Elon Musk's racket
The big automotive news is that Elon Musk's Tesla reported record earnings of $438 million for the past quarter. This translates to 93 cents per share on $10.39 billion in revenue. Tesla did this despite a semiconductor chip shortage that is hobbling other car companies like Ford, which had to slash vehicle production at seven plants in North America.
Some see this as proving investors right to give Tesla stock a nosebleed price-to-earnings ratio of nearly 1,700, and thus making Musk the second richest person alive if not the richest. Our betters also preach that the stock market portends the future. So it follows that electric vehicles (EVs) are the coming thing, and Musk must be a genius. Right?
There's much skepticism about EVs. It's not adequately reported in the news, but they have serious technical, environmental, and electrical infrastructure problems to solve before they can seriously challenge internal combustion vehicles on America's roadways. But by any measure, yes, Elon Musk certainly is a genius...but not in the way most people think. As Eric Peters writes:
It is being reported that Tesla's net "earnings" have "surged" to $438 million. What they do not report is that his includes $518 million "earned" via regulatory credits — which aren't cars. Rather, they are monies mulcted from other car companies, paid to Tesla to get "credit" for not having a sufficient number of electric cars themselves.
Peters explains the way it works in California. If a car manufacturer wish to sell internal combustion vehicles in that state, they are required to make a certain number of "zero emissions" EVs themselves. If they don't, they're forced to buy "credit" from Musk for him having made them. Peters calls this extortion. And so it is. One of the results of this racket is that the cost of this "regulatory" extortion is embedded in the price of cars from the non-EV-compliant companies. At the end of the day, it is the consumers who never bought a Tesla product who ends up fattening Tesla's income statement.
Musk got on the green wave early. A large part of his immense fortune ($170 billion) has come by successfully leveraging government regulations into a cash flow for his company.
When reporting on Tesla's financials, the media do mention the regulatory credits the company receives. But it's not dwelled upon. Instead, the news reports quickly move to focus on things like Tesla models under development, EVs delivered, price-to-earnings, Tesla's China operation, and so on. That's all nice, but such things are perhaps secondary to what underpins Tesla's business: regulatory credits. Without them, Tesla's stock wouldn't be sky-high, and Musk wouldn't be getting stock options that have made him so obscenely rich.
The media rolls this way because EVs are an integral part of the Great Reset and the green agenda, both of which corporate media are in full accord with.
To prevent investors from being blindsided, the media should ask questions like these. With other car companies rushing pell-mell to build EVs, how much longer will Musk be able to ride the regulatory gravy train? And when those subsidies stop, will Tesla stock be able to stay at its elevated level? The short sellers feel they know the answers. They've made Tesla the largest short not just in the U.S., but worldwide.
There are countless ways to illustrate how America has changed from yesteryear. Tesla affords one. Just compare the value to society of industrialist Henry Ford to Elon Musk. Ford created things of real substance and wasn't aided by cash transfers from other car companies. Can the same be said about Elon Musk?
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