Famous short seller Jim Chanos has blasted Tesla CEO, Elon Musk, at an event moderated Fox Business Network’s Charles Gasparino. Chanos has had a long-running feud with Musk and in this recent outburst critiqued Musk’s management style and attitude.
Musk is “re-learning the hard lessons [automakers] in Detroit learned 100 years ago,” he stated. “It’s one thing to manufacturing cars but Detroit learned the hard way they didn’t want to be at the nexus” of selling cars directly to consumers, Chanos said.
Tesla learns nothing from history
Selling cars directly to consumers - at times even from the actual factory, is central to Tesla's brand and business model. Chanos gave Musk some advice, saying he should stop trying to sell cars to consumers and instead focus just on the issues of production.
Musk’s attention is now split across the company from development to sales and marketing. “Tesla’s idea was to tear all that up and start from scratch...but sales and services are coming back in a hard way,” Chanos remarked. He also criticized the teal vehicle itself. While Admitting the Tesla range was ‘sexy’ he also suggested it was poorly made and becoming difficult to insure.
Teslas getting hard to insure
Musk promised investors during a Q1 call that he would unveil a Tesla insurance product within a month. But that time frame has come and gone with no mention of the product.
When this was mentioned to Chanos he dismissed the viability of the insurance service saying “You have to be f-ing kidding me.” “If you know anything is that the free market has woken up to the poor quality of Tesla’s vehicles, and insurance rates are going up,” Chanos said. “Tesla must be trying to get in front of the problem. It’s not going to happen and if it does it won’t be what people think.”
Musk can't quit
Despite the heavy criticism of Musk, Chanos doesn’t believe Musk should quit. I don’t think he can,” the investor said of the possibility of Musk stepping aside. “He’s the brand...it’s all about Elon Musk,” Chanos said. “I think a lot of people buy the car because he’s the brand.”
Luxury Tesla’s are incredibly popular on the coast of the U.S but has struggled to find a decent market elsewhere. The downturn in demand is reflected in Tesla’s stock price which dropped to a new 52-week low below $200 last week. Though it has risen more than 6% on Thursday, after a report suggested the carmaker did manage to pull off delivering over 30,000 cars this quarter.
There is no love lost between Chanos and Musk. Musk has always been very public about short sellers and Chanos is quick to pick on Musk at every opportunity. Musk heard of Chaos method of investing boiled over last year when Musk tweeted that he might go public. The tweet ultimately cost Musk a lot of money but it may have been worth it to meddle with the ever-present short sellers albeit briefly.