Elon Musk Pulls An ICO

By Chris at www.CapitalistExploits.at

First up, this beauty received by one of the crew here at HMS Capitalist Exploits:

Marketing an ICO...

Killer!

The Tesla ICO

Speaking of ICOs, last week something amazing, breathtaking, and revolutionary happened. We had another ICO... the very first of its kind.

An Initial Car Offering.

Pundits said it was an unveiling of the Tesla semi truck, but we now all know it was actually a thinly veiled capital raise.

Like many good things in life, this also began with foreplay.

Customers and shareholders are like women ovens - they need to be warmed up first.

So a few weeks before launching the ICO, the oven was dialled up:

Amazingly, I woke up this morning and, though having watched the unveiling, I looked around me and couldn"t notice anything different (though my dog had this strange look in his eyes).

My mind was surprisingly still in my skull and had not been sent into an alternate dimension, which was disappointing as I was quite excited by the prospects of that.

Anyway, so once the engine was warmed, we were treated to the de-robing of this.

I thought at first I"d missed it. Then I watched it again. And no, I hadn"t.

There was zero explanation of how Tesla would get all the dough to build this creature, where it would build it, and how (given the competition all have existing production plants, positive cashflows, dough in their treasuries, and access to credit markets) Tesla miraculously thinks that by the time it gets there it will have all of these things as well as the technology (that does not yet exist) to pull it off.

But then my nerves were calmed when they offered a warranty on the product. Wait, what? A warranty BEFORE they have a product? Killer!

I guess there"s a first time for everything.

But that wasn"t to be all.

No, then came the real showstopper as Elon went a step further in prostituting promoting Tesla. The fastest sports car in the world. And it may even just fly.

The kid in me did backflips. I sooo want a car that flies. Don"t you?

But then I remembered that there was a time when I really wanted the Easter bunny to be real, too.

Now, being older and wiser, I realise that rabbits screw up your lawn and chocolates make you fat, and I want nothing to do with either of them.

What I would like to know is how they found the time to muck around developing both a sports car and a giant truck when they can"t get a little Model 3 out?

Maybe that"s just me being a grouch. Heck, what do I know about cars? Mine"s 5 years old and smells of kids sweaty football socks which are buried in the back there somewhere.

Thankfully, I didn"t have to wait too long to figure out how they intend to fund some of this:

Now, when I saw this I"ll admit to having made the sort of noise a cat would make if fed through a mangle.

I realised then that Tesla was trying to pull off an ICO.

You see, the thing with 99% of ICOs is they"re kinda like the deals on Kickstarter, which means that you don"t actually get anything. It"s more like a donation... or part of a rewards points system. You know, like your air points where you get to trade them for a flight to Greece for a dirty weekend away or to upgrade your flight to first class so you can sit next to all the folks who eat lobsters in their bathrobes.

This works spectacularly well for anyone uneducated in investment markets. And that, my friends, is perfect for Tesla. Because you know what?

That"s about 90% of the population.

For the other 10%, here are some things to consider.

I"ll gladly admit to not really knowing a lot about cars. I like them very much as long as they take me where I want to go and do all the cool things that modern cars do.

But try explain to me about all the ins and outs of the bits inside and my brain does that man thing - it stops working and starts thinking about sex.

But what I do know a thing or two about is numbers and markets. And frankly, when Musk starts talking about these things he may as well be speaking Nepalese and explaining how to cook a yak stew because it"s all complete gibberish.

Tesla by the Colours

Last week when we were staring at Margot Robbie (don"t tell me you didn"t stare), and we said:

It was overconfidence that led the pointy-shoed suits on Wall Street to package subprime mortgages up, believing that a pile of isht when added to other piles of isht through the magic of diversification turns isht into non isht.

Like Margot explained in the Big Short (and bear with me as I"m extrapolating here): If we use Wall Street logic, you take the colour red and add it to more red... much more... you can get green.

So let"s run through Tesla by the colours, and then after that we"ll run through it by the numbers. Sounds fair?

