Michael Burry On Tesla:
Electric Cars Are Not About To Solve The Climate:
Lies Of Solar & Wind:
German Failure:
Conclusion:
Michael Burry On Tesla:
Michael Burry, the Big Short, has a history of contrarian, and often correct, bets against popular equities. Burry recently said that, he’s not betting against Tesla right now, but he sees a compelling case to wager against Elon Musk’s electric-vehicle company.
“If I am tweeting this you can bet I am not short it,” he said in a now-deleted tweet on Tuesday. “But I should be.”
As evidence of the automaker’s gloomy outlook, Burry highlighted a CNBC story about a Tesla Megapack battery catching fire at a PG&E energy-storage facility in California on Tuesday. The fund manager of “The Big Short” fame has repeatedly taken aim at Tesla during the pandemic. He revealed in December 2020 that he was short the company, and labeled its stock price “ridiculous.”
“Well, my last Big Short got bigger and bigger and BIGGER too,” Burry tweeted in January 2021, after Tesla stock surged. “Enjoy it while it lasts.”
A few weeks later, the investor compared the massive buzz around Tesla to the speculative mania during the dot-com and housing bubbles. Burry has also warned that Tesla stock could plummet 90%, criticized the company’s meager sales and profits relative to its peers, and described its battery technology as “inferior” based on multiple reports of Tesla vehicles catching fire. In April of this year, he cautioned that “the competition is coming” for Tesla.
This had led to questions regarding Burry, and his reasoning for shorting Tesla. Within this contrarian piece, I want to highlight my commentary and thoughts in reference to Burry, and why potentially, Burry may short Tesla again in the future.
Electric Cars Are Not About To Solve The Climate:
Electric cars are marked as another great way to reduce carbon emissions. but most drivers are reluctant to switch because the electric cars are substantially more expensive and, the need for recharging leads to “range anxiety”.
This is why across EU, and around the world, lavish subsidies are the norm.
When governments remove the support, for instance in Denmark in Hong Kong, sales plummeted to nearly nothing.
Replacing your current car with an electric car won’t lead to dramatic emission cuts. The International Energy Agency makes comparison between a standard gasoline powered car and an electric one. The gasoline powered car admits 34 tonnes of carbon dioxide over its 10 year lifetime, including production disposal.
At first glance, an electric car would seem to eliminate all the emissions. And, whilst they all certainly sold as having zero emissions, that is true only while it’s not being driven.
Yet in many parts of the world electric cars are reliant on electricity largely produced from fossil fuels, and the production is also more energy intensive than that of gasoline powered cars – especially the battery.
Since this production is typically reliant on fossil fuels, an electric car is actually responsible for lots of carbon dioxide emissions over its lifetime.
Across the world – an electric car with a reasonably long range – will on average emit 26 tonnes over its lifetime. So, switching from a gasoline powered car emitting 34 tonnes of carbon dioxide to a comparable electric car that emits 26 tonnes, does not eliminate emissions – it cuts them by 24% leaving more than 3/4 in place.
Emissions of course are not the only cause of damage caused by driving. Driving creates a lot of problems – ranging from noise pollution to lethal accidents. Climate damages are actually a small part of the total damages cause by vehicles.
Of course the electric car will be a bit better than a standard car on this measure. Electric cars make less noise – which is about 5% of the total damage caused by driving – but nevertheless a measure on which electric cars outperform standard ones.
Air pollution has an impact of 6%, and surprisingly more electric cars can mean more air pollution. If you have plenty of hydro power, as in Norway, replacing gasoline with electric power can improve air quality.
But in places with significant coal powered electricity generation – including parts of the US – more electric cars means more air pollution.
China, the world’s biggest electric car market, has so many coal powered plants that electric cars worsen local air with lethal consequences.
It is estimated that in Shanghai, air pollution from an additional billion electric powered vehicles, would kill nearly three times as many people annually as an additional million gasoline powered cars.
But pollution is not the most significant cost when it comes to cars. About 80% of the damage caused cause overall come from accidents and congestion. For these effects – it doesn’t make a difference if the driver is in a Tesla or BMW. All of which is to say that buying or subsidising electric cars does not help with the biggest social problem with cars, and it is certainly not a good investment from a climate standpoint.
The International Energy Agency hopes we can reach 130 million electric cars by 2030, a breath-taking expectation given that we have spent decades and billions of dollars in subsidies just reach 5,000,000. Even if we could do that it would cut a trifling 0.4% of global emissions by 2030.
Electric cars are likely to be part of future transportation, but they’re not about to solve climate change.
Lies Of Solar & Wind:
In 2014, under the slogan, “energy access simplified”, Green Pace supplied a village with a solar powered microgrid – an electric grid that’s not connected to the central grid. Green Pace proudly declared that the village refused to give into the trap of the “fossil fuel” industry. The worlds media reported excitedly on the first village in India where all aspects of life are “powered by solar.”
Greenpeace had the best of intentions. but intentions don’t count for much in development.
The day the electricity was turned on, the batteries were drained of power within a few hours. A boy from the village remembers wanting to do his homework early in the morning before leaving to work in the fields, but there wasn’t enough power for the families one lamp. This is because solar is way too weak to power a stove.
