Investor's Corner
Sorry Jim Chanos, but the Tesla Model 3 is definitely not ‘looking to be a lemon’
A lot of Tesla’s immediate future is tied to the Model 3. Elon Musk said as much in an interview last July, when he accurately described the Model 3 ramp as a “bet-the-company” situation. This means that if the Model 3 proves a success, Tesla could take a definitive step towards Elon Musk’s Master Plan; but if the vehicle fails, it would be catastrophic for the company.
The Model 3’s failure is something that Jim Chanos, arguably the most high-profile of Tesla’s short-sellers, is looking forward to. Chanos has taken an aggressive stance against the electric car company, never hesitating to express his belief that TSLA stock is worth $0. Over the years, the prominent short-seller has frequently attacked the electric car maker, pointing out Elon Musk’s alleged fraudulent activities and Tesla’s weaknesses as a company.
So far, Chanos’ bet against Tesla has not been paying off. His hedge fund, Kynikos Capital Partners, has not done very well since 2015, a time in which he held a short position against Solar City, and not long before he announced that he was shorting Tesla. Including a 9% loss through July of this year, Kynikos exhibited a net annualized return of 4.86% since 2015, compared with the S&P 500’s return of 12.17% during the same period.
Considering the high-stakes bet that Tesla took with the Model 3, the success of the electric car is something that would not do any favors for Kynikos’ already-embattled year. Chanos, for his part, noted in a recent interview with Institutional Investor that he still likes his odds on Tesla. He does, for one, believe that Elon Musk “handcuffed” himself by promising profitability during the second-half of 2018. He also believes that there are inherent problems with the Model 3, as shown in its production slowdowns in August and alleged issues with the vehicle.
“It’s looking to be a lemon,” Chanos said.
As the third quarter draws to a close, the prominent short-seller’s thesis against Tesla would be put to the test. The electric car maker, after all, has set aggressive targets for itself this Q3, aiming to build 50,000-55,000 Model 3 during the quarter while attaining profitability. Whether Tesla could accomplish its ambitious objectives remains to be seen, but there is one thing that is starting to become evident — the Model 3 does not seem to be a lemon at all.
The electric car’s production issues are well-known, and the teething problems that Tesla exhibited in the vehicle’s initial run were evident, as shown by the first observations of teardown specialist Sandy Munro when he started tearing down an early-production Model 3. But even Sandy Munro eventually admitted that behind the inconsistent panel gaps and imperfect fit and finish issues of the early production Model 3 he tested, he was thoroughly impressed with Tesla’s battery technology, electronics, performance, and ride quality. Tesla’s fit and finish on the Model 3 has improved since the car that Munro tested rolled off the assembly line, and the vehicle has only gotten more praise since then.
The electric car, particularly the Model 3 Performance, has practically garnered unanimous praise from professional auto reviewers. Various auto journalists, from the Wall Street Journal to Car & Driver to Road & Track (to name a few), have praised the vehicle, with the consensus being that it is a car that can disrupt the high-performance sedan market dominated by longtime legends such as the BMW M3.
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- The Tesla Model 3 gets crash tested by the National Highway Traffic Safety Administration. [Credit: NHTSA]
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- The Tesla Model 3 gets crash tested by the National Highway Traffic Safety Administration. [Credit: NHTSA]
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- The Tesla Model 3 gets crash tested by the National Highway Traffic Safety Administration. [Credit: NHTSA]
The Tesla Model 3 gets crash tested by the National Highway Traffic Safety Administration. [Credit: NHTSA]
The Model 3 was given a flawless 5-Star safety rating by the Highway Traffic Safety Administration as well, garnering perfect scores in all categories and subcategories. Videos of the vehicle’s frontal crash, side crash, and rollover crash depicted the electric sedan providing ample protection for its driver and passengers during collisions. With the Model 3’s rating, all of Tesla’s vehicles currently in production now have the distinction of having 5-Star safety ratings from the NHTSA.
Recent reports from the Tesla community in both the United States and abroad also indicate that the company has adopted an aggressive delivery schedule for reservation holders, with centers reportedly conducting handovers until 10 p.m. Other reports further suggest that Tesla’s delivery centers are handing over up to 100 cars per day.
Tesla’s capability to become profitable is linked to the Model 3, which would comprise the majority of its sales this quarter. A vote of confidence for this came in the form of analyses from a German teardown firm and Detroit’s Munro and Associates, both of which concluded that Tesla could make a profit with the Model 3. Munro, for one, noted after his teardown of the Long Range RWD Model 3 that the vehicle could give Tesla a 36% profit. More expensive trims, such as the Long Range Model 3 AWD and the Model 3 Performance, are likely even more profitable.
The third quarter is not yet finished, and much of Tesla’s production and delivery progress remains unknown. But all things considered, Jim Chanos’ bet against the Model 3 as a vehicle could very well end up being a disappointment for the esteemed short-seller.
Investor's Corner
Michael Dell points out practical advantage of Elon Musk’s proposed pay package
As pointed out by the Dell Technologies CEO, Musk will only be rewarded if he delivers extraordinary value to shareholders
Michael Dell has weighed in on Elon Musk’s controversial 2025 CEO Performance Award, offering a grounded perspective amidst the noise surrounding the pay package today.
As pointed out by the Dell Technologies CEO, Musk will only be rewarded if he delivers extraordinary value to shareholders. Musk would quite literally receive no compensation if he fails to achieve his targets.
