While shareholders spark an optimistic tone on the forthcoming Tesla-SolarCity merger, at least one bearish investment analyst believes the merger will cause Tesla Motors shares to plummet.
Marc Faber, editor of the Gloom, Boom & Doom Report, has made a career out of successfully short-selling stocks – and now, the famed investment guru is urging investors to bail on Tesla.
“What they produce can be produced by Mercedes, BMW, Toyota, Nissan. Anybody in the world can make it eventually, at much lower cost and probably much more efficiently,” Faber said Monday on CNBC’s “Trading Nation.”
Faber is called “Dr. Gloom” by investment analysts because of his consistently negative outlook on investments Wall Street insiders consider winners. Faber has managed to accurately predict market shakeups such as the 1987 stock market crash, as well as the spike in oil prices in 2002.
His overall predictions are a mixed bag, with some of his prognostications never coming to fruition, such as his warnings of an impending economic collapse in 2013. Faber believes that the biggest automotive companies will eventually catch up to Tesla and overtake the company, due mostly to their ability to mass-produce vehicles.
“The market for Toyota and these large automobile companies is simply not big enough, but the moment it becomes bigger,” Faber said, “they’ll move into the field and then Tesla will have a lot of competition.”
He thinks an increasingly crowded electric vehicle market will likely push Tesla out of the mix.
“I think Tesla is a company that is likely to go to zero eventually,” Faber said.
Faber’s downgrading Tesla may have been informed by Mercedes-Benz’s announcement last week that it will jump headlong into the electric vehicle market as well, which could potentially put a sizable crimp in Tesla’s business plans.
The German automaker will add two electric sport utility vehicles and two sedans to its fleet, Bloomberg reported in August. Mercedes’ chief executive officer, Dieter Zetsche, said in June the company would unveil a new electric vehicle at a Paris auto show in September.
An expanding electric vehicle market might spell trouble for Tesla’s main brand, which has struggled financially.
Tesla’s debt continues to rise, moving up to $480 million in the first quarter of 2016. The company has burned through cash, due in large part to operating losses of $249 million in the quarter, and its overall investments ($234 million) to build its vehicles.
The electric vehicle company’s CEO, Elon Musk, will need much more investments — in fact, it will need more than $2.25 billion to meet demand for its Tesla Model 3.
As Tesla’s financials continue to wobble, the creation of a new Mercedes’s electric vehicle may add a glint of reality to Faber’s predictions on the Musk-lead company.
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