" - Montana Skeptic - April 2020

"Next year, 2022, is when competition will absolutely crush Tesla" - Bloomberg - June 2021

"Well... maybe not 2022, but just wait and see. The competition in 2023 will be the end of Tesla." - Business Insider - April 2022

"Psyche! We were just kidding last year, but 2024 competition is coming for real." - Mr. Montana - December 2023

"Competition. Is. Coming. Next. Year. Just. Wait." - TSLAQ Twitter Bot - January 2024

"Competition. Is. Coming. Next. Year. Just. Wait." - TSLAQ Twitter Bot - January 2025

"Competition. Is. Coming. Next. Year. Just. Wait." - TSLAQ Twitter Bot - January 2026

"Competition. Is. Coming. Next. Year. Just. Wait." - TSLAQ Twitter Bot - January 2027

And so on, and on, and on.....

But let's present some more serious arguments as to why Mr. Montana is wrong... yet again.

First, let me point out a fallacy in his arguments. He's at the same time arguing that ZEV / regulatory credits will fall away and hurt Tesla, and that regulatory credits are increasing in 2020 so that manufacturers were incentivized to be less serious about EVs until now. These two contradict each other.

Second, although it is true that the EU (and China) are starting to implement much stricter regulations as of this year, the EU started to implement emission regulations as early as 2012. So yes, there's some truth to the fact that the competition is incentivized to try harder this year, and even more so in the years after 2020, but they've been incentivized in the EU since 2012, and so far they have not influenced Tesla's sales numbers.

Third, Mr. Montana's argument relies heavily on the assumption that competition in the EV space will hurt Tesla's sales. So far, in the EU that has not been the case:

https://insideevs.com/news/394870/plugin-sales-europe-record-december-2019/

The Model 3, in spite of being far from the cheapest car on this list, outsold its nearest competitor in the EV space 2-to-1 in 2019, but Mr. Montana said that the competition has not been serious so far, and will be more serious starting in 2020. So let's take a look at two of the most hyped up EVs of 2020, starting with the Porsche Taycan.

First, there were production delays:
Porsche announces Taycan electric car production delays

Then, the range turned out to be a letdown:
Porsche Taycan Turbo S has an official EPA range, and it's not that great

Then, there was the price:
Porsche Taycan Starts at $150,900, Most Expensive Is $241,500
(There will be a cheaper variant at some point, but it's unclear exactly when.)

And now, a lot of people are thinking about cancelling:
Problems of Porsche Taycan worry buyers, change of heart for a Tesla vehicle

Next, let's take a look at the Volkswagen ID.3.

Production started in Nov'19, but software issues caused the first deliveries to be delayed until the summer of 2020:
Volkswagen Has "Massive Difficulties" With ID.3 Software

Then, with a ton of vehicles stuck in parking lots, deliveries were delayed further until August of 2020, accompanied by more bad news about various features:
Volkswagen ID.3 Update - More Delays Expected

And most recently things started looking really really really bad, because:

• The software issues are MASSIVE.
• More than 10,000 technicians are working to address the problems.
• Up to 300 bugs are rumored to be reported every single day.
• It's expected to also delay the launch of the crossover ID.4.
• Further delays of an additional 3-12 months on top of the August 2020 delays are expected.
• The board and Porsche and Piëch families are very displeased with the CEO.

VW ID.3 electric car's software bugs threaten summer launch

All in all, it looks like the "onslaught of competition" might have already been delayed by another year, keeping the "the competition is coming next year" mantra intact.

I could go on and on about why "the competition is coming" is not an argument against Tesla being a viable business, but I'd be repeating myself, because I already summed up a lot of the difficulties the automotive industry will be facing as it transitions to EVs in a previous blog:

The Automotive Industry's Transition to AEVs: Which car manufacturers will survive the next decade?

Stock Price (16:01-16:37)

The share price has nothing to do with the fundamentals. You've seen it go down to $170 and up to $960, the share price is enormously volatile. Just in the last year and a half it's been enormously volatile. How can you say that you know what the value of the company is when one day it's at $170, and a few months later it's at $960. Number two, it trades on Elon Musk's latest tweets.

I was almost going to completely agree with Mr. Montana here, until that last sentence.

He's completely right that in plenty cases a stock's price is not a good reflection of a company's fundamentals, and Tesla is no exception. It's also a very bad idea to value a company by its stock price, even though many people do. That's not to say it should be disregarded completely though, because the way the market values a company, especially over longer periods of time, does say something about how a large number of people look at a company. The fact that the market has valued Tesla very differently than other car companies ever since the IPO almost a decade ago may be something he disagrees with, it's a huge amount of money being of the opinion that Tesla is different from other car companies.

