Beyond the Rockets and Robots: Unveiling Potential Flaws in Tesla’s Accounting

During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, and Trainer discussed Beyond the Rockets and Robots: Unveiling Potential Flaws in Tesla’s Accounting. Here’s an excerpt from the episode:

Jake: David, any thoughts on–? I heard David Einhorn interviewed recently, and he says that there’s a lot of red flags with Tesla’s accounting. What does New Constructs see on that front?

David: Yeah, it’s been there for a while. We’ve pointed out so many flaws in Tesla for, like, I don’t know, how many years, and people just don’t want to hear it. So, we’ve stopped pounding that drum despite the fact that, you know, it feels like every other week, I’m like, “Oh, the walls are closing in on this one, finally.”

[laughter]

Jake: And then it’s up another 50%.

David: Yeah. “Oh, guess what? Hey, we’re going to send a rocket to Mars.” [Tobias laughs] “Hey, pay attention to that. Don’t look over here. We’re going to Mars.”

Tobias: We’ve got a robot.

David: Yeah, “I got a robot. It can dance.” “Oh, wait, that’s somebody in leotards.” “Oh, okay, wait a second,” or spandex. Gosh, the gullibility, it feels like is just people want to believe what they want to believe. And that’s another thing. It’s like, not even that people aren’t discerning. They totally fall in the confirmation trap, and they will only focus on things that will confirm what they already believe. Because, by the way, that’s easier too. Speaking of what’s hard or easier, producing good information or bad information. It’s a whole lot easier just to say, “Oh, you know what? I believe in Elon Musk, and I’m going to focus on all the things that make me want to continue to believe and not look at anything that doesn’t confirm my existing beliefs.”

Tobias: Well, you just assume you’re missing something that everybody else has figured out, and you don’t want to say anything because you don’t want to be the guy pointing out the emperor has no clothes if in fact there are fully dressed.

Jake: Oh, really? I think it’s the other way around, where you get to feel smarter than everybody else. Like, you figured out something that no one else understands.

Tobias: But isn’t that why you wouldn’t want to stand outside? Like, you don’t want to stand apart?

Jake: I think that’s why it’s such a battleground stock. I think you have both sides that feel very religious about it.

Tobias: I will say this. I was short the stock at some point, and I’m highly skeptical of the accounting. I think that it’s worth a lot less than everybody thinks it’s worth. But it was in trouble before it raised a whole lot of capital through that 2020, 2021 period and that’s probably donut has been taken off the table. But driving the car– So, I recently got one of the cars.

Jake: [laughs]

Tobias: The cars are beautiful. It’s very thoughtfully laid out. It actually makes me angry at the other car companies when I drive it, because I just think, there’s nothing in here is genius. It’s just thoughtful, and anybody could do this. And they’re not. Like, what are they doing? Makes no sense.

David: I think it drives a lot of the sentiment. I think that’s a lot of the reason you got the Tesla fanboys, because they’re like, “This is so much better.

Tobias: It’s good product.

David: These other guys, the Indians, they can’t do it.” I think that that was true for a while, but they’re catching up. I think that these other cars, at least in terms of market share and sales are, for sure, catching up and even eclipsing Tesla,

Jake: it might be BYD is the actual–

Tobias: You see BYDs in the States?

Jake: No, not yet. They’re not in the US yet.

David: Are the trucks in the US? Because I thought I read that they had some trucks that were–

Jake: Maybe. I don’t know.

David: They’re coming. I think it was part of the deal. By the way, in terms of accounting with Tesla, absolutely, the biggest and most important one I think is the regulatory credits, considered normal recurring profit. I don’t believe that they are. They’re going to go away because they’re just not going to be able to enjoy those forever. You should not consider that as part of the operating margin of the business. It won’t survive.

The time they’re raising capital in the US markets and they got the capital from China when they needed it. I believe that BYD has done as well as it has, probably in no small part to robbing some technology from Tesla.

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