Why the market is freaking out about Tesla

Tesla hasn’t historically been bad at capital discipline; over the course of a year, it has a fraction of what a GM or Ford or Toyota might spend in a quarter, so it has to watch every penny. But CEO Elon Musk and his team are now in triple-secret double-down mode — I know that doesn’t make any sense, but Tesla future investment requirement are almost comically ambitious — and from the perspective of leadership, it would be dumb to let the stock slip before heading back to the markets to raise money. Musk wants to produce 500,000 vehicles annually by 2018, and getting there ain’t gonna be cheap.

The bottom line is that Tesla sees its stock price as a means to an end. The company’s own investment thesis, such as it is, asks investors to take a long-term view: Tesla will be a major player in the future of transportation. Whatever happens with the stock price day-to-day is a distraction. All that matters is that Tesla shares be considered valuable when it’s time to create a new cash pile.

Tesla is right on the edge of crossing a river when it comes to how it spends money. As it gets bigger and has to manage more lines of business, capital efficiency will become vastly more important. But for now, Tesla’s capital exists to be spent, and that’s clearly freaking out the analysts who cover the company.

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German Government Report Critical of Tesla Autopilot

Der Spiegel says the Transport Ministry called the feature a “considerable traffic hazard.”

The Autopilot function on Tesla’s Model S car represents a “considerable traffic hazard,” according to an internal report for Germany’s Transport Ministry seen by magazineDer Spiegel.

Experts in the Federal Highway Research Institute carried out tests on the electric car and criticized it on a number of points, the magazine reported on Friday.

For example, drivers are not alerted by the Autopilot system when the vehicle gets into a situation that the computer cannot solve, Spiegel cited the report as saying.

In addition, the car’s sensors do not detect far back enough during an overtaking maneuver, while the emergency brake also performs inadequately, according to the report.

Spiegel said Transport Minister Alexander Dobrindt was aware of the report but did not want to take the model out of service.

The ministry told Reuters a final evaluation had not yet been taken and further tests were being conducted.

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Tesla stock had a rough week

Tesla CEO Elon Musk is probably trying to figure out what he has do to get on Wall Street’s good side.

After Tesla reported an impressive third-quarter for vehicle deliveries — 24,500 vehicles, with another 5,500 in transit — on Sunday, shares moved higher.

At one point, $215 was in sight.

But by Friday’s market close, the stock had dived around 9% from earlier trading-day peaks, finishing up at $196.61.

The slide was intensified when Goldman Sachs downgraded Tesla and dropped its target price to $185 from $240.

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New Report Sheds Light On Tesla’s Dirty Batteries

The high demand for the lithium ion batteries that power electric vehicles like those produced by Tesla Motors could potentially do more harm than good to the environment, according to a report Sunday from The Washington Post.

The electric vehicle automaker uses Panasonic batteries, which, according to the report, uses graphite derived from mines in China. The mines are raining graphite particles down on the residents of several villages in northeastern in the country.

Tesla told reporters its batteries do not include graphite from the Chinese company BTR, yet declined to identify its graphite source. Nearly 75 percent of the world’s graphite comes from the northeastern section of the China. The company’s refusal to explain where its graphite is produced could raise questions about the environmental soundness of its vehicles.

Panasonic, one of the largest manufacturers of Tesla’s lithium ion batteries, is forking over $1.6 billion to the cost of Tesla’s “gigafactory,” a massive factory meant to build the company’s lithium ion batteries. Tesla believes the Nevada-based plant will produce about 500,000 electric-car batteries annually.

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Musk’s Tweet Fails To Recognize That Tesla Has Crossed The Rubicon With The Inventory Model

While many commentators have expressed disbelief that a CEO is not aware of the Company’s discounting practices, let’s give Mr. Musk the benefit of doubt. It is not that difficult to see that this unfocussed CEO does not know what is going on in his Company. Life is too busy contemplating life on Mars and trying to force the wrongheaded acquisition of SolarCity (NASDAQ:SCTY).

