Tesla’s own numbers show Autopilot has higher crash rate than human drivers

A couple of weeks ago, I wrote about Tesla’s claim that its Autopilot driver-assistance software is safer than a human driver.

After a fatal Autopilot crash last May, the company said the death was the first in 130 million miles of Autopilot driving—and noted that, “among all vehicles, in the U.S., there is a fatality every 94 million miles.”

The clear implication: Autopiloted Teslas are safer than human-piloted cars, and lives would be saved if every car had Autopilot.

But Tesla’s statistics are questionable at best. The small sample size—one crash—makes any calculation of Autopilot fatality rate almost meaningless.

Furthermore, Tesla compared its Autopilot crash rate to the overall U.S. traffic fatality rate—which includes bicyclists, pedestrians, buses, and 18-wheelers. This is not just apples-to-oranges. This is apples-to-aardvarks.

One statistician called Tesla’s comparison “ludicrous on the face of it.”

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Tesla and SolarCity are dealing with a critical business problem

As Tesla prepares to acquire SolarCity and create an integrated auto-energy-power storage company, SolarCity’s legacy business model is undergoing a change.

SolarCity reported third-quarter earnings on Wednesday, and the company noted a shift from its traditional solar-panel leasing operations to a newer loan program that brings in more cash, Bloomberg reported.

Here’s Bloomberg’s Christopher Martin:

SolarCity is facing shifting consumer sentiment over solar power. Homeowners increasingly prefer to purchase the rooftop systems rather than the decades-long leases that make up most of the company’s business. Rive said in an Oct. 9 interview that 30 percent of September sales came from cash installs, or loans, instead of leases.

Cash and equivalents rose 78 percent to $259.3 million from the end of the second quarter, and Rive said he expects improved cash generation in the current quarter and next year.

This is important for a couple of reasons. First, Tesla and SolarCity, as a combined company, will be rolling out a new solar-roof product that’s designed to be a fully integrated roof, not a group of solar panels attached to an existing roof. That’s something that Tesla will want homeowners to buy, through financing, when it comes time to install a new roof.

Second, leased solar panels might make it easy for customers to get into solar energy, but when it comes time to sell the house, the lease could be an issue. SolarCity can arrange for it to be transferred, but what if the new homeowner doesn’t want to deal with the cost?

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SolarCity’s $8 Billion Turns Out To Be Just $1.1 Billion

When Tesla (NASDAQ: TSLA) announced in June it would buy SolarCity (NASDAQ: SCTY), I got really excited. For months, I’d been studying SolarCity’s financials and I had been stunned by the many misrepresentations of its value in the company’s publications.

Preparing the merger, I thought, would make a lot of 3rd parties take a closer look, so we would finally get a true picture of what the highest paid Bay Area executive under 40 had been achieving so far.

Unfortunately, the 3rd parties brought to the table by Tesla and SolarCity did not offer a lot of joy. They stuck to the numbers given to them by the people who paid them, so the story of deception just continued.

In fact, smooth sailing made executives of Tesla even more courageous, because on October 25, they showed the following graph in a presentation given to Institutional Shareholder Services Inc.

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Solar Roof Is Dead On Arrival - Yet Another Reason Why Tesla’s Merger With SolarCity Makes No Sense

Tesla (NASDAQ:TSLA) in an unusual presentation Friday evening, put together a press event to discuss a new product that the Company will enable with SolarCity (NASDAQ:SCTY).

By the end of the presentation, details on cost, performance, or any other specifications were nowhere to be found - other than that the solar shingles look beautiful. Per the company, the product will not be available till next summer. With almost a year to go for purported availability and no specs to offer, why do the product unveil now?

Make no mistake. Solar Roof was a dog and pony show to sell Tesla’s merger with SolarCity to fans and investors.

In spite of the lack of details, what was disclosed was sufficient to conclude that this product is going nowhere.

Firstly, we need to point out that solar shingles is not a new concept. A Google image search will show many different solar shingles including some aesthetically pleasing options. However, none of these have been successful and many companies pitching these products have gone bankrupt.