• SolarCity: Red


• Gigafactory: Red


• Model 3: What Model 3?


• Model 3 in full production: Red


• Tax credits: Green... ah isht... no, make it red

Excellent!

So red + red + red + red + red = Green.

Tesla by the Numbers

Let"s take Q3 cashflow and toss in interest charges for 2017 (which is only fair — after all, someone has to pay them).

With that we realise that Tesla burned through about US$1.7bn or about US$500m a month.

Now, let"s be super conservative and say capital expenditures remain at 2017 levels, which is absurd and impossible given the new initial car offering and that semi truck, too (it"ll be far higher).

Anyway, let"s give it to them.

Well, let"s say they can find 1,000 fools buyers to drop a quarter million bucks on a pre-order for a car that they hope to receive some years in the future. Let"s say they can do that.

That"ll put US$250m into Tesla"s treasury, which will buy them less than 3 weeks. Killer!

I"m going to go out on a limb here and say that in the first quarter of 2018 Tesla"s going to lose US$1bn. Crazy, I know. How long for? It"ll go on until it doesn"t.

And here"s something to think about...

Here"s Venezuela"s 5-year sovereign CDS spread:

You may ask, why Chris are you posting this in an article about Tesla?

Well, Venezuela — like Tesla — made promises it couldn"t keep.

What I"d really like to know from you today is this:

Cast your vote here and also see what others think will happen

- Chris

“If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.” — Jim Chanos

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Liked this article? Then you"ll probably like my other missives on

this topic as well. Go here to access them (free, of course).

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Tesla Unveils Its "Mind-Blowing" Semi And New Roadster, The "Fastest Production Car Ever Made"

Update 2: there were some rumors of a surprise during tonight"s presentation, and Musk did not disappoint when just as the semi-introduction was ending, Tesla also unveiled a new Roadster, the new version of its original sports car. According to Musk, It’s the fastest production car ever made, with speeds of just 1.9 seconds for 0 to 60 and 4.2 seconds for 0 to 100. It can handle a quarter mile in 8.9 seconds.

“This is the base model,” Musk said, then went on to mention that its top speed is above 250 mph. and it has a 200 kWh battery pack that offers 630 miles of highway driving range.

This just drove out of the Tesla Semi. A next gen Roadster!!!!! #TeslaSemiTruck pic.twitter.com/3gmyzhPHkl

— Lance Ulanoff (@LanceUlanoff) November 17, 2017

* * *

Update 1: this is what the new Semi truck, which Tesla will give a 1 million mile guarantee for, looks like:

This doesn"t look bad #TeslaSemiTruck pic.twitter.com/VrwHXb6qN8

— Madi ?????? (@Phalanxia) November 17, 2017

* * *

Tonight"s the night!! In what has been promised to "blow your mind," Elon Musk will unveil an all-electric Class 8 semi truck.

In the works for two years, it’s a project that’s aimed squarely at cleaning up the freight industry, which accounts for one-fifth of global oil demand... and which Goldman Sachs has warned will cost 300,000 jobs per year.

As Bloomberg notes, Chief Executive Officer Elon Musk has promised a truck that will “out-torque any diesel semi” and drive “like a sports car.” Seeing what an all-electric semi is capable of may be the most entertaining part of the night, even if it’s not a key metric for Tesla’s trucking customers.

It can transform into a robot, fight aliens and make one hell of a latte pic.twitter.com/8h9vvWu4f5

— Elon Musk (@elonmusk) November 15, 2017

“If you had a tug-of-war competition,” Musk bragged at a Ted Talk in April, “the Tesla Semi will tug the diesel semi uphill.”

The show is due to start at 8pmPT, 11pmET.

If the transmission is interrupted, readers can go to Tesla’s website by clicking the image below...

Here"s what to watch for - including some potential wild cards (via Bloomberg)

1. How Long Is Long Range?

The range of any electric vehicle is the critical metric—it defines how the vehicle can be used and the size of its potential market. Five years ago, few would have thought that a long-range heavy duty-truck was even possible. That’s changing fast. Daimler, the leader in Class 8 diesel trucks, recently unveiled a 220-mile range electric big rig, establishing a new bar for the industry. Long-range hauling across vast stretches of the U.S. would likely require more than 500 miles of range.