The citizens now had – maybe – a lamp illuminating the kitchen, but they still had to use the same old cook stoves burning wood or dung, polluting the home and putting the whole family at risk.
Green Peace invited the state chief minister to the inauguration of the solar powered system so he could meet grateful inhabitants. When he showed up, he was met by a large crowd of people waving signs demanding real electricity – the kind you can use to brand refrigerator stove and that your children can use do the homework in the morning – and not fake electricity.
A week after the protests, the village was hooked up to the National Grid with more reliable electricity access. The residents now get power from the grid at 1/3 of the price.
This situation repeats itself around the world.
In Fiji the government teamed up with a Japanese technology company to deliver off grid solar panels to remote communities. They provided a centralised power solar unit to the village of Raku.
Prime Minister frank proudly declared that he had no doubt that the “number of development opportunities are going to be unlocked by the by the provision of reliable sources of energy.”
Understandably all of Roku was thrilled to get access to energy and wanted to take full advantage. So, more than 30 household purchased refrigerators. but unfortunately the solar panel off grid system was incapable of powering more than three fridges at a time. Every night the power would be completely drained.
That led to six households purchasing diesel generators.
According to the researchers who studied this project, the village is now using about three times the amount of fossil fuel for electricity that was used prior to installation of the renewable energy system.
German Failure:
Germany’s renewable energy policy called the Energiewende, has been held by environmentalists and politicians around the world. Under this decade old policy, the nation is moved away from nuclear and fossil fuels towards wind, solar and biomass energy. The plan has cost $36 billion annually in recent years, and it is the country’s biggest political project since reunification.
Electricity costs have doubled over the past two decades and are now at 35 dollar per kilowatt average – almost three times the USA average. Germans will have spent 580 billion on renewables and related infrastructure by 2025.
This massive expenditure has meant renewable energy sources have gone from meeting 7% of Germany’s total electricity needs in 2000 to 35% of the electricity needs in 2019, with solar and wind power accounting for 2/3 of the renewable electricity.
But the country have been worried about nuclear power. This fear has led to a halving of nuclear electricity from 2002 to 2019. Since nuclear power is carbon free, the decline in nuclear energy, has offset much of the increase in solar and wind power.
Overall fossil fuels have declined only slightly as a share of German energy. In the first decade of the new Millennium, the fossil fuel share of the overall energy supply, dropped somewhat from 84 to 80%. But in the years since the plan was passed in 2010, the fossil fuel share has stayed almost constant, itching down just one percentage point to 79% today.
It is impossible to get around the fact that climate policies are expensive. Campaigners and politicians either downplay the cost or far more dangerously manoeuvre to make it appear that there was actually a benefit.
If we change from fossil fuels to clean renewable sources, the claim that we will not only solve the climate crisis, but unlock jobs, savings, competitiveness and improved well-being, is a total fallacy.
Claiming the climate policy is not only good for climate – but also will actually make everyone richer – is not just a comforting bedtime story. Even worse, it is flat out wrong.
Every serious report shows extraordinarily large costs from climate policy simply because changing the energy infrastructure that is underpinned the last two centuries of economic growth will be incredibly costly.
A 2018 Goldman Sachs report showed that the cost to build just the infrastructure for electric cars, such as charging stations and power networks, would be in astronomical 6 trillion or 8% of today’s global global GDP.
If the EU sticks to the climate promises for 2050, it alone could end up paying more than 2.5 trillion per year in climate costs – 10% of its entire GDP. This is more than all the EU’s current spending on education, health, environment, housing, defence, police, and courts.
It is inconceivable such spending will go unchallenged.
We are constantly being told the renewables like solar and wind just about to takeover the world.
This is almost entirely wishful thinking. The sheer scale of battery storage capacity that would be needed for solar panels to work is vastly underappreciated.
Today the US has enough batteries, across the entire nation, to store just 14 seconds of average US electricity use.
Instead of not flying on aeroplanes we must invest into carbon efficient aeroplanes, more sustainable fuels. Every dollar spent on investing in carbon efficient planes is far better than cutting out our flights. There is a perhaps strong case to be made that, instead of mass electrification- in which has incredible costs – society should focus upon carbon efficiencies and the creation of new fuels.
Conclusion:
Fundamentally, I am questioning not solely the necessity, but also the viability and logic of mass electrification. In consideration of the huge costs associated with EVs batteries and charging, I believe that it is far too reductionistic to solely assume that by 2030 everyone shall be driving an EV.
In fact, in consideration of the notion that this requires a total transformation of the infrastructure today, this should not be taken so lightly. Whilst it seems likely that EVs will be used – perhaps at some scale – in the future, I believe investors should question this perceived future with more scrutiny.
The climate debate is filled with major misconceptions, lies, and unrealistic narratives. This is why it is fundamentally necessary to approach Tesla, and the whole premise of mass electrification, with major scurrility. Otherwise, these claims of 30M plus vehicles for Tesla by 2030, are likely to hold little truth.
Whilst there is reason to be negative, the optimistic side is focused upon mass innovation. At the core, if we want poor nations to adopt EVs, solar panels and wind, we must rapidly innovate until the point in which cost parity has been met in relation to renewable sources versus conventional sources. Without this mass innovation, there is little hope as to wide spread adoption for EVs and true utility of renewables.