The last sentence about the stock trading on Elon Musk's latest tweets is 100% false, and shows a lot about who Mr. Montana is: a spreader of misinformation. Ever since all the debacles in 2018, Elon has tweeted very little material Tesla information for the past 12 months, and especially the run up from $170 to $960 had absolutely nothing to do with any of Elon's tweets, but rather was caused by a number of other factors.

I believe anyone would be hard pressed to find examples of Elon tweets that materially, if at all, impacted TSLA stock price during the past twelve months.

Free Cash Flow (16:37-17:08)

Free cash flow sure, if you spend nothing on CapEx, you can have free cash flow if you use capital leasing, which is what Tesla does. You don't count that, it inflates the apparent free cash flow. The fact is that year after year they're unprofitable, and you're going to see the opposite of free cash flow this quarter, even though Tesla ran Fremont full tilt up until a week ago. The last week, those cars don't get delivered in that quarter anyway.

This is very incoherent, and I don't really understand what point Mr. Montana is trying to make here. In essence, FCF (Free Cash Flow) is a measurement to see whether a business is gaining or losing cash. It sounds like he believes Tesla is 'gaming the system' and trying to move expenses from CapEx (Investing Cash Flows) to Capital Leases (Financing Cash Flows??).

I've been unable to confirm whether Mr. Montana is right that this is happening, because there's very little about capital leases in Tesla's most recent 10-K SEC filing.

Even if it is true, I highly doubt that they are gaming the system and doing things differently than other companies, because it's far fetched and unlikely that a ~$100B company is using illegal accounting tricks, and getting away with it in spite of auditors and the SEC. Not impossible, but an unlikely conspiracy theory.

But far and away the largest reason as to why this is another nonsense argument from Mr. Montana, is that even if you don't look at FCF, but simply look directly at how Tesla's cash position has changed over the past year and a half, and exclude public offerings and bond repayments, Tesla's cash position still increased on the order of ~$3.25B.

Inventory (17:16-17:20)

They're going to end up with 30k cars in inventory. They can't sell the cars.

According to the Q4'19 ER, Tesla's inventory was 11 days of sales at that time. Q4'19 deliveries were 112,095, so that was 112,095 / 92 = 1,218 per day, and therefore inventory at that time was approximately 1,218 * 11 = 13,398 vehicles. In Q1'20 Tesla produced approximately 14,272 more vehicles than it delivered, so inventory at the end of Q1'20 was 13,398 + 14,272 = 27,670, so 30k is very close, and I have to congratulate Mr. Montana on this quite accurate prediction.

However, if he wants to argue that this is a bad number or that it indicates Tesla can't sell its cars, he is dead wrong. Tesla sold an average of 88,400 / 91 = 971 vehicles per day in Q1'20, so that means its inventory in days of sales was 27,670 / 971 = 28. This is in the middle of an economic crisis, and a total economic shut down in many parts of the world. So, there is no way that all of this inventory can be attributed to a lack of demand.

Regardless, if you compare this 28 days of sales inventory number to, for example, GM's 83 days of sales inventory number from early September 2019, a number that was unaffected by the current virus-crisis and global shut downs, then that Tesla inventory number is suddenly starting to look pretty damn good.

Q.E.D., Mr. Montana.

Model Y (17:24-18:33)

Look at the Model Y. David Welch and Sandy Munro said people want this car. Elon Musk would never let us see what the order book was on the Model Y, and now we have a clue why. First of all there was a report in Electrek, which is a Tesla fan-zine, saying "there are a lot of cancellations, people are cancelling". And now people are getting emails saying "the RWD car you ordered, we're ready to fill that order now". Tesla had earlier said all we're going to do is AWD performance and LR AWD cars. Two, three thousand cars later, we're out of orders because they just don't have demand for that car. The people who really wanted this Tesla bought the Model 3, and the people who want the Model Y won't be buying the Model 3. How do you explain that you burned through your performance and AWD order book on the Model Y in a manner of weeks, if everybody wants this car. You're imagining demand that's not there.

So Mr. Montana is saying that an Electrek report and some emails indicate that Tesla is out of orders for the Model Y, and that there is no demand for it. He also makes some statements about cannibalization between the Model 3 and Model Y.

Let's tackle cannibalization first.

There's definitely going to be some cannibalization, there's no denying that, but nobody can argue that they know to what extent these vehicles will cannibalize each other, because all anybody can do is guess.

The fact of the matter is that the Model 3 is a (midsize) sedan, and the Model Y is an SUV/Crossover. These are two very different vehicle segments, and the SUV/Crossover happens to be extremely popular.

https://www.best-selling-cars.com/global/2018-full-year-international-worldwide-car-sales-and-global-market-analysis/

https://www.statista.com/statistics/276506/change-in-us-car-demand-by-vehicle-type/

Furthermore, literally every single car manufacturer is jumping on the SUV bandwagon and launching more SUVs because of this "SUV Craze".

