Jim Chanos is a famed billionaire hedge fund manager known for short selling companies. He is also a regular market commentator for CNBC and Bloomberg. Chanos recently disclosed having a short position on solar installer SolarCity (SCTY) and although he refused to disclose his position on Tesla Motors (TSLA), he doesn’t have good things to say about the company.
During an interview with Bloomberg on Monday morning, Chanos explained why he thinks both companies are overvalued, but the “facts” he used to support his opinion are misleading. Chanos started by comparing Tesla to German automaker BMW:
“In September, we think that BMW, which is a little company in Germany, sold just about as many electric cars in the U.S. as Tesla did – about 2,000.”
Note that Chanos said “we think” because he simply doesn’t know how many cars Tesla sold in the U.S. in September. Not only the company doesn’t breakdown sales by markets, but it also doesn’t release monthly numbers, only quarterly.
Some analysts offer reconciliations based on quarterly deliveries, which isn’t ideal and should be taken with a grain of salt considering Tesla’s production and delivery schedule, but for example, InsideEVs estimates 2,500 deliveries for Tesla in September.
We do have the exact number of BMW i3 and i8 sales Chanos was referring to as “about 2,000”: BMW delivered 1,710 i3’s and 182 i8’s in the U.S. in September for a total of 1,892 units.
But instead we could look at markets where we have more accurate registration data for both companies, though for BMW we will only look at the i3 since i8 numbers are only marginal.
We are looking at August 2015 data since the numbers from September are not in yet for all the major markets. As we can see, Tesla out sold BMW by an important margin in most markets except Norway, but looking at year-to-date data, Tesla delivered more than twice as many Model S’s in Norway than BMW delivered i3’s during the same period:
We can see that looking only at one month worth of data based on an estimation can be misleading. We find that in most cases when looking at longer time-frames, Tesla outsells BMW’s i3 even though the i3 is about half the price of the Model S.
Furthermore, Chanos continued his comparison to BMW
“In fact BMW… there are press reports claiming that almost their entire fleet will be electric by 2025.”
This is either a misrepresentation of said press reports or Chanos is getting his information from questionable sources. He is referencing articles originating from a report by Autocar in January 2015.
In this report, Autocar simply laid out BMW’s plan to comply to EU fuel consumption regulations set for 2025. The publication claimed that “BMW’s plan to make all of its cars from the 3-series upwards plug-in hybrids”.
We are talking about plug-in hybrids (PHEV), not all-electric vehicles. BMW already started introducing its e-drive PHEV powertrain to several models including the new 225xe and 330e. Those vehicles have about 25 miles of range on all-electric mode and heavily rely on their internal combustion engine. The strategy is hardly comparable to Tesla’s 200 miles range all-electric vehicles.
The hedge fund manager then moved on to SolarCity:
“SolarCity is basically leasing you solar panels, if you are a residential customer, at what we think is an uneconomic deal […] They are selling you power, in SolarCity’s case it is at 17 cents a kWh [and] the average power bill in the United States residentially is 12.8 cents[…]”
SolarCity doesn’t sell at a rate of $0.17 per kWh, but $0.15 per kWh. You can find a copy of a SolarCity contract here. Furthermore, Chanos brings up the national average electricity rate as if SolarCity sells solar energy to people who pay the average. Using the national average is useless since SolarCity doesn’t operate nationally, but only in 16 states. Of course the company, like most solar installers, sells where energy costs are higher and therefore homeowners can save money by going solar.
For example, SolarCity’s biggest market is California where the state average is $0.18 per kWh. The company is also seeing success in Hawaii where the average is $0.30 per kWh, or New England where all 6 states have average rates higher than SolarCity’s $0.15 per kWh rate.
It seems Chanos has a very unique view of both Tesla and SolarCity. A view based on what appears to be misleading and sometimes plain wrong information.
The billionaire hedge fund manager is going against another billionaire, Tesla CEO and Chairman of SolarCity Elon Musk, who increased his stake in both companies around the same time Chanos became vocal about his position and views of the companies.
Full disclosure: the author of this article owns shares of both Tesla Motors and SolarCity. We encourage you to always actively seek reliable sources and verify any information you read or hear. You can also visit the sources linked in this article.
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