Within the next year:

  • Unemployment will increase, perhaps to +30%
  • Demand will shift from brick and mortar retail to online.
  • Restaurants will continue to suffer, and grocery will improve. More people will eat at home. Demand for “Cloud kitchens” may increase, but cash strapped consumers may not demand this higher premium service.
  • Automotive will be hit hard. No demand for new cars. People will travel and commute less. Cars will be less of a status symbol.
  • Oil is cheap, so demand for EV will decline.
  • Tesla will declare bankruptcy.*
  • Governments will struggle with budgets with no tax revenue. This will have cascading effects for gov employees, teachers, pensions, etc.
  • Short term rental industry will collapse. Airbnb will likely collapse. Lack of short term rental demand and outstanding mortgages will result in increase of home sales.
  • Home prices will fall as supply increases.
  • Travel and tourism will struggle. Cities and business in this industry will struggle.
  • Airlines will continue struggling.
  • Commercial businesses will see remote work success and increasingly move to remote work model. Decreasing need for commutes and expensive office space.
  • Home electronics demand will increase.
  • Lab automation will increase, with increase demand for mass testing and lab diagnostics.
  • Current food production outstripped demand. Food producers over supplied. Decreased restaurant demand will mean less food waste, further decrease in food demand. This will further impact food production, increasing need for gov subsidization, or increasing consolidation/monopolization of food industry.
  • Local farms will likely flourish as people are spending less at restaurants, and will spend more on high quality groceries.

The stock markets will reverse their bullish course soon, likely this month, and continue to decline as these economic realities begin settling in.

As much as I genuinely love Musk, I have been bearish on him for a long time.

I’m not trying to be a hater or non conformist, or any of that.

I just see two things as flags:

  1. He’s financed his growth, and when he stops getting finance, that’ll be a bad day.
  2. He’s got a bad reputation with suppliers. Doesn’t pay his bills so he can show positives on balance sheet for shareholders. Treats his suppliers like trash.

His model could work if he had infinite runway I suppose. Like Amazon, ramp and scale up revenue streams then flip some switches and turn on profits. But automotive supply chain is not like distribution or software. Very complex. And lots and lots of overhead. He thought this could be automated away, but he learned it could not.

So I think this is the year that Tesla has its reckoning. I think auto sales will be crushed. I think Tesla will have very low car sales. I think they will bleed out until their debt obligations hit, which between 2021 and 2023 are $4.2 billion.

There are a lot of variables still. They have this China factory building Model Y and some batteries. Cost is his biggest barrier to mass consumer, and batteries are a significant portion of total vehicle cost. His China plant should reduce cost significantly, thanks to cheap labor.

I’m curious how this relationship with China will pan out. I think it will reduce his costs significantly— China has cheap labor, almost slave labor (Uyghars). But then also have massive government intervention. This could be good or bad. In many ways Elon and China has lots in common: they do whatever necessary to get the job done. However, I wonder what arrangements were made. Did Elon sell his soul to the devil? Does Elon know that his entire IP will be stolen? Or will this be a saving grace, and will China bail him out to save face and use Elon as a propaganda tool?

I dunno.

But either way Elon needs to sell cars to stay afloat. And will definitely will not this year.

Teslas cash reserves will stave off the inevitable for awhile, but his salesmanship won’t work if there is no liquidity, or if there’s no one willing to bet on an auto EV company that no ones buying.

Elon knows all this. I think he’s worried, definitely.

Working at the Gigafactory revealed that there is a bearish sentiment regarding Tesla. Panasonic executives don’t want to continue working with Tesla. That’s a flag. Everyone at the factory supports his mission. Sustainability. Electric vehicles.

But he doesn’t run his business like he should. He doesn’t treat employees well, and he doesn’t treat suppliers well.

No one works for Elon. They work for his dream.

I don’t think there will be the demand he needs, not this year. With oil prices, with lack of commuting and traveling, with unemployment, etc. No way will Tesla, who has never had a profitable year in its 12 years as a company, somehow emerge unscathed.

The battery tech will be interesting. The most exciting part is combining Maxwell’s super capacitive technology with Lithium ion, which will increase battery life significantly, and also boost performance. Adding supercapacitive will reduce cost as well. We’ll see how this pans out.

Panasonic is launching its Tech6 battery in a few months. I believe this is unrelated. But Panasonic’s battery technology is leap years ahead of its competition. It’s worth noting that this technology is not owned by Tesla.

But Tesla actually doesn’t produce any batteries, and has never mass produced batteries. Building batteries in a lab is different than mass manufacturing. So no one knows whether Tesla’s batteries are just concept or will work in practice.

At the moment Panasonic is the sole supplier of Tesla batteries, and they produce double what the next largest supplier produces CATL, Teslas future China parter.

I think there’s a big risk China will likely steal whatever battery technology Tesla develops. Or just any technology period. This could be problematic for Tesla, assuming it’s better and less costly to manufacture than current batteries. China has 486 EV car manufacturers that would benefit from this.

At the end of the day, Elon is a showman. He tells half-truths. He’s not honest or transparent about the whole picture. About anything really. This may be well and fine, and business as usual. But there is a lot hiding that people don’t see. He only lets people see what he wants them to see.

People forget about all of his straight out lies, and only seem to remember the things he pulls through on.

I can list all the things he promised and never came through on, but it’d be exhausting.

He has indeed done remarkable things. Maybe unconventionally. Maybe with too much risk. But he’s done it.

I think as long as he has cash/liquidity on hand he can afford mistakes. Make 10 bets, one pays off, people forget the rest, he gets more funding, drives up share prices, etc.

I just thinks there is more than meets the eye with his Tesla business. I’m not convinced he’s got a sound business model yet. It feels like he’s constantly flailing, always desperate.

My intuition is that when cash/funding/liquidity dries up, these cracks will expose bigger problems.

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