2. At What Cost?

Batteries are the single most expensive component of any electric truck, and the battery of a cross-country hauler could cost $100,000 even before you build the truck around it. The sticker price, regardless of size, is going to be higher than its diesel equivalent because of those pricey batteries.

Can Tesla keep the upfront price low enough to be offset by cheaper operating costs from fuel savings and simpler maintenance? Tesla may provide such figures, though many fleet operators will want to put them to the test with hundreds of thousands of road miles before they’ll be convinced.

Source: Bloomberg analysis

3. Platooning on Autopilot

Will the truck, expected to roll out by 2020, come with some level of autonomous driving? Tesla has been in talks with California and Nevada regulators about testing semis that can automatically follow a lead vehicle, a technique known as “platooning.” Platooning cuts fuel costs by reducing wind drag. And if the autonomous driving system is good enough to run without a driver, it could also dramatically cut labor expenses.

A teaser animation released by Tesla on Wednesday suggests the realization of one of Musk’s design aspirations: cameras instead of side door mirrors.

Tesla Semi unveil, 8pm PT tomorrow — watch live at https://t.co/8uVlhvzpu5 pic.twitter.com/hCIm5iCW6J

— Tesla (@Tesla) November 15, 2017

 

4. Who Are the First Customers?

The biggest players in freight are good at keeping their trucks in top driving condition and averse to messing with the supply chain. Convincing companies like Swift, Ryder, and Wal-Mart Stores Inc. to bring an electric drivetrain into their fleets will be a tough sell. Musk says Tesla has been gathering feedback from trucking companies throughout the development process (at least one, Ryder, confirmed it), so it would be a good sign if Tesla comes out of the gate with some early partnerships.

It could be that Musk’s own empire will be the first demonstration customer of the big rig. Tesla’s automotive reach is growing, and its SolarCity arm is the biggest rooftop solar installer in the U.S. Musk"s SpaceX could potentially use the vehicles to transport rockets, satellites, capsules, and equipment.

During earlier unveilings of Tesla’s passenger cars—the Models S, X and 3—the company started taking paid reservations immediately, at least 18 months before the first deliveries. Is that a strategy that can work with commercial trucks? How long until the first rigs hit the road?

A new 40-stall Supercharger station and customer lounge opens in Kettleman, California.

Source: Tesla

5. Infrastructure Solutions

A lot of infrastructure goes into servicing big rigs. Truck stops line the world’s highways, and fleet operators stand by with mountains of replacement parts ready to fix anything that might go wrong. How does Tesla plan to deal with these hurdles? Will they introduce a whole new type of charging system, with ultrafast chargers or a robot that swaps out used batteries for fresh ones? Who will build out and operate the charging network? Who handles maintenance and roadside assistance?

6. Location, Location, Location

Tesla’s car factory in Fremont, California, is running out of room. Musk wants to build 500,000 electric passenger cars there next year, and even if he misses that goal by half, it’s very unlikely Tesla would be able to squeeze in a big rig assembly line. Tesla’s massive battery factory near Reno, Nevada, which is still under construction, seems like a more natural fit. That factory is also where Tesla makes electric motors and drivetrains—primary components for an electric semi.

7. “Driver Comfort Features”

In a profile in this week’s Rolling Stone, Musk hinted at an unspecified “driver comfort feature” that he’s fond of. “Probably no one will buy it because of this,” he said, “but if you’re going to make a product, make it beautiful.” One possibility? A sweet coffee maker. In a Twitter post on Wednesday, Musk joked that the truck “can transform into a robot, fight aliens and make one hell of a latte.”

The Model 3 motor sits in line with the wheel axle. The semi will use multiple Model 3 engines in tandem to power the big rig semi trucks.