While there are many reasons for the lack of success, the most important reasons are that the cost of these products was high and the performance was low. These products did not make any economic sense in spite of their supposed aesthetic advantages. We discuss later in this article why the solar roof solution has no practical merit.

Coming back to Tesla, just about the only thing that is going for the Solar Roof concept, and the only thing that Mr. Musk emphasized, is the look of the products (4 different varieties - see image below).

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Tesla: Musk Tweet Disaster Furthers Our Case That Company’s Communications May Be In Shambles

Tesla’s (NASDAQ:TSLA) CEO could be doing the company more trouble than good with his Twitter account. In the past, we had written articles suggesting that the company may want to begin looking at a succession plan for Elon Musk. Our argument at the time was that a more Wall Street friendly CEO could potentially bolster a little bit of much-needed credibility behind the company and while the company could retain Musk as Chief Technology Officer or a position similar, the big responsible decisions should be left to somebody with significant executive experience and a great relationship to the street.

Last week provided us with a great example of why our theory may hold some water.

We also recently made the argument that it seemed as though communication within the company was cloudy. There have been several instances over the last year where the company and its executives simply don’t seem to be in sync. We postulated that perhaps this is what has made so many executives leave the company over the last year.

The sloppiness that we took concern with was on display in full force last week. Elon Musk once again took to Twitter to disseminate information that may or may not be considered material and may require a proper disclosure through SEC filings and the like.

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Tesla: You’re All Missing The Point

Believe it or not, I actually don’t really care about this quarter. In fact, I don’t care about ANY quarter on its own.

So Tesla pulled some levers and juiced its numbers. Lots of companies do that. But what companies can’t do is alter the core economics of their business, and here’s where Tesla falls down.

Tesla is an industrial company that makes cars and batteries (and now plans to offer ride sharing, which, you know, makes so much money for Uber(Private:UBER)…). My view is that cars and batteries generate roughly the same EBIT margins at around 10-12%.

I’ve already modeled this out, and here’s the key: even with massive growth, immediate free cash flow, and higher-than-guided production of its current models, Tesla’s shares are overvalued.

For this reason, it doesn’t matter if it is profitable. In fact, I expect the company will be (at some point). The key is that as a car company, Tesla will never earn huge returns. Cars are a cyclical, highly capital intensive, and unattractive industry. TSLA continues to face competition from competitors who have more resources, and who know they’re behind, and can easily imitate Tesla’s strategy and whittle away any excess returns it has yet to generate.

For the record, I have never disputed that Tesla makes a great product. They’re slick, fast, sexy vehicles, and people love them. I think Elon Musk is humanity’s best hope to colonize mars, and to advance the human race into a more sustainable way of living. That does not mean, however, that one should fall in love with Musk, with Tesla, or with ANY stock for that matter.

What matters is the present value of free cash flow a business generates over its life, and based on the information we have now, Tesla is a long way from justifying its value on that basis.

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Is Tesla’s Elon Musk Throwing A Hail Mary For The SolarCity Deal?

Tesla’s Elon Musk tweeted on Friday that he would pay SolarCity’s debt if it came to that. It was in response to a tweet from David Tayar asking about Tesla assuming SolarCity’s obligations after the presentation on the SolarCity acquisition on November 1. There are major concerns about the merger due to SolarCity’s negative (and increasing) cash flows and therefore its ability to service its debt (and then becoming an obligation to Tesla).

This is compounded by the concern that Tesla may not be legally obligated to pay for the debt (even though Musk says they will be one company) since there is language in at least one of Tesla’s filings with the SEC that “the Company and its Subsidiaries shall not guarantee or otherwise become directly liable for any Indebtedness of SolarCity and (b) the Company and its Subsidiaries shall not permit SolarCity to guarantee or otherwise become directly liable for the Indebtedness of the Company or its Subsidiaries.” This is from an 8-K filing on August 1 and you have to go to the EX-10.1 portion to find it.

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