Tuesday, September 29, 2020

Nikola Motors - Another Elio?

Promises of products to be made "next year" and a few prototypes and some great CGI presentations.  This all sounds so familiar.

I noted in an earlier posting that we met a couple who bought a used Model-S Tesla that was seven years old.  Teslas are not only on the market, but on the used car market as well.   Tesla has demonstrated that it is capable of making a real production-quantity of vehicles, although it is hardly at the level of Toyota or General Motors or Volkswagen.

It is interesting how Tesla got started - with small baby-steps at a time.  The first Tesla model - the roadster - was basically a Lotus chassis bought from that company, and then fitted with the Tesla battery pack and motor.   What made it turn heads is that unlike earlier electric cars - that relied on lead-acid batteries - this was not some overgrown golf cart that would be going slow, hogging the lane, honked at, and running out of electricity before you got home.   The Tesla roadster was a hotrod, and capable of performace than rivaled some supercars - certainly better than the Lotus it was based on.

These were expensive cars, but again, they are now hitting the used market and I am reading online about people buying them - fairly cheaply - and having fun with them.   But since they were sold as a premium brand, Tesla could bring in a lot of cash right up front.   From that, they went to the Model-S, which again was positioned as a premium brand car, so they could command six-figure prices for it.   Only when they had established a market and demonstrated they were capable of building a product have they attacked the mid-level market with the Model-3.   We won't talk about the Model-X, which apparently has a lot of reliability issues.   Gull-wing doors never work out well, and just smack of useless "dream car" prototypes.   Maybe they can ditch the fancy doors and just make a regular SUV.  We'll see.

But given all that, Tesla still struggles to make money, and there are many car makers promising to enter this market segment.   But one carmaker - that has yet to make cars - has promised to enter this field as well.  Nikola motors is sort of a Tesla wanna-be, right down to the name chosen (Tesla's first name).   GM recently announced they were investing in the company, but the company has yet to build any vehicles.  In fact, their building plans seem to amount to more of licensing their technology to various manufactures.  No giga-factories here.

This article is one of many that argue that the entire thing could be a scam.  It does seem to sound like one.  I wrote before about the Elio - a car that has never been built, other than as a sketchy prototype, whose color changes regularly.   Elio seems to have gone dormant - perhaps the founders have milked that for all it was worth.  Believe it or not, they are still taking reservations for the cars and selling the stock - although it may be de-listed.   And of course, these cars are coming out "next year" - a convenient term, as you don't have to update your website every year.

Of course, people like to write articles saying such-and-such a company is going under, and then they short-sell the stock.  And some say that is what is happening with Nikola.   But for the small investor, the point is moot:  You have no business investing in Tesla, Elio, Nikola, or any other start-up, period.

The problem with these companies is that the stock prices are constantly being manipulated.   Even Tesla, which has a real product and factories and whatnot, is subject to short sellers and the erratic behavior of its founder.   Again, Joe Littleguy thinks, "These mutual funds are boring!  I need something that will make me a lot of money, fast!  Why not spend a few hundred or a few grand on something that might go somewhere?  Who knows?  I might make out!"

This is not investing, it is gambling.   And unfortunately, a lot of people are compulsive gamblers, and as a result, fritter away a lifetime of income, if not at an actual casino, at the Wall Street casino.   You can gamble at draft kings, on sports betting, or gamble on their stock - and lose money both ways.  Yes, you see the ads all the time on "How this man made a million dollars on draft kings!" just as casinos tout the guy who won the Camaro on the progressive slots.   That guy is not you.   For every winner, there are hundreds of losers.  For every million-dollar winner, thousands of losers.

So when I read about Nikola Motors, I basically put that down under "don't give a shit" because there is no way I am going to invest in something that is sketchy and unproven, or at least during the time of my life when I was investing.   Today, I am invested in nothing, because quite frankly, the whole stock market thing smells bad.   But if I was buying stocks, it would concern me that GM was being drawn into this, given that they have their own line of electric vehicles on the drawing board.   If you read the fine print, however, it seems that GM was given stock in the company in return for agreeing to produce the Nikola pickup truck, which has yet to happen.   So it looks like GM may end up losing nothing out of this bargain, and all Nikola gets is bragging rights to gin up the stock price, perhaps.

Just walk away from "the next big thing!" because chances are, even if there is a "next big thing!" you'll invest in the wrong company (Digital Research instead of Microsoft) and even if the deal pans out, there are no wild profits to be made.

In the car business, this is particularly true - it is a worldwide business that is saturated with over-capacity and narrow profit margins.  There are no fat dividend checks coming out of these companies, even the most profitable ones.

Trying to "win" in the marketplace is the one sure way to lose!