Market Overview

Jim Chanos Blasts Tesla, Says Its Business Is 'Structurally Unprofitable'

Jim Chanos Blasts Tesla, Says Its Business Is 'Structurally Unprofitable'

Hedge fund manager Jim Chanos has been short Tesla Inc (NASDAQ: TSLA) for quite some time. His conviction hasn't changed despite the stock's strength.

Tesla's stock could become a compelling buy once the company is profitable, Chanos said during an interview with Bloomberg TV. The problem is that not only is there no immediate timetable toward profitability. Chanos said; the business model itself is "structurally unprofitable."

Three years ago the narrative surrounding Tesla was that it would be profitable today, he said. But now projections are only calling for the company to be profitable by 2020. In 2019, the timetable for profitability will be pushed out even further, perhaps to 2025.

"No one is buying Tesla's stock based on its current business," Chanos said. "It's all based on the future."

One of the biggest hurdles toward profitability is that it is "way too leveraged," he said. The company paid $8 billion to acquire its sister company SolarCity through debt and stock issuance, but it ended up with a company with a negative EBITDA.

"The drain to the shareholders on SolarCity alone is about $1 billion a year — that's a big drain," he said.

Tesla's success can be attributed to its founder and CEO's ability to market electric cars as being "sexy," Chanos added. There's little doubt that the Model S is not only a "sexy car" but a great one as well, especially compared to other competing electric cars that are aren't anywhere "as cool." But that was then and the reality today is much different, as global auto giants like Porsche enter the space, he said.

"The competition is [now] coming out with sexy sports cars and high-end vehicles," Chanos said. "This is going to be a reality by 2019 and that's a different animal."

Related Links:

The Bear Thesis For Truckers: Tesla To Conquer All

Tesla's Opportunity In China Could Double On Relaxed Regulations

A Tesla Model 3. Courtesy photo.


Related Articles (TSLA)

View Comments and Join the Discussion!

Posted-In: Bloomberg TV Electric Vehicle Jim Chanos SolarCityShort Sellers Tech Media Best of Benzinga