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Why Jim Chanos is thoroughly unimpressed by Tesla

Influential short-seller Jim Chanos, who runs hedge fund Kynikos Associates, has been betting against two companies founded by billionaire serial entrepreneur Elon Musk — Tesla Motors (TSLA) and SolarCity (SCTY).

Chanos, famous for nailing the collapse of Enron, said that shareholders view Musk as a “messianic leader.” In other words, he can do no wrong. While Chanos has no doubt about Musk’s intelligence, he does see serious problems with his companies, which he described as a “melange of publicly-traded and privately-traded science projects sort of gone awry.”

“The fact of the matter is this is a company — in Tesla’s case — that’s now really going to need to step up the production. It’s going to be competing against Mercedes, Audi, VW, finally, who are bringing product lines as an OEM [original equipment manufacturer],”  Chanos said at the Vanity Fair New Establishment Summit in San Francisco on Wednesday.

Elon Musk

According to Chanos, Tesla has been “leapfrogged” by most the other OEMs, making Tesla’s massive  gigafactory it’s currently building in the Nevada desert “somewhat of a giant white elephant.”

“This is a car company,” Chanos said.

“This is not a high-technology company in that people forget that battery technology has been around a long time,” he continued. “It’s not subject to Moore’s Law. It’s basic chemical reactions.”

Furthermore, he added that the battery technology Tesla uses is not proprietary, but rather belongs to Panasonic (PCRFY).

“A lot of people are continually stunned to find that out.”

Chanos has also been critical of SolarCity, which he called “basically a roofing company with a consumer financing arm attached to it.”

“It’s not a high-tech company and it’s not a very economic business in and of itself selling you power at 17 cents a kilowatt hour.”

Chanos has previously called Tesla’s $2.2 billion bid to buy SolarCity a “shameful” deal.


Julia La Roche is a finance reporter at Yahoo Finance.

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