SUV Craze Shows No Signs of Slowing as More Automakers Join in

Why would these manufacturers all introduce SUVs, if according to Mr. Montana there is no demand and it'd just take sales away from their sedans? Because Mr. Montana is wrong.

Now, let's take a look at the more direct evidence Mr. Montana cited as to why, according to him, there is no demand for the Model Y:

Tesla starts preparing Model Y RWD deliveries amid drop in demand - Electrek

First of all, let me address his comment about Electrek being a 'Tesla fan-zine'. I personally loved Electrek when I first started following Tesla and EVs in 2015, but as I've gained more knowledge, I've come to realise that Electrek isn't all that good of a source a lot of the time. The editor in chief, Fred Lambert, does not have any formal training nor experience as a journalist, and started out as a hobbyist blogger. All the more respect to him for turning Electrek into what it is today in spite of this, but it shows in certain parts of Electrek's reporting.

Just last week Electrek posted this article upon which Mr. Montana's evidence is based:

Tesla furloughs employees due to drop in demand amid crisis

Tesla did indeed furlough some employees in Norway, but the reason for this was not a drop in demand. Here's the actual quote from a Tesla email:

In plain terms, our current capacity is higher than the actual work available to us, due to uncertainty and restrictions caused by the coronavirus outbreak.

So actually the furloughs were because Tesla's labor capacity in Norway was higher than the amount of work that needed to be done, and this was because of uncertainty and restrictions. Restrictions most definitely cannot be a drop in demand. Restrictions likely means local authorities are no longer allowing certain work to be done. Uncertainty also cannot be related to demand. At worst there is uncertainty about (future) demand, but this would not cause there to be a lack of work available right now, and therefore Fred's inference that the furlough was due to a drop in demand is incorrect.

In the same article, Fred also wrote that he has sources who told him that Tesla is seeing "few new orders and a lot of cancellations", which could be true, but which could just as easily be wrong like his sources who told him about a Model S and X interior refresh. I don't mean to say that it's impossible that demand has been impacted by the virus, I think it's far more likely than not that it has been impacted, but we don't have any hard evidence either way yet, and it was not the reason employees were furloughed in Norway.

There are many more examples of these kinds of Electrek articles, and I've personally stopped following Electrek for that reason. For me it's not a great source to get my Tesla news. But regardless, let's take a look at the article Mr. Montana cited about the drop in Model Y demand, because by no means are all Electrek articles are incorrect.

Mr. Montana's main point here is that the earlier than expected introduction of the RWD variant, means that Tesla has already burned through its entire order book for the Model Y AWD and Performance variants, and that therefore there is little to no demand for the Model Y.

First, Mr. Montana (and Fred from Electrek) have completely ignored the fact that geographical location has always played a huge role in Tesla's deliveries. We're just talking about USA orders and deliveries for now.

Second, Tesla has undersold the Model Y as to not osborne their Model 3. There are likely at least some people who would've not bought a Model 3 in the second half of 2019 if they knew the Model Y was coming as early as Q1'20. There not only was no point for Tesla to try to build up a large Model Y order backlog, it would've potentially hurt their short term financials.

Third, potential Model Y buyers were even less incentivized to pre-order the Model Y, because of the way the Model 3 pre-orders turned out. People camped out in line overnight to be able to put in an early order for the Model 3, but due to the way Tesla expanded deliveries by prioritizing certain geographical locations, most early Model 3 reservation holders ended up gaining very little from their reservations. Knowing things would probably turn out the same with the Model Y, potential buyers were a lot less incentivized to put in an early pre-order.

Fourth, as I mentioned before, short term demand has more likely than not been impacted by the virus-crisis. A large percentage of people with pre-orders might be deciding to temporarily hold off on going ahead with their purchases until they're no longer stuck at home.

Fifth, no deliveries of the RWD variant have actually been scheduled yet. We don't know how soon deliveries will actually start.

Sixth, we don't know the state of Tesla's Model Y production ramp up. Tesla has been producing Model Ys since at least January, and it's possible that they're on the cusp of significantly increasing production in Q2'20, especially now that the Fremont factory has been temporarily shut down and Tesla is using the down time to make manufacturing improvements. I wouldn't be surprised if the preparations for RWD deliveries have more to do with the Fremont shut down and extra time Tesla has to upgrade the production facilities, than with a lack of orders for the AWD and Performance variants.

I think this about sums up why Mr. Montana's "there is no demand for Model Y" argument is false.

Norway & Competition (18:33-19:04)

And it's not just coronavirus. Look at Norway. Norway has a regime that absolutely favors EVs, has forever, and punishes the taxes on ICEVs. For five straight quarters Tesla's absolute numbers have been dropping off there. And this quarter, lowest ever, the Audi E-tron alone outsold the Model 3, Model S, and Model X. That's not coronavirus, that's competition.

