CleanTechnica‘s Maarten Vinkhuyzen recently took a deep dive into a UBS report about the Tesla Model 3. The finding was that the report demonstrated tremendous ignorance at best or intentionally misleading nonsense at worst.
This UBS report, unfortunately, was covered all across major media outlets without useful examination of the assumptions and conclusions. One thing Maarten explained was how it is the UBS report concluded that the cost to produce the Tesla Model 3 was so high when other teardown takeaways were that it was significantly cheaper. In fact, one of the experts who had concluded a much lower estimate was the lead person who tore down the Model 3 for UBS, and he was muzzled via lawsuits! That’s Sandy Munro. He was sued to keep his mouth shut on this topic, which is super weird, but we don’t yet know who sued him. Maybe it was UBS, maybe another entity.
A core component of the report is that UBS used market rates to estimate the costs of each of the car’s components, and then added them up to come to a total cost of the car. As Maarten pointed out, that doesn’t make sense when Tesla has in-housed so many core components, especially high-priced components that don’t actually have a competitive market to bring down their costs. When you consider that Tesla has “military-grade electronics” in the car and other sophisticated tech that it has in-housed, that can quickly lead to a cost estimate thousands of dollars higher than reality. That’s just one portion of the overall mistake of a report, but my goal here isn’t to just rephrase Maarten’s piece, so just read his piece if you want more details on this.
The topic of focus for this article is the top analyst listed on the first page of the report. That analyst is Colin Langan. Non-journalists with a stronger journalistic gene than CNBC’s reporters did some sleuthing and found out that this analyst has recommended selling TSLA 18 times in the past two years. He hasn’t recommended buying TSLA at all.
Furthermore, this UBS analyst has recommended buying GM stock over two dozen times in the 7 years he’s been covering the company. He has never recommended selling GM.
I don’t really understand where this bias comes from, but it’s clearly at play in buy/sell recommendations and seemingly in the misleading Model 3 report as well. You don’t recommend only selling a stock (never recommending that someone buy it) over the course of a couple of years and then get treated as neutral. Furthermore, only recommending that people sell TSLA and only recommending that people buy GM is absolutely confusing when you look at how the companies have performed in the past few years.
Update → One note Maarten dropped into the comments is that UBS has a large TSLA short position, which you can track to some degree on Fintel.io. As one reader summarizes it, “UBS Group AG has a history of taking positions in derivatives of the underlying security (TSLA) in the form of stock options. The firm currently holds 314,690 call options valued at $107,923,000 USD and 1,302,400 put options valued at $446,658,000 USD.”
That’s not supposed to influence their analysis arm, but I’ll leave it to free thinkers to contemplate the relationship. (Of course, their analysis arm should influence their stock position, but if that’s what’s going on, it seems like the company should pay for some better analysis.)
As one more note, pile on the fact that the Tesla Model 3 was the highest selling car in the United States last month in terms of revenue and was the 5th best seller in terms of unit sales. Also add in that Tesla sold more cars (only cars, excluding SUVs) than BMW, Mercedes, Lexus, Audi, Acura, and every other luxury automaker in the US. When you look at this information, you have to wonder, why is Colin Langan so bearish on Tesla? When you look at the UBS report, you have to wonder, why did the report’s analysts do such a crappy job trying to estimate component prices? You have to wonder, why did UBS come up with such a dramatically higher cost estimate for the Model 3 than other independent examinations cost estimates. (See what experts at the German paper WirstschaftsWoche and Sandy Munro concluded. Their estimates for the cost of the Model 3 line up very closely with Tesla’s own statements.)
After writing this article, I was passed the following video. It’s another great rebuttal to the UBS report and media coverage of the report. It also mentions some odd assumptions and apparently bad math from Colin Langan and this UBS report, as well as from the major media outlets parroting their claims.
One of the fun gems Galileo Russell pulled up in this video was a reminder that it was UBS that falsely claimed in 2016 that Tesla’s battery pack costs were $260/kWh. On a conference call in which the same Colin Langan was discussing this matter, Tesla’s head of investor relations, Jeff Evanson, joined the call to correct the record and share that Tesla’s battery pack costs were $190/kWh at that time. That’s just a reminder of how bad UBS assumptions about Tesla have been for so long.
To simplify everything for you: Something smells fishy in Basel, and shitty as hell in New York City or wherever Colin Langan is based.
But, again, for a deeper critique yet of the UBS report on the Tesla Model 3, I think this is still the best piece to consume and share: “Analysis: Sloppy UBS Tesla Burn Is Not Supported By UBS’s Own Numbers.” Please do the world a favor — send it and a comment or two to CNBC, CNN, the Wall Street Journal, the New York Times, and the Washington Post.