Oh, you're gonna need coupon code PP after all this is said and done expires, Friday We need to talk about Tesla Hell and I'll tell you the last 90 minutes have absolutely been Tesla Hell I Woke up at 3 59 and I'm like what the hell Tesla what the hell and now we're getting reports from the Shanghai Securities Journal that no, don't worry, the rumors about Tesla are false I don't know about that. Okay, let's break down The Good the Bad and the Ugly here because there are some potentially real big issues and there's some red flags that corroborate those potential issues at Tesla. But again, I Want to be clear up front here because I don't want people sitting in the comments which they're gonna do anyway before they even watch the video. Uh, again.

right now, reports about this Tesla issue are reportedly potentially false information according to the Shanghai Securities Journal citing Tesla China sources. But folks, let's break down what This Disaster is first. I'm going to start with the good, which is supposedly not fake news and then we'll talk about what is potentially now fake news. Such a disaster! Okay, first good news: Tesla Shanghai Produced 100 291 vehicles from a Shanghai plant in November This is according to the Chinese passenger car Association and this is a new record: Tesla produced 83 135 vehicles from its plant in September 71 704 vehicles in October slightly less.

And if you add this up for the first 11 months of the year, this puts total Shanghai Tesla deliveries in excess of 650 000 Vehicles 655 069 to be exact. That is actually up a very solid growth rate of up 62.86 percent from last year. That's Huge! That's over 50 percent growth. And remember, Shanghai is also an export Hub So this is a really great number.

In fact, if we got another 100 000 Vehicles delivered in in December, we would be at 750 000 Vehicles produced at Tesla Shanghai in just one year. Absolutely freaking phenomenal terminal. In the first 11 months of 2021, we did just 402 000 vehicles. That would be almost twice as much.

Absolutely insane. Really really good news. Now keep in mind Tesla Shanghai fulfills demand for both the European and Chinese markets. Generally what happens is the first half of the quarter is reserved for export production.

Then they shift gears and focus on local production. And this is where potentially we're starting to see issues Reuters whom Elon Musk has previously called fake news multiple times and this story was echoed by Bloomberg has come out to suggest that Tesla will cut Shanghai plant production by 20 as soon as this week according to quote widespread reports which those widespread reports were apparently started and rumored by two individuals unauthorized to speak on the matter. Now this is very scary because the one thing that could really collapse Tesla's growth story is a lack of demand and potentially therefore a lack of Pp or pricing power. If either of those things happens or both of them happen together, the valuation for Tesla could collapse and there are some red flags that indicate some of the demand for Tesla may be beginning to wane.

although we as Bulls like to explain this away. For example, Tesla is now offering a three thousand, seven hundred and fifty dollar price cut in the United States for anyone buying a Model 3 or Model Y before the year end. Now that might be because many potential Tesla buyers are just waiting until January 1st where you could get a tax credit of up to seven thousand five hundred dollars. The benefit of that seven thousand five hundred dollars is it's basically twice as much as 37.50 But if you take that tax credit Buy buying it in January of 2023, you have to wait until 2024 to actually get it right.

Whereas if you take a 37 500 uh sorry 37.50 discount here in December, you get that right away. So you do have a little bit of a time value of money consideration there. But again, why do we need subsidies of demand in America is so strong? On top of this, we've got potential subsidies expiring in a lot of European countries at the same time as Berlin is struggling ramping their rumors circulating that people are showing up for work that Giga Berlin has only hired 7 500 workers instead of the 12 000 it was expecting to hire. By this point, its production has substantially missed some of the Glorious expectations that Elon Musk has set in its ramp and some workers are describing Giga Berlin as utter chaos and people taking weeks worth of sick days because there's little to do at the factory Now those are just unconfirmed rumors so and could just be straight up bashing and nonsense that makes no sense at all.

But let's focus on some facts. Fact number one: Neo has reduced production in April and November potentially as I hate to say, but potentially as more expensive vehicle demand in China is waning, not just because the supply chain constraints see, Byd is actually killing it. They sold a record of 230 400 all electric and plug-in hybrid vehicles in November. That's up 153 percent versus a year earlier and up 5.8 percent versus October.

That's a really big move. up 113 000 of those Vehicles were fully electric and 116 000 were plug-in hybrids. So they do about 50 50, right? 50 hybrids? 50? Uh, fully electric. However, those vehicles are less expensive and there is this potential shift from Chinese from Chinese.