There's some truth to what Mr. Montana is saying here. Although Tesla sales in Norway have not been dropping off for five straight quarters, they have dropped off for four straight quarters. Mr. Montana argues that this is due to competition, but before we believe this statement, let's look at the actual data from eu-evs.com:

As for the Q1'19 and Q2'19 sales numbers, these were likely inflated due to the start of deliveries of the Model 3.

I also would not be surprised if Q4'19 numbers were deflated due to supply constraints. An EV tax subsidy was lowered at the end of Q4'19 in The Netherlands, and as a result Tesla diverted a lot of vehicles from other European countries to The Netherlands to allow its customers to take advantage of this. As a result, Tesla outsold its nearest competitor 4-to-1 in the Dutch EV market in Q4'19:

As for Q1'20, I'm not entirely sure what happened to Tesla. I could theorize that Tesla had no inventory in the country going into the quarter, and that due to shut downs across Europe a lot of vehicles were unable to reach the country. I have no proof for any of this though, and fact remains Audi should be congratulated for their strong Q1'20 in the quarter.

But all of this is besides the point, because Mr. Montana's argument is that Tesla's sales declined due to competition in the EV space. However, looking at the sales numbers of the competition, none of them have changed at all over the past four quarters, except for Audi's Q1'20 numbers are up by ~2k QoQ.

Comparing Q1'19 to Q1'20:
Volkswagen: 2,577 -> 2,258
Nissan: 2,296 -> 1,861
Hyundai: 2,033 -> 1,805
BMW: 1,802 -> 783
Jaguar: 912 -> 278
Audi: 799 -> 3,705
Renault: 774 -> 1,132
KIA: 477 -> 908

That doesn't exactly look like the competition took away Tesla's sales now, or does it Mr. Montana?

Furthermore, looking at Norway's Q1'20 sales numbers in isolation during an enormous economic recession is looking at a tiny piece of all the data, and one can't extrapolate any conclusions from it.

A much better idea would be to look at EV sales over the course of a year from large geographical locations:

https://insideevs.com/news/394870/plugin-sales-europe-record-december-2019/

https://carsalesbase.com/us-car-sales-analysis-2019-ev-phev/

As we saw before, in the EU the Model 3 outsold its nearest competitor 2-to-1 and commanded 17% total markets share in 2019.

Meanwhile in the US the results were even more extreme. In 2019, the Model 3 outsold its nearest non-Tesla competitor almost 10-to-1!! And commanded a total market share of 66%!! Adding in the Model S and X gives Tesla as a brand a total market share of 80% of 2019 US EV sales. A near monopoly.

So in essence, Mr. Montana is nitpicking data, and on top of that is also drawing incorrect conclusions from them.

Service & Brand (19:04-19:45)

And in terms of this great brand, Tesla last year actually cut its SG&A. It cut its Service, General & Administrative. People have been waiting forever to get a service appointment. They amputated their service, people have complained bitterly about it. You have to wait a long time to get your car serviced. You can destroy a brand, it's nice they do have a beautiful brand, but they're destroying it. There's a lot of discontent if you read the forum boards. With the way Tesla's treating its customers. That's certainly true in Europe. There's just no way to explain how this works. If its brand is so wonderful, why are they getting killed in Europe.

First of all, Tesla is not getting killed in Europe as we just discussed. Tesla is who's doing the killing.

Second, I've been reasonably impressed by how well Mr. Montana knows his numbers, but SG&A = Service, General & Administrative?

https://en.wikipedia.org/wiki/SG%26A

I think not, Mr. Montana. The 'S' in SG&A stands for Selling, not Service.

However, although Mr. Montana is wrong about Tesla having 'amputated' their service, it is undeniable that service has thus far been a weak point of Tesla. Tesla is working on it and making some progress, but we should indeed hold Tesla accountable for this, and speak up if improvements halt at some point in the future.

Conclusion

I originally planned to go over the entire show, and refute all of Mr. Montana's comments, but I'm kind of done with it at this point. I also underestimated how long it'd take, because I've spent something like 6-7 hours on this already, and I've only dissected about 10 minutes worth of arguments, out of 70 minutes total.

But most importantly, I believe I've already more than demonstrated that this guy deserves absolutely 0 credibility when it comes to Tesla and should be completely ignored.

If you're interested in a more accurate take on Tesla's business, feel free to check out some of my other blog posts, or any other source but Mr. Montana.

My Tesla Investment Thesis: Why Tesla is the most exciting thing going on in the world today

My Tesla Investment Thesis 2.0: Tesla's Monopoly Potential

The Automotive Industry's Transition to AEVs: Which car manufacturers will survive the next decade?