Source: Tesla

8. Shared Parts

Perhaps Tesla’s biggest advantage over other truck makers is that its Semi will share some core parts with its first mass-market car, the Model 3. Musk disclosed during an earnings call in May that the Semi uses “a bunch” of Model 3 motors, which sit in line with the truck’s axles. These relatively cheap electric motors will give the Semi unparalleled electric torque for getting quickly up to speed with a heavy load.

Tesla’s foray into commercial trucking is coming at an impossibly tough time for the company. The Model 3 is already months behind schedule, and Tesla is spending $1 billion a quarter to get things cranking.

But if Musk can get Model 3 production lines up to their promised rates, and the motors and battery cells are truly interchangeable between the Semi and the new passenger car, the scale of those operations would be profound. While traditional diesel truck makers are testing truck-suitable electric motors by the hundreds, Tesla could be making them by the hundreds of thousands—even before its first big rig hits the road.

*  *  *

Tesla shares have been on the downtrend since mid-September...

So this event could be just what Musk needs to turn things around and distract investors from the massive cash burn the company is suffering while hand-making Model 3s...

Amid Management Exodus, Tesla Fires Hundreds Of Workers

One month after Tesla lost its head of business development who wished to "spend more time with his family", and just weeks after the EV company"s veteran battery technology director also unexpectedly quit amid a growing senior management exodus (full list at the bottom of this article), Tesla decided to even out the ranks on the bottom as well, and fired "hundreds of workers" this week, including engineers, managers and factory workers even as the company struggles to expand its manufacturing and product line, according to the Mercury News which first reported of the mass layoffs.

Workers estimated between 400 and 700 employees have been fired, although Tesla refused to say how many employees were let go, and added that it expects employee turnover to be similar to last year’s attrition. Tesla employs about 10,000 workers at its Fremont factory; it lost $336 million in the second quarter, and burned through a record $1.16 billion in cash in Q2, or $13 million per day.

In September, Tesla announced it was cutting 63 positions at SolarCity Corp.’s Roseville, California office; the staff was dismissed after Tesla bought the company, which manufacturers and installs rooftop solar panels, for about $2 billion in 2016.  SolarCity had over 12,200 employees as of the end of 2016.

The dismissals come at a critical point for the company, which is scrambling to increase vehicle production five-fold and reach a broader market with its new Model 3 sedan. The electric vehicle maker missed targets for producing the lower-cost sedan, manufacturing only 260 last quarter despite a wait list of more than 450,000 customers. It was later revealed by the WSJ that Tesla"s "dirty secret" for the unexpected production problem is that it was banging out parts of the Model 3 by hand.

According to the Mercury News, this week’s dismissals have not been reported to the state Employment Development Department, a spokeswoman said. The state generally requires companies to report layoffs of more than 50 employees in a 30-day period. Tesla countered that the performance-based departures were not considered layoffs and not subject to state notifications.

In an absurd demonstration of Musk"s bizarre management style, the company said the mass terminations have "generally boosted worker morale", as high-performing employees have been rewarded. it was unclear what the 700 layoffs, pardon, exit events did to worker morale.

While the company said this week’s dismissals were the result of a company-wide annual review, claiming some workers received promotions and bonuses, and expects to hire for the “vast majority” of new vacancies, insisting the mass terminations were not layoffs, some critics have noted that these are layoffs "plain and simple" as a company does not fire 700 people at the same time in the middle of the year due to "performance" issues.

“As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures,” a spokesman said. “Tesla is continuing to grow and hire new employees around the world.”

Still, validating the argument that these were indeed layoffs, in interviews former and current employees told the Mercury News little or no warning preceded the dismissals. The workers interviewed include trained engineers working on vehicle design and production, a supervisor and factory employees.

"Workers spoke on the condition of anonymity because they feared reprisals from the company. Employees said the firings have lowered morale through many departments. Several said Model X, Model S and former SolarCity operations seemed to be targeted."

Among those fired was Juan Maldonado, a production worker, who felt the tap on his shoulder on Thursday. He worked at Tesla for nearly four years, and said he heard about 60 other workers in his section of the factory were dismissed. Maldonado, 48, said he ran late for work twice in recent months, but thought he had straightened things out with his supervisor. Now, he said, “I’m going to try to find a job.”

