Claim Chowder: Revisiting Linette Lopez’s Gigafactory Shanghai Predictions

Welcome to our new series: delicious tasty claim chowder! In the series, we revisit past predictions about the future to see how they stand up against reality.

Today, let’s revisit this video from Business Insider “columnist” Linette Lopez on Tesla’s Gigafactory Shanghai.

From March 12, 2019:

Tesla has planned on making a huge entrance into the Chinese market by building a factory there that makes Model 3s, the standard version, which is to say, the least complex version of the Model 3.

Business Insider

The Model 3 Standard is not less complex than the long range version –– it’s the exact same car. The only difference is that its battery has less capacity.

Well, Tesla is known for setting goals that are completely beyond anything that the auto industry would possibly ever do.

Business Insider

Fact check: This is true

Unfortunately, Tesla is also known for not meeting those goals.

Business Insider

Yes, I’m sure there is no way they’ll be able to build this factory on schedule. “You miss 100% of the shots you don’t take, so don’t take any shots” –– Linette Lopez

So far, the China plant is, basically, an open field with some digging going on.

Business Insider
Tesla’s Gigafactory Shanghai Today

Wow, that’s a lot of digging! Almost as impressive as the hole Linette dug for herself making this video.

 It’s harder and harder to believe that there will be Model 3s coming out of the Tesla China Gigafactory by the end of the year.

Business Insider, March 2019
Model 3 coming to of the Tesla China Gigafactory, October 2019

China is not only the manufacturing hub of the world right now, but also, the Chinese government has been giving generous subsidies to people who make and purchase electric vehicles. In Beijing, it can cost like $10,000 to get a license.

Business Insider

My understanding is that it was less about money and more the fact that getting a license plate is a random lottery that could take years to get through. Electric vehicles don’t have to go through the lottery because they don’t pollute –– these restrictions are designed to reduce air pollution.

If you buy an electric vehicle, that has been waived for you. But the problem is that the government is gonna start replacing those deals with a cap and trade program for manufacturers. So instead of the customers getting the deal for buying an electric vehicle, the manufacturers are going to get a deal for making electric vehicles. So we have yet to see how that’s gonna change consumer behavior.

Business Insider

The Chinese government is phasing out cash subsidies they used to give for any company that makes EVs. This has created many weak domestic EV brands, most of which will not survive without subsidies. Rules like the license plate lottery, which are designed to curb pollution, will remain in effect.

Furthermore, any Econ 101 student can tell you that whether the consumer gets the incentive or the producer gets the incentive, the effective price is the same. If the consumer doesn’t have to worry about it it may actually be easier for them –– just buy the car at a lower price, and let the manufacturer worry about government incentives.

Tesla’s going to have to figure out how to re-source all the parts for the cars that it already has sourced in the United States. So they’re gonna have to change their supply chains.

Business Insider

Many of the parts that go into a Tesla already come from China. Other parts can be imported or re-sourced. This was an attempt to make the task of getting the factory up and running seem impossible, but in retrospect it just makes Tesla’s achievement much more impressive. Thanks Linette!

There’s a lot of competition at different price points. Because the government was giving so many subsidies, electric car companies popped up all around the country and Chinese car manufacturers decided to make electric cars too.

Business Insider

Yes, and they’re all doing so great.

Tesla is a luxury car and out of reach for a lot of Chinese people, so Tesla’s gonna really have to work on getting the cost down if it wants to sell more than just luxury models.

Business Insider

There’s 1.4 billion people in China. That’s a billion more people than there are in the United States. The number of wealthy Chinese now outnumbers wealthy Americans for the first time. I think Tesla will do just fine focusing on luxury models –– the market for those vehicles in China is bigger than in the US.

Yes, there is a lot of poverty in China. But there’s also a lot of wealth, and a rapidly growing middle class.

Another thing about the Chinese market is that SUVs are really huge there. At this point, Tesla only has the Model X, which is about $170,000 in China. That car will be competing with cheaper electric vehicle SUVs including one from NIO, which just came out recently, which is a little more high-end Chinese electric car maker.

Business Insider

Tesla is selling every car they make (actually, in the last quarter they sold more cars than they made). I think they’ll do just fine until the Model Y starts deliveries next year.

As for “NIO”… they’re on the verge of bankruptcy.

Because of the kind of erratic price cuts and stories about fiery accidents and Elon Musk’s legal troubles and behavior, all of that is having an effect on Tesla’s brand value. 

Business Insider

Pray tell Linette, who wrote those stories? Was it… you?

If you really believe you destroyed Tesla’s brand value, how do you explain record Tesla sales quarter after quarter?

According to my sources, if Tesla wants to win at China, they need to get cars out fast.

Business Insider

Did you really need to interview your buddy Jim Chanos to figure that out?

Jim Chanos runs a fund that is dedicated to short selling, or betting that a company’s stock price will go down. He has been betting against Tesla for years. Linette and Chanos are good friends, so Linette often helps his short position by publishing untrue information about Tesla such as this video about the Gigafactory. They know the effect on the stock price could be immediate (allowing Chanos to profit) but it will take months for people to realize the information in the video was false.

If you can get a lot of cars on the road, according to my source, we’re talking 150,000 to maybe 300,000 cars. If Tesla can do that, it can probably have a big impact and keep a foothold in China. Until then, it may have to sell cars at a loss. For other car companies in China, that’s going to be difficult because they have deals with manufacturers that require them to make a certain amount of cars. Tesla doesn’t have that. It has an advantage. But what Tesla doesn’t have right now is a factory. So that’s a problem.

Business Insider

Yeah, almost as big of a problem as the $6 billion+ in short selling losses incurred by people who believe this bullshit.

Until next time –– enjoy this nice tasty claim chowder!

mmmm Claim Chowder

5 thoughts on “Claim Chowder: Revisiting Linette Lopez’s Gigafactory Shanghai Predictions

  1. Brilliant, Steve! Added emphasis for having these false prophets state their stupidity (and paid puppeteering) on video for eternal reference — bonus points.

    I’m looking forward to your next installment — of many — in Claim Chowder.

    You might consider some copyright on this naming —- FaceCash isn’t doing too well; I heard. ❤️

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