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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Your graphs would look better with contrasting colors, green and sky blue are too similar and hard to distinguish from a quick glance.
Thanks for the note. I’m trying to stick to electrek colors, but I’ll look into it.
Its not rocket science to determine a good approximation of cars sold per month by tesla, and according to InsideEVs Chanos is essentially correct and you have misconstrued the whole thing.
Did you actually read the contract? It rises by 2.9% annually so in short order it will be 17 and then beyond. This in addition to the fact Cali will be lowering high usage customer prices in upcoming years, the exact customers they target.
Oh…disclosures…makes more sense.
A 25% difference is “essentially correct for you”. I think we simply don’t have the same standards. I don’t settle for mediocrity.
“Its not rocket science to determine a good approximation of cars sold per month by tesla”
It’s clearly not rock science because it’s absolutely worthless. It’s a complete guess. I’d like for you to prove me wrong. InsideEVs says it… complete guess.
“rises by 2.9% annually so in short order it will be 17 and then beyond.”
Chanos said 17 cents and compared them to current rate. SolarCity’s current rate is 15 cents not 17. SolarCity’s will be at 17 in 5 years, if he wants to talk about 17 he needs to compare it the rates in the same markets in 5 years, but he doesn’t know these rates because no one does.
Can you predict utility rates in 5 years? In 2011 it was 15 cents in California and now its 18. SolarCity’s increase is below historic data in their sectors.
“This in addition to the fact Cali will be lowering high usage customer prices in upcoming years, the exact customers they target.”
As SolarCity’s costs are decreasing, they are going for lower and lower energy demand markets and they are know entering community solar and lower income residence, so you are plain wrong.
And the same policies from the California Public Utilities Commission that will decrease electricity bills for some, will actually increase for most households.
Directly from PUC Commissioner Carla Peterman:
“Some people will see their bills go down, but many more will see them go up.”
How about Chanos disclosure? and yours possibly?
Standards? Settle for mediocrity? Wow, had no idea you were so defensive. Is it a complete guess or something more in the range of more than 1 and less than 11,580? Its only the fault of tesla that they are obscure with their definitions and reporting standards, this is the info we have and do the best. Lets not make more of it than it is.
The difference between 4 and 5 is 25%. When assessing things not only percent but nominal terms is also important. It is “essentially correct” when he used the word “about”, about does not imply a strict level of precision but does imply a +/- margin of error/confidence. Any reasonable person without a position on either side of this debate would not take such umbrage when each set of numbers used is obviously not exact to start with, and when qualified with mathematical language it passes. Many people get confused when people use math language, and get overly defensive when people say “majority, most, etc..”, when they actually have specific meanings, in the examples given its simple>50%, or an even smaller percent based on whatever subset breakdown the particular issue has. It just seems you read far more into it than was meant by Chanos.
For Solar City, they are using shady sales tactics to act as if utility bills go up in perpetuity and they need to lock their actually increasing rate in before theyre out of luck. Outside of high cost places like HI, CA…that contract (maybe cheaper in less $/kwh places) doesnt make sense elsewhere. Not to mention it impairs your ability to sell the place, no one wants to assume your lease or hassle with the company providing it, and this is before you consider the lien they have place on your property, however they want to classify it, thats what it is.
The people that will be paying more will only be paying a slight amount more after years of not paying much relatively and its those that are very low users overall. Everyone in the central valley, inland empire that uses large amounts due to heavy AC use will get a large decrease. You can see the $/kwh break down for the whole plan on the cpuc/pge/etc…sites. People actually do know rates into the near term future as that is part and parcel of being a public utility, there are road maps. Just like I know I dont need as large a PV system as I thought since my rates are going to drop on the 2 tier system as opposed to the current 4 tier one. My current low tier is .16 up to like.42! I know, terrible at the higher tier. One really just needs a system sized to arbitrage the tiers to their benefit. Currently PV isnt very economical outside of CA, HI, and the like.
There are lots of unknowns going forward. What happens when the credits run out, fees increase for pv users, $/kwh drops anyways (thatd be great), etc….any business model based on tax subsidy harvesting and duping people into loans that arent quite the economic gift they are made out to be doesnt have an easy road. We will see how they pivot into this new dynamic. Interesting things in the future.
Sorry no material disclosures. I like the Model S, I love solar, but I think tsla stock is overvalued and hindered much future return, and not a fan of solar city or their tactics.