The dismissals come after Tesla said it built just 260 Model 3 sedans during the third quarter, less than a fifth of its 1,500-unit forecast. The company has offered scant detail about the problems it’s having producing the car, although the previously noted WSJ report suggests that Tesla is having severe manufacturing bottlenecks forcing workers to build parts of the Model 3 by hand. The vehicle’s entry price starts at $35,000, roughly half the cost of Tesla’s least-expensive Model S sedan. When unveiling the Model 3, Musk joked to employees they would be going through “production hell” to meet demand for the new car.  Little did many the employees know that hell would come in the form of a pink slip.

As Bloomberg notes, a delayed ramp-up risks the ire of some of the almost half million reservation holders who started paying $1,000 deposits early last year. On Oct. 12, Tesla Chief Executive Officer Elon Musk posted a video on Instagram of what he said was a stamping press producing body panels for the Model 3.

Musk has told investors the company is focused on Model 3 production and expects to eventually build 10,000 cars a week. The manufacturing will become highly automated, but Musk told investors during the early ramp up he expected high overtime costs.

* * *

Meanwhile, Tesla has faced ongoing discontent from some factory workers, who have complained about work conditions and wages below the auto industry average. Tesla has a hearing before the National Labor Relations Board in November for charges that company supervisors and security guards harassed workers distributing union literature. Tesla denied the accusations.

Openly pro-union workers were among those fired this week. Some believe they were targeted, even as the company denied union activities played a role in the dismissals.

Quoted by the Mercury News, Michael Harley, managing editor at Kelley Blue Book and Autotrader, thought the dismissals could be an effort to improve vehicle production. “It’s no secret that Tesla’s Model 3 development and ramp-up for production has been derailed,” Harley said. “A major change in staff – whether dismissal or layoff – is an indication that there is an upper level movement to put the train back on the tracks.”

Whatever the reason behind the "non-layoffs", one thing is clear: Tesla has a management exodus problem as demonstrated by this extensive list of recent senior level departures from the company, including two of the most important, non CEO positions in just the past three months.

Solar-Energy Company Sunrun Lied To Investors To Boost Its IPO Price

The largest solar-energy company in the U.S. has been called out by The Wall Street Journal for manipulating a key sales metric shortly to try and boost the company"s share price ahead of its IPO.

In a report published Monday, WSJ got the jump on investigators at the SEC, who had announced their own investigation into shady reporting practices at solar-energy companies earlier this month. WSJ alleges that Sunrun Inc., the largest solar-energy company in the U.S., encouraged its managers to delay reporting hundreds of contract cancellations - figures that would"ve prominently factored into the company"s sales metrics - during the months leading up to the company’s August 2015 IPO.

Sunrun"s shares have dramatically underperformed in recent years as solar demand in California, the U.S."s largest market, has slowed, contributing to a string of bankruptcies. Sunrun shares recently traded at $4.91, about one-third of their IPO price.

The SEC is also investigating Elon Musk’s Solar City for engaging in similarly shady reporting practices, WSJ reported earlier this onth.

The paper hangs the story on on Darren Jennings, a former manager at the company who says he was pressured to delay reporting more than 200 cancellations - amounting ot a whopping 40% of total orders - while working for the firm in Hawaii, it’s biggest market, and three other former managers. Solar firms typically give customers a few days after installation to reconsider. 

 “The big internal push was to cram as many sales as we could through the pipeline,” Jennings said. “If those deals cancelled, we would not report it.”

When approached by WSJ, Lynn Jurich, Sunrun’s chief executive and co-founder and Edward Fenster, Sunrun’s co-founder and chairman, both declined to comment.
However, they did provide a statement to WSJ – but it didn’t directly address the allegations that the pair had overseen a managerial culture where employees were encouraged to misreport material information and mislead investors, all to try and boost the offering price.

