Bearish investor Jim Chanos, who’s had a long-running bet against Tesla (TSLA), blasted its vehicle quality and CEO Elon Musk’s management style, but dismissed the idea that he could get the boot — even with the company’s constant turmoil and missed expectations.
Chanos founded the world’s largest short-selling fund and is a notorious scourge of Tesla’s true believing bulls, and once famously declared that the stock was virtually “worth zero.”
He reiterated his longstanding critiques of the billionaire CEO on Thursday, who’s racing to meet lofty production goals and keep the company solvent in the face of rising capital needs.
Musk is “re-learning the hard lessons [automakers] in Detroit learned 100 years ago,” Chanos told an audience of big investors and business people. His wide-ranging remarks were made at a Connecticut event moderated by Fox Business Network’s Charles Gasparino.
“It’s one thing to manufacturing cars but detroit learned the hard way they didn’t want to be at the nexus” of selling cars directly to consumers, Chanos said — something that’s integral to Tesla’s business model, where clients order cars online.
Decades ago, Detroit’s big car brands decided to “let the dealers do that, and focus on manufacturing and updating models,” Chanos said.
However, Musk is “now dealing with all of the things car makers have had to deal with,” the investor said. “Tesla’s idea was to tear all that up and start from scratch...but sales and services are coming back in a hard way.”
Musk has managed to create “a very sexy car” Chanos acknowledged. While the energy efficient vehicles are popular with many drivers, it’s “turning out to be a poorly made car. What people love about it is the nature of the ride.”
Chanos — who also has his fair share of critics and a less than stellar track record on his aggressive short bets — did not address specific concerns or complaints about Tesla’s automobiles.
However, in February, Consumer Reports yanked its recommendation for the Model 3 sedan, amid “a number of complaints” made by members about the car’s reliability and quality.
Moreover, the publication has not recommended either the Model S or X— both of which have been the subject of complaints by owners, according to Consumer Reports.
Tesla did not immediately respond to Yahoo Finance's request for comment.
Under pressure from a revolving door of executives and board resignations, Chanos was asked if he’d view the company more constructively if Musk were to resign.
“I don’t think he can,” the investor said, calling Musk’s disruptive attitude “contrived” while deriding the fictional Avengers superhero “Tony Stark” persona that he’s cultivated with his penchant for inventing and entrepreneurial endeavors.
“He’s the brand...it’s all about Elon Musk,” Chanos said. “I think a lot of people buy the car because he’s the brand.”
Amid a downturn in demand for its luxury electric vehicles, Chanos heaped scorn on what he said was “a poorly made car” that’s very popular on the U.S. coasts, but not as much in other regions.
‘You have to be f-ing kidding me’
During Tesla’s Q1 earnings call, Musk vowed to unveil an insurance product for Tesla owners within a month, but has yet to deliver on that ambitious timeline.
In response to a question, Chanos harshly dismissed the idea by joking: “You have to be f-ing kidding me.”
Tesla vehicles, while environmentally friendly, are among the most expensive luxury cars to insure, and insurance quotes are known to vary widely among models.
“If you know anything it’s that the free market has woken up to the poor quality of Tesla’s vehicles, and insurance rates are going up,” Chanos said. “Tesla must be trying to get in front of the problem [by offering insurance]. It’s not going to happen and if it does it won’t be what people think.”
In recent days, Tesla’s stock plunged to a new 52-week low below $200, but soared more than 6% on Thursday, after a report suggested the company delivered over 30,000 cars this quarter, more than half of the number it moved during an ugly first quarter.
Musk has waged a public and very pitched battle against short-sellers — and notoriously tried to wrong-foot them last year when he floated an idea to take Tesla private if the stock hit $420. That notorious tweet got the CEO in hot water with regulators, who accused Musk of misleading Wall Street.
However, investors are still bearish on Tesla’s stock, according to data compiled by Ihor Dusaniwsky, head of predictive analytics at S3.
According to the analyst, short-sellers have amassed bets against Tesla’s stock worth nearly $8 billion.
Javier is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek
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