Buyers who are recognizing their household wealth is deteriorating. Real estate is deteriorating, the Chinese economy is collapsing, are shifting to less expensive cars or just delaying car purchases at all. Byd cars sell for about one hundred thousand to two hundred thousand Yuan versus Tesla vehicles starting around 300 000. Yuan That works out to fourteen to twenty eight thousand dollars versus forty two thousand dollars for a cheaper Tesla And there are a lot of concerns that even if Tesla ends up reopening, we could end up leading to a hospitalization wave that would overrun the ICU beds needed in China by a factor of five to one.

The Economist also tells us that those over 80 years old or over 100 times as likely as a healthy 20 year old to die from Covid and the economists suggest that the Chinese government has not properly prepared the elderly by prioritizing vaccines for them. So number one argument four: What could be happening in China is a supply chain issue. I Don't buy this though. I Actually think there's a greater potential of a straight up Chinese crash.

After all, if in the second half of a quarter, most of the vehicles are just destined for China then it wouldn't surprise me to see a production cut in China If Chinese demand is plummeting or shifting towards lower end. Vehicles The larger potential issue could be the sign of a global recessionary crash. This would be a sign that Tesla is not in fact immune to recessionary. Dynamics The previous thesis that I've held is that Tesla would be at least somewhat insulated from recessionary Dynamics because of their massive order backlog.

The problem is that massive order backlog has already begun shrinking. Now the backlog is still present. You can see we still have as of November 15th according to Troy On uh on on Twitter tests like is his handle. You have an order backlog of 255 000 units which is about half as much as we're a little less than half as much, but nearly half as much as the backlog that we had in the summer.

And you can see the red bar which represents China has almost completely evaporated. So hopefully the backlog collapse is solely a collapse from China. Although you can see even the U.S back backlog excuse me which is the light blue line here or bar uh is also starting to shrink. Now we would expect shrinkage.

uh, in a recession. Now keep in mind on the Tesla earnings calls we've regularly heard: Elon Musk tell us that Tesla does not face a demand problem. It faces a production problem. Well, now it's starting to look like we're facing a demand problem and that is a scary, scary word for Tesla because it could collapse the valuation and it's also not good.

given that sometimes Elon Musk is known to say things that are beneficial to himself not necessarily Tesla shareholders. I Hate to say it. but right before Elon Musk sold about 20 million shares of Tesla to help fund his Twitter purchase, what did he do on earnings call? He told us about how Tesla one day should be worth more than Apple and Saudi Aramco combined. And right after that, after leaving this beautiful carrot hanging, walked right out the door and sold 20 million shares.

So if that is possible to happen, why is it not possible for Elon Musk to potentially mislead shareholders about Tesla demand? But again, if Tesla demand collapses, Tesla's valuation has some real big heartaches in front of it. After all, if Tesla's EPS is slated to grow 45 over the next year and their their price to earnings ratio forward for the next 12 months is about 45, then we have a PEG ratio of one. If their price to earnings ratio based on today's price is under 40, then we actually have a PEG ratio of under one. And that seems like a great deal unless of course the growth story falters.

If the growth story for Tesla falters, then what ends up happening is Tesla's valuation collapses. This is really bad news and what potential red flags are there? Well, Elon Musk has been complaining about the Federal Reserve needing to immediately cut rates. Some folks are now suggesting hmm, maybe they need to cut rates because demand for Tesla is faltering. If you also search Tesla lease or Tesla for sale on Google search Trends Even though we're producing substantially more Vehicles now than we've ever produced before, a Tesla Tesla search Trends are not holding up if anything, In most cases, they're lower than where the search Trends were last year.

And all of this news follows an insurance subsidy in China and a price cut in China as well as the pricing subsidy we already talked about in the United States in the United States excuse me which is a suggestion that potentially the backlog is starting to fail and potentially we could be seeing a loss of pricing power in both China and globally. Now The best thing that could happen here is that Elon Musk could reiterate uh, any of this uh, this this report about reduced Uh production in China which that appears to be what's happening now. It appears to be that Tesla China is coming out and saying that the media report of December out output cut added Shanghai plant cut or a plant is untrue. This is breaking as of you know, 30 seconds ago this is coming out here.

although about 12 minutes ago we did, we get a report that this was false information. Now we're getting information that this is just straight up untrue. so it looks like there's going to be a lot of drama evolving about this I Would expect some form of commentary from Elon Musk today if this report is untrue and we produced 100 000 vehicles at Giga Shanghai that would be very bullish as long as those vehicles are being sold. But I will tell you Tesla's demand is being called into question right now and this is potentially a red flag for Q4 Because even if it's untrue, that production is not going to cut it, get cut in December What if the demand story is beginning to falter and rumors are starting to circulate that production will be cut in the future at Tesla Remember folks, where there's smoke, sometimes there can be fire.

We'll see anyway. Thanks for watching folks and good luck.