Jurich said the company “reviewed the digital audit trail in our systems” and “turned up no evidence that our sales employees changed cancellation dates in our systems to delay the reporting of cancellations.”

“I proudly stand by Sunrun’s workplace culture, our values and our unwavering commitment to customer satisfaction and the principle of integrity upon which our company was founded.”

Solar City was headed for bankruptcy when Musk - who had installed his cousin, Lyndon Rive, at the helm of the perpetual cash burner – announced last June that Tesla Inc. would step in and buy the troubled energy company, combining two firms where Musk is the largest shareholder, raising questions about whether the acquisition was really in the best interest of Tesla"s other shareholders.

It"s important to note that the solar energy industry as a whole has developed a reputation for shadiness that stretches beyond these two firms: As WSJ reports, many have complained about solar companies" aggressive sales tactics, with WSJ reporting one incident where a sales representatives literally following people home from Home Depot Inc.

And let’s not forget about “Solyndra-gate,” when the Obama Administration approved a more than $500 million loan to solar energy firm Solyndra, only to see it file for bankruptcy soon after, leaving taxpayers on the hook.

Former SolarCity CEO, And Elon Musk Cousin, Lyndon Rive Is Leaving Tesla

Last June, when Tesla unexpectedly announced it would acquire the cash burning behemoth that was SolarCity, which at the time was run by Lyndon Rive, a cousin of Elon Musk, many quickly alleged the transaction was nothing short of a less than "arm"s length" bailout by Musk of both SolarCity and Rive. The reasons were legion: from the corporate cross ownership, with Musk Chairman and largest shareholder of both companies...

... to the extensive board overlap and potential "related party" conflicts of familial interest...

... culminating with a transaction which saw between 7 if memory serves board members recusing themselves.

In the end Musk won, the deal was concluded, and Lyndon Rive"s reputation of commanding a melting - and massively cash burning ice cube - was saved.

He also made a killing by cashing out his stock.

Fast forward not even a year later, when Reuters reports that SolarCity"s founder, and Elon Musk cousin, Lyndon Rive, is leaving the combined company in June, he said on Monday.

Why the hasty departure from a merged company which cashed out Rive"s shares at a whopping premium to what they were worth in the standalone company? In an interview, the former SolarCity chief executive gave the token excuse: "he wanted to start a new company next year and spend more time with his family." Rive, 40, said SolarCity was "healthier than it"s ever been," and the time had come for him to move on.

Rive had been serving as head of sales and services for Tesla"s energy division since last year. Upon his departure, Rive"s responsibilities will be distributed among Tesla leadership, Tesla said.

Rive co-founded SolarCity with his older brother Peter in 2006 with financial backing from their cousin Musk. Peter Rive, who was SolarCity"s chief technology officer, will remain to focus on the company"s solar roofs.

Over the next decade, SolarCity expanded rapidly with no-money-down financing schemes and a vast sales and installation operation. The company in 2013 aimed to have 1 million customers by 2018, but drastically scaled back plans at the end of 2015, growing far below expectations, as costs for funding that growth mounted and demand began to slow. SolarCity hit 300,000 customers late last year. It was also burning through so much cash some more outspoken analysts - who did not fear losing Tesla as a future underwriting client - alleged SolarCity would be insolvent without the Tesla "bailout." Even Goldman noted at the time that SCTY"s loan covenants were on the verge of getting breached absent some dramatic rescue:

* * *

Since its acquisition by Tesla, SolarCity had continued to generate substantial losses for Tesla, which however is now part of the company"s grand unified vision of providing a vertically integrated "green" transportation and energy conglomerate.

As a reminder, Tesla acquired SolarCity for $2.6 billion last August - cashing out all existing SCTY executives, and paving the way for Tesla CEO Elon Musk"s ambitious plans for a carbon-free energy and transportation company.

As Reuters correctly notes, "the sale came as investors worried about the solar panel installer"s debt-fueled growth." However, under the much bigger Tesla balance sheet, SolarCity"s financial problems were quickly diluted, if not forgotten.

