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Tesla has a business problem. More precisely, no one who follows the company seems interested, even from a distance, in knowing which sector is the car manufacturer.
The problem likely resurfaced this week when, in its filing of 10 questions with the Securities and Exchange Commission (SEC) after disappointing first quarter results, Tesla said that, in addition to a relatively modest $ 15 million Zero Emission Credit (ZEV) sales, the company also sold about $ 200 million of non-ZEV credits.
"Tesla analyst is shocked by sales of missing credits in Musk's call," read Bloomberg's headline in an article that showed that Tesla had failed to rate non-credit. -ZEV, which could have come from an agreement with Fiat Chrysler Automobiles to mitigate emissions reduction risks in Europe, according to Bernstein's Toni Sacconaghi.
It's fair to note that Tesla and his CEO, Elon Musk, did not say anything about the extra credits when the company announced profits. The sale dropped a loss of nearly $ 1 billion to just $ 700 million. It is unfair, however, to attribute a negative motive to the sale.
Read more: Tesla is blamed for doing something that would be stupid to avoid
As I have already explained, Tesla can sell issue credits, ZEV or non-ZEV, at any time. In fact, Musk rightly claimed that Tesla was getting a rough deal on credit sales because it could not always sell them at its full price. The existing credit system in California, for example, offers ZEV credit discounts to Tesla because buyers can control their own demand.
Issuing credits are an integral part of Tesla's activities
That said, the credits are part of Tesla's activities. It is the only car manufacturer in the world to produce electric vehicles and nothing else. He accumulates a considerable number of credits. Opponents call it a subsidy, but of course it has nothing to do with the titanic document that traditional automakers are receiving from the US government, which has not increased the gas tax since the 1990s.
Tesla has no reason to accumulate credits, but each time it sells or sells an agreement in the sense of the one it would have with Fiat Chrysler Automobiles, the transaction is concluded. Simply to do business as an all-electric builder.
Musk has been playing well with Wall Street since last year's infamous fallback, but the fact is that Tesla does not really care about public markets (Musk's failed attempt in 2018 was not really surprising – he had been moaning about excessive control of Wall Street for a while). Musk's disgust for the banks is reinforced by his strong appetite for capital. It will probably have to go back to the financiers again this year, either to raise funds by issuing shares, or by carrying out another series of bond issues.
Wall Street, for its part, is experiencing another of its troubling epiphanies about Tesla's business, that it does what it can ignore. Do not take into account the stupidity pumped by Ark Invest (Tesla is worth $ 4,000 per share!) And focus on investment banks. Analysts on the sellers side certainly understand that even as Tesla expands its market, the case for a $ 40 billion market capitalization is very, very low.
The latest reality check for Wall Street
The fight against vehicle construction and vehicle sales has become Tesla's daily struggle – its poor first quarter results were mainly due to logistical problems related to the transport of cars in Europe and Asia – Wall Street has retreated on ambitious price targets and ruined Tesla's breakthrough capabilities. Some of these analysts are automotive experts and already know where things are going: General Motors and Ford have been recording many profitable quarters since the financial crisis, which has made normal margins, but stock prices do not lead anywhere.
It is probably the fate of Tesla: to be a provider of electric means of transport, but nevertheless quite powerful. Over time, the income from emission credits could become for Tesla what captive auto loans represent for a major automaker: a sustainable and lucrative revenue generator.
And that's why Wall Street (and everyone else) should rely on Tesla's tactics in selling credits. His returned, to cry hot tears! Tesla needs money. What can be gained from what the company can and should do?
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