Dell emphasizes results over rhetoric
Dell shared his thoughts about Musk’s 2025 CEO Performance Award in a post on X.“Vote FOR Elon Musk. The award is only achieved IF he hits exceptionally ambitious market-cap and operational milestones—if he falls short, he gets nothing,” Dell wrote in his post.
“If he succeeds, shareholders will win big through unprecedented value creation, and he will earn added voting rights to continue driving Tesla’s long-term vision.”
Musk replied with a short “Thanks Michael,” acknowledging Dell’s support. Dell’s framing cuts through the debate surrounding Musk’s compensation, as he simply focused on the incentive structure’s risk-reward balance.
Musk’s ambitious pay package
Elon Musk’s 2025 CEO Performance Award requires Tesla’s market capitalization to rise from roughly $1.1 trillion today to $8.5 trillion within a decade. This would make Tesla more valuable than any company in history.
Apart from this, Tesla’s operating profit must also grow from $17 billion to $400 billion annually. Musk must also lead the company to several product-related milestones, such as 20 million cumulative vehicle deliveries, 10 million Full Self-Driving subscriptions, 1 million Tesla Bots, and 1 million operating Robotaxis.
So far, proxy advisors Glass Lewis and ISS have urged shareholders to vote against the plan. Some prominent investors, including ARK Invest CEO Cathie Wood, however, have voiced strong support for the plan. Wood called Musk “the most productive human being on earth,” arguing that his vision and ability to attract talent are central to Tesla’s success.
Investor's Corner
Elon Musk’s 2025 pay package gets support from Tesla’s biggest bull
ARK Invest founder Cathie Wood has previously stated that she is quite confident that the vote on Elon Musk’s 2025 Performance Award would pass.
Cathie Wood, CEO of ARK Invest and one of Tesla’s most ardent bulls, reiterated her support for Elon Musk’s 2025 CEO Performance Award.
Wood highlighted that Musk’s leadership attracts incredible talent, and it has allowed the companies he leads such as Tesla to become disruptors in their respective fields.
ARK Invest supports Musk’s leadership
Elon Musk’s 2025 CEO Performance Award has received a mixed reception. Proxy firms such as Glass Lewis and Institutional Shareholder Services (ISS) have stated that they would be voting against Musk’s pay package. Other entities, such as the State Board of Administration of Florida (SBA), have stated that they would be voting in favor of Tesla’s proposals.
ARK Invest founder Cathie Wood, for her part, has previously stated that she is quite confident that the vote on Elon Musk’s 2025 Performance Award would pass. She also stated that a favorable result to the vote for Musk’s 2025 pay plan would be beneficial for Tesla.
“Elon Musk is the most productive human being on earth. And a human being who attracts incredible talent, people who want to solve the world’s hardest problems. This is a win-win for all of us if Elon succeeds this time,” Wood stated. Musk appreciated Wood’s comments, stating, “Thanks Cathie!” In a post on X.
ARK Invest has been one of Tesla’s most loyal bulls
Tesla is ARK Invest’s single largest holding, with the firm holding an estimated $1 billion worth of TSLA, as noted in an Insider report. Wood previously said she expects the approval of Musk’s pay package to trigger “super-exponential growth” for the automaker, as new products like the Cybercab and Optimus expand Tesla’s offerings.
“Because think about it. It is a convergence among three of our major platforms. So, robots, energy storage, AI, and it’s not stopping with Robotaxis. There’s a story beyond that with humanoid robots, and our $2,600 number has nothing for humanoid robots. We just thought it’d be an investment, period,” Wood stated during an appearance at Steven Bartlett’s podcast The Diary Of A CEO.
Investor's Corner
Tesla VP for AI software makes a case for upcoming Elon Musk shareholder vote
Elluswamy reiterated the idea that Tesla is indeed at a critical point in its history.
Tesla’s Director of Autopilot Software and VP of AI Software Ashok Elluswamy has shared his thoughts about CEO Elon Musk’s 2025 performance award. While the executive typically discusses topics related to the company’s tech and AI initiaives, Elluswamy made it a point to make a case for Musk’s proposed pay package.
Tesla’s VP for AI Software shares his insights
In a post on X, Elluswamy reiterated the idea that Tesla is indeed at a critical point in its history. This is because the company is changing from a leader in electric vehicles and a major player in the energy storage market to a powerhouse pioneer in robotics that are powered by real-world AI. As per the executive, Elon Musk’s leadership of Tesla is more relevant now more than ever. He also reported an X article he previously wrote about Elon Musk and Tesla.
“This note regarding the importance of Elon leading Tesla is more relevant now than ever. Tesla is at a critical juncture, as it is metamorphosing into the world leader in robotics. Creating large-scale, useful robots requires expertise across engineering design, manufacturing, real-world AI software, chips for AI, and more. Elon is, quite likely, the only person on Earth with deep skills and the right instincts across all these domains,” Elluswamy stated.
A push to support Musk’s 2025 performance award
In recent weeks, Tesla executives such as Board Chair Robyn Denholm have been encouraging TSLA shareholders to vote in favor of Elon Musk’s 2025 performance award, as well as other proposals that the company’s directors have argued are critical to the future of the company. These proposals, Tesla executives noted, are necessary to ensure that the company can achieve the ambitious targets of Elon Musk’s Master Plan Part IV.
Elon Musk’s pay package, as well as the company’s proposals, would be decided at the upcoming 2025 Annual Shareholders Meeting, which would be held at Giga Texas on November 6, 2025. Needless to say, Tesla’s future might very well be decided during the event.
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