Since the acquisition, SolarCity has further slowed installations and focused on the most profitable projects that generate cash upfront.

Throughout his decade at the helm of the company, Rive had a populist vision of making rooftop solar energy affordable to all in an effort to curb demand for fossil fuels and combat climate change. Much, if not all, of its original business model - much like that of Tesla - was based on receiving taxpayer subsidies and grants.

Last week, Tesla launched its innovative solar roof tiles - a product that generates electricity without traditional rooftop panels. As we showed before, the only reason the company"s business model is competitive and even remotely  viable, is due to "tax grants."

According to Reuters, Rive said he began to consider leaving a few months ago. "My skill set and what I love doing is starting and running companies," Rive said. "I can hand off the baton to somebody else and give myself the opportunity to do something else that could also have another impact."

Something tells us whatever company Rive starts will once again end up being generously subsidized by taxpayers.

As to whether Tesla"s acquisition of SolarCity by Musk in the summer of 2016 was a bailout for both the solar panel installer and his cousin, we leave it up to readers to decide. We"ll just repeat our question from nearly a year ago when we discussed the Tesla-Solarcity merger, and concluded that "we wonder if 22nd Century investors will be warned of "Musk Schemes"?"

Why Tesla's Solar Roof Is Just Another Giant Taxpayer Gift To Elon Musk

There are two things in which Elon Musk is an undisputed champion: creating hype and buzz for massively cash-flow burning products and companies, and abusing every possible loophole in the US tax code to get explicit and implicit subsidies from the government. He demonstrated the latter on Wednesday, when Tesla began taking orders for its solar roof tiles, a cornerstone strategy of Elon Musk"s strategy to sell a "green", fossil-fuel-free lifestyle under the brand name of its luxury electric vehicles.

First the bad news: Tesla said the product, which generates solar energy without the need for traditional rooftop panels - assuming one lives in a traditionally sunny climate - will be substantially pricier than a conventional roof but don"t worry, it will "look better" and ultimately pay for itself through reduced electricity costs... it just may take 20 or more years for the payback period to occur (more on the math below).

Made with tempered glass, Tesla assures that "Solar Roof tiles are more than three times stronger than standard roofing tiles" and is why the company offers the "best warranty in the industry - the lifetime of your house, or infinity, whichever comes first." There is just one problem: most Americans live in their house less than a decade before they end up selling it and moving to a different roof, which means that the vast majority of Americans who end up buying the new Tesla product offering will have moved out of their home long before the investment pays back for itself.

The solar roof tiles were unveiled in October as Musk sought to convince shareholders of the benefits of combining his electric vehicle maker with SolarCity, the solar installer run by his cousins. Tesla acquired SolarCity in November, and has been working to remake a money-losing company that was selling traditional solar systems into a premium energy brand. To date, other companies have had little market success with attempts to incorporate solar technology directly into roof tiles. It remains unclear whether the products will appeal to consumers as much as Tesla"s electric vehicles do.

Being a Tesla product, esthetics are perhaps the most important variable, and as shown in the images below, the roofs are certainly pretty and comes in four different formats:

Textured:

Smooth:

Tuscan :

and Slate, although only the first two are currently available.

In order to create hype for his latest product offering, Musk took a page from his Model 3 playbook, and told potential buyers to literally get in line by putting down a $1,000 deposit via Tesla"s website. There, they can also calculate the estimated upfront cost of a solar roof. The problem with this attempt at generating buzz is that its wears off quickly, and can rapidly become a liability as we showed after the latest Tesla earnings report, which shows an accelerating decline in Model 3 customer deposits.

Now, the good news, if only for Musk... which also happens to be negative for taxpayers.

Tesla said the solar tiles cost $42 per square foot to install, making them far more costly than slate, which costs around $17 per square foot, or asphalt, which costs around $5. To mitigate the price shock, Musk said average homes would only need between 30 and 40% of their roof tiles to be solar; the rest would be Tesla"s cheaper nonsolar tiles which would blend in with the solar ones.