However, if Mr. Musk did not know the sales practices at Tesla, it brings forth a whole different set of questions:

- How can a competent CEO not know the sales practices at his Company? If the argument is that Mr. Musk does not have the time, then we suggest that the Company’s board is once again asleep at the wheel.

- What was Mr. Musk expecting that his sales teams would do when he sent a company-wide email to push hard to get strong Q3 results ahead of capital raise?

- Does Mr. Musk not discuss sales and promotional strategies with his sales and finance teams?

- Is Mr. Musk not aware that Tesla builds spec cars (also called “inventory”) which are not build-to-suit?

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Lawmakers are fighting a space battle on Capitol Hill over SpaceX and its biggest competitor

Raising issues about SpaceX, its launch failures and anomalies, and its relationship with the US government is not a first for Coffman.

As a member of the House Armed Services strategic forces subcommittee (which oversees military spacecraft), he did so in 2014, and in 2015 on multiple occasions.

The senator faces a tough 2016 reelection campaign in his district — the home base of ULA.

Records show that, during his political career, Coffman has accepted at least $51,800 in campaign donations from Lockheed Martin and $21,000 from Boeing, and has publicly defended ULA.

In the 2016 election cycle, SpaceX contributed money to at least half of the 24 signers of the congressional letter that responded to (and contested) Coffman’s. Flores himself has taken at least $2,000, and cosigner Loretta Sanchez (D-CA) accepted at least $7,000 from SpaceX.

Flores also presides over district 17 in Texas, which is home to SpaceX’s 4,000-acre rocket development facility in the town of McGregor.

Samanthan Masunaga, a reporter for the Los Angeles Times, captured the relationship well in a story published in May 2016:

“Traditional launch providers see their market being threatened by nontraditional entrants,” said Loren Thompson, aerospace analyst with the Lexington Institute, an Arlington, Va., think tank. “Basically, this is competition between launch providers over market share and money that in the political process gets related to local interests.”

Business Insider contacted Rep. Coffman’s press secretary as well as ULA, Boeing, and Lockheed Martin about campaign funding and other issues related to this story, but we did not immediately receive a response. Representatives from Rep. Flores’ office and SpaceX also did not immediately provide a comment.

Despite the apparent turf-based lobbying war, Coffman and his colleagues are not alone in their critique of how government agencies permit SpaceX to internally lead their own mishap investigations — and, by extension, other rocket companies like Orbital ATK and ULA. (Both have chosen to lead their own investigations in recent years.)

In fact, a June 2016 audit by NASA’s Office of Inspector General (OIG) argues that internally led probes don’t meet the bar for being independent.

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Business House Republicans cite concerns over SpaceX explosion

A group of 10 Republican members of Congress wrote Thursday that they are increasingly concerned about SpaceX’s ability to safely fly NASA astronauts and national security satellites after the company recently suffered its second rocket explosion in just over a year.

In a letter to the Air Force, NASA and the Federal Aviation Administration, the group said SpaceX should not be leading the investigation into its most recent failure, and that authority should be turned over to the federal government “to ensure that proper investigative engineering rigor is applied.”

Last year, an unmanned Falcon 9 rocket exploded a couple minutes after it launched a resupply mission to the International Space Station, destroying $118 million worth of cargo. Then, earlier this month, another Falcon 9 rocket blew up as it was being fueled ahead of an engine test. A $195 million commercial satellite sitting on top of the rocket was lost in the fireball.

“These failures could have spelled disaster, even loss of life, had critical national security payloads or NASA crew been aboard those rockets,” wrote the members, many of whom represent states where SpaceX’s chief competitor, the United Launch Alliance, has a strong presence.

SpaceX declined to comment. After the Sept. 1 explosion, SpaceX founder Elon Musk said on Twitter that the Dragon capsule would have been able to abort in time, ferrying the astronauts on board to safety.

The company has said it is narrowing down the cause of the explosion, pinpointing a breach in a second-stage helium system. Earlier this week, Musk said the investigation was “vexing and difficult.” He stressed that finding out what went wrong is the company’s “absolute top priority” but said what actually caused the explosion was still unknown.

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