STEWART R. FLINK

Phineas Taylor Barnum once said of himself, “I am a showman by profession–and all

the gilding shall make nothing of me.” But to P.T. Barnum’s critics, his aim was to put

money in his coffers and oft ascribed quote; there’s a sucker born every minute.”

It sounds a lot like Elon Musk to me. If the shoe fits, wear it when driving out of the

showroom in your brand-new Tesla.

Comparing P.T. Barnum and Elon Musk

P.T. Barnum was an American businessman, showman, and politician remembered for

promoting celebrated hoaxes and founding the Barnum and Bailey Circus with James

Bailey. He was also an author, publisher and philanthropist. My issues with Tesla are

not personal but driven by economics and a bait-and-switch strategy that I can only

assume had Musk’s handwriting all over it.

My Tesla Journey

My Tesla journey began when I put down a fully refundable deposit on a Cybertruck in

the summer of 2020. It was clear to me and others that we had locked into a specific

price, like a call option- the right to buy the pickup truck at a certain price at a particular

time in the future. Depending upon battery and range, the choice in 2020 was either

$39,900, $49,900, or $59,900. I chose the lower end, figuring that I wouldn’t be driving it

cross country and didn’t require the battery range of the others.

As I looked over the electric pickup market in 2020, the Cybertruck appeared to be a

real bargain, especially the bulletproof windows and the solid steel doors that were

advertised as rustproof. I am a realist and never bought into the idea that Tesla’s

tank version of a pickup would be ready in a year, but now it’s 3 ½ years later. After a

couple of P.T. maneuvers (P.T. had a different meaning when I was a teenager), the

latest announcement about delivery starting November 30th is still somewhere over the

rainbow because I cannot determine what number I am on the waiting list of an

estimated two million.

 

 

Price Changes and Delivery Delays

But that’s not the underlying issue. E.R. Musk recently launched a stealth grenade into

the marketplace. For me, it’s classic bait and switch with some eyebrow-raising

repercussions. The $200+ billion man implied that before delivery, the prized Cybertruck

would come with some price increases due to inflation. I soon discovered the specific

prices were: $60,990 for the base model, the one I believed I locked in at the $39,900

price level; $79,990 for the mid-tier, and $99,990 for the Cyberbeast top-of-the-line tri-

motor model.

 

And the bad news keeps coming like a Cyber Truck rolling uphill off its Austin-based

assembly lines. While E.R. Musk indicated that 250,000 Cyber Trucks a year would be

produced, I recently learned that the new 4680 battery cells used to power Cyber

Trucks are only being produced at a rate to power 24,000 Cyber Trucks a year, about

10% of the latest overpromised and under-delivered forecast.

 

Battery Production Challenges

And here comes a knuckle curveball for strike three. In 2020, Tesla indicated that they

could rapidly ramp up battery output by dry-coating electrodes rather than using the

slower and more costly wet-coating process. This was the primary assumption behind

the idea that battery costs would be cut by 50% or more, creating a smaller, greener

factory.

As of this month, some 3 ½ years later, Tesla had yet to crack the code for dry coating

for large-scale manufacturing to make 4680 batteries live up to 250,000 Cyber Truck

annual production rate. It appears that dry coating the anode battery was not the

problem, and E.R. Musk and company continue to struggle with the same technique for

the cathode. Unsurprisingly, the cathode is the most expensive component in the 4680

batteries.

My erroneous assumption in 2020 was based on the premise that Tesla would take

another six to 12 months for their future deliveries, but not much more. At that point, no

inflation was in sight and 30-year fixed mortgage rates averaged three percent.

 

The Inflation Argument

For E.R. Musk to use inflation to raise prices smacks of hypocrisy. How can a company

justify lowering prices three times on its popular selling cars during an inflationary period

to maintain market share from companies like BYD in China and then raise prices on

the much-anticipated Cybertruck after multiple delays?

Easy. If you are reincarnated as P.T. Barnum, anything can be rationalized away. Or as

Epictetus, the stoic Greek philosopher, uttered two millennia ago, “Expect nothing. Be

prepared for everything.” When you have that much clout and net worth, you can throw

justification and rationalization out the bulletproof window. At the end of the day, when it

comes to building significant businesses in different industries, whether it involves

Tesla, SpaceX, Twitter, or Neuralink, E.R. Musk can hawk his circus to anyone who is

willing to buy into his dreams and Tesla stock and grow immensely wealthy in the

process.

 

Environmental Concerns and Electric Cars

One more thing has been eating away at me like a tick that has bored a hole

underneath my skin (does anyone remember The Boring Company)? We watched Mr.

Musk stand on his soapbox, pontificating why electric cars, particularly Teslas, were

good for the environment, which is easily countered once all the facts are portrayed

accurately.

 

C’mon, Mr. Musk, most of us are keenly aware that when you charge an electric car, it is

powered by electricity, most of which still originates from oil and gas and, to a lesser

extent, coal. Solar and wind are still way behind the curve as renewable energy

sources. Unless, of course, you reside in China, Russia, India, or even Mongolia, where

you will not see renewable energy traction for decades as they still rely heavily on coal

and, to a lesser extent, oil and gas.

In addition, how many communities and villages have watched their precious water

supplies dwindle and become contaminated due to lithium mining without regard for the

environment and people’s livelihoods? And with no recourse or remuneration?

 

Personal Decision and Future Outlook

It is much less of a noticeable outcry against humanity when you destroy lives and

communities that are thousands of miles away and that very few electric car purchasers

are paying attention to. And consider the new Tesla Giga plant in Berlin, something I’ve

been tracking with eyebrow-raising curiosity. In particular, the freshwater drain caused

by the Giga factory in Berlin is equivalent to what a German village of 35,000 people

consumes each year for its basic water needs. The last time I checked, water doesn’t

grow on trees.

 

Therefore, E.R. Musk, I’ll take the refund on my deposit back and look elsewhere for

now. Besides, suppose the Cybertruck follows a similar pricing pattern of other Tesla

models. In that case, I will simply sit back and wait until prices are lowered a couple of

times as inflation subsides before I purchase the Cybertruck that you seductively offered

back in 2020. Maybe others will get the bugs out as they roll off the production line.

 

The author is Stewart Flink. Mr. Flink has an MBA in Finance from Kellogg Graduate

Business School and a B.A. in Economics from Vanderbilt University. He has been in

business for over forty years and founded Dillon Capital in August of 1998, where he

has been the managing member of Dillon Capital since inception. His first novel. For All the Water, was

published in October of 2023.