Tesla said the typical homeowner can expect to pay $21.85 per square foot for a Tesla solar roof. A 1700-square-foot roof in Southern California, with half the roof covered in "active" solar tiles, would cost about $34,300 after a federal tax credit, according to the website calculator. And this is where the fibbing began: the company said its solar roofs would cost between 10 and 15% less than an ordinary new roof plus traditional solar panels. However, according to Jim Petersen, CEO of PetersenDean, which installs about 30,000 new roofs plus solar a year, told Reuters that a 1700-square-foot roof with new solar panels, including the tax credit, would cost about $22,000, well below the Tesla website"s estimate.

Tesla also calculates that every roof would generate an estimated $62,100 in electricity over 30 years. Over that time period, Tesla estimates, the homeowner would save $8,500. However, as explained above the breakeven period take places somewhere between 20 and 25 years into the life of the roof, by which point the original buyer is most likely long, long gone, unable to capitalize on the full IRR.

But the punchline is all the roof costs are net of, drumroll, federal tax credits, also known as subsidies to the producer in this case Elon Musk, who has made a living off capitalizing on state and government generosity. Here is the bottom line: every Tesla roof would be eligible for a roughly $15,500 federal tax credit.

Here is an actual example of how Tesla "pitches" a typical solar roof on its website, in this case let"s assume the White House will be "solarized."

The bottom line is a cost of $57,500 for a roof that is 50% covered in solar tiles, or roughly $33/square foot, double the cost of slate, oh and which would also require the purchase of a Tesla $7,000 Powerwall battery. The kicker, however, is that the entire purchase would be uneconomical over the entire life if its wasn"t for the $15,800 tax credit! Only with that "freebie" is the "net earned" over 30 years positive, and even so it comes to less than the actual tax credit received!

The bottom line, Tesla"s new, "cool" and extremely expensive product offering is only viable due to yet another round of generous taxpayer subsidies in the form of tax credits, without which the entire concept falls apart as breathtakingly uneconomic. Which, considering the vast amounts of money Tesla burns on its cars, one can say about the bulk of Elon Musk"s product creations.

Tesla Sued Over Model X "Spontaneous Acceleration"

Is Tesla having the worst year ever?  Over the course of 2016, we"ve written frequently about Tesla"s many setbacks including several auto-pilot related crashes, hackers taking control of moving vehicles, egregious levels of cash burn and a very controversial merger with SolarCity.

Now, as 2016 draws to a close, Tesla once again finds itself in the spotlight as a Model X owner has filed a lawsuit alleging that his electric SUV suddenly accelerated while being parked, causing it to crash through the garage of his home and into his living room, injuring the driver and a passenger.

In the lawsuit filed Friday in California, Ji Chang Son said that one night in September, he was slowly pulling into his driveway as his garage door opened when the car suddenly sped forward.  Unfortunately for Tesla, the lawsuit seeks class action status noting at least seven other complaints from owners of similar incidents.  Per CBC News:

"The vehicle spontaneously began to accelerate at full power, jerking forward and crashing through the interior wall of the garage, destroying several wooden support beams in the wall and a steel sewer pipe, among other things, and coming to rest in plaintiffs" living room," the lawsuit said.

The lawsuit, filed in U.S. District Court in the Central District of California, seeks class-action status. It cites seven other complaints registered in a database compiled by the National Highway Traffic Safety Administration (NHTSA) dealing with sudden acceleration.

Not surprisingly, after conducting a "thorough investigation," Tesla concluded that their cars are still extremely awesome and therefore any malfunction in operation was certainly due to user error.

Tesla said in a statement that it had "conducted a thorough investigation" of the claims made by Son.

"The evidence, including data from the car, conclusively shows that the crash was the result of Mr. Son pressing the accelerator pedal all the way to 100 per cent," a Tesla spokesperson said in an emailed statement.

Tesla said it has various ways to protect against pedal misapplication, including using its autopilot sensors to distinguish between erroneous pedal application and normal cases.

Of course, the only question now is how many "plumes of smoke" have to be discovered before Tesla investors start to worry that there might actually be a fire?