Tesla reported a 31% drop in sales in the first quarter of 2019, only delivering 63,000 vehicles in Q1. The electric car maker’s problems don’t end there, as CEO Elon Musk heads to court in his ongoing battle with the SEC. The regulator is seeking to hold Musk in contempt, arguing his tweets violated a September settlement. Yahoo Finance’s Dan Roberts, Akiko Fujita, Myles Udland, and Alexis Keenan break down what this means for Tesla’s future.
A highly unusual move by Tokyo prosecutors to arrest former Nissan Motor Co. Chairman Carlos Ghosn for a fourth time on Thursday morning marked the latest plot twist in an almost five-month legal drama, and could reignite criticism of Japan’s judicial system, dubbed by critics as “hostage justice.”
In the latest arrest, the prosecutors accused Ghosn — who had been released on bail — of misappropriating Nissan’s payments to a distributor in Oman, alleging that some of the money had been siphoned off for his own personal use.
Legal experts interviewed by The Japan Times the same day said the move — to not only bring a new charge against Ghosn but to rearrest him — indicates they are likely to have obtained credible evidence showing Ghosn’s culpability.
In a statement released to media outlets shortly after the development was reported, Ghosn described his latest arrest as “outrageous and arbitrary.”
“It is part of another attempt by some individuals at Nissan to silence me by misleading the prosecutors. … I will not be broken. I am innocent of the groundless charges and accusations against me,” he wrote.
The arrest came less than 24 hours after he announced, from a newly launched Twitter account, that he was “getting ready to tell the truth about what’s happening,” and would hold a news conference in Tokyo on April 11.
Junichiro Hironaka, one of his attorneys, harshly denounced prosecutors Thursday afternoon, lambasting them for silencing Ghosn’s attempt to speak out at the news conference and their decision to detain him instead of simply pressing a new charge.
Hironaka said that Ghosn had denied any wrongdoing, including the new accusation, stressing that the former Nissan chief was neither a flight risk nor likely to tamper with evidence.
“Even though it was a separate case, it is unthinkable to arrest someone who has been released on bail,” he said vehemently. “We strongly condemn the prosecutors for doing so. … We have no choice but to describe the arrest, which has no merit nor necessity, as an act of aggression.”
Hironaka said the defense team is planning to release a video in which Ghosn would explain his position “as much as possible.” It is not clear whether what was said in the recording is exactly the same as what Ghosn would have said at the April 11 news conference, the lawyer added.
When the prosecutors raided Ghosn’s house, they confiscated his phone, diary and documents that he was preparing for the trial, Hironaka said. His wife, who is not a suspect and was present during the raid, was perturbed, and her cell phone and passport were also seized, the lawyer added.
Since Ghosn had been arrested three times already, any evidence related to accusations would have already been in the hands of the prosecutors.
“Is taking away those materials really necessary, and allowed?” he said. “We believe this is a clear violation of defense rights.”
Ghosn was released on bail from the Tokyo Detention House on March 6 after paying ¥1 billion in bail and having spent 108 days in confinement. The long detention drew criticism from many legal experts in other countries.
The decision by the prosecutors could rekindle global criticism toward Japan’s judicial system, dubbed by critics as “hostage justice,” in which suspects are frequently detained for long periods without an attorney present in order to coerce a confession.
Thursday’s arrest also serves as a rude awakening for Ghosn, indicating that prosecutors would be willing to arrest him, if they have reasonable suspicion, regardless of whether he has already been released on bail.
“For instance, it might be not appropriate in this case but if a gang member who had been arrested on drug charges and released on bail uses drugs again, the gang member would likely be arrested,” said Shin Ushijima, a Tokyo-based corporate lawyer who is not involved with the Ghosn case. “The prosecutors are not doing something out of the ordinary.”
The timing of the arrest also prompted speculation. Nissan is currently scheduled to hold an extraordinary shareholders meeting next Monday to oust Ghosn and Greg Kelly, his close associate who was also arrested, from the automaker’s board.
Nobuo Gohara, a lawyer and former prosecutor, suggested prosecutors in Japan might have been prompted to pursue the new charge after they learned about the new allegation surfacing in France.
Reuters reported Monday that Renault SA had notified French prosecutors regarding millions of euros in payments made from the French automaker to a business associate of Ghosn in Oman that was then transferred to a Lebanese company with which he is associated.
Yasuyuki Takai, an attorney and former prosecutor at the Tokyo District Public Prosecutor’s Office, said Japanese prosecutors have cooperated with authorities in Oman, and had been planning to indict him if the findings from Oman authorities’ investigation were convincing.
According to Takai, the authorities had actually hoped to arrest Ghosn prior to April 1 — the day the next Imperial era name was revealed.
“They usually wouldn’t want to arrest (him) in the middle of a celebratory mood,” Takai said. “They had hoped to wrap up the investigation by then. But they couldn’t do it because they didn’t receive findings from the Oman authorities by then. … The arrest took place now because it took a while to receive the findings.”
The length of Ghosn’s detention this time is an aspect of the case that is likely to draw renewed attention.
Prosecutors will be able to hold Ghosn for up to 22 days from the arrest to decide whether to indict him. If he is indicted and the court considers him a flight risk or as potentially willing to destroy evidence, prosecutors will then be able to detain him for two more months. After that, the detention can be extended further by one month each time if necessary.
Despite having already posted ¥1 billion bail, Ghosn will also need to pay additional bail if he is indicted again this time and his detention continues.
The money will be returned to him after his trial is completed if Ghosn does not violate any bail conditions, according to the Japan Bail Support Association, an organization that supports those who have difficulty securing bail payments.
Ghosn was initially arrested last November and accused of having deliberately underreported his remuneration for years. He was subsequently hit with additional charges, including aggravated breach of trust, for the alleged transfer of private investment losses to Nissan in 2008.
Ushijima said Ghosn would likely be released on bail again after being indicted on this accusation, since the defense team had already presented bail conditions when he was accused on those three charges and the court had granted him bail.
One of Ghosn’s bail conditions was restricted use of the internet, but Hironaka said that did not mean Ghosn could not use the internet at all.
The defense team believes the fourth arrest was the “last card the prosecutors can use, and there is nothing that they can do further,” Hironaka added.
The past few weeks have been a bumpy ride for the 65-year-old French former auto titan. The Nissan-Renault-Mitsubishi Motors Corp. alliance has already moved on without him, and has been focusing on strengthening their partnership.
Renault has announced Ghosn would resign from his position as director at the French automaker in June.
“After being wrongly imprisoned for 108 days, my biggest hope and wish today is for a fair trial,” Ghosn wrote in a statement.
“I was scheduled to present my story in a press conference next week; by arresting me again, the prosecutors have denied me that opportunity, for now, but I am determined that the truth will come out. I am confident that if (am) tried fairly, I will be vindicated.”
The dollar eased below ¥111.40 in Tokyo trading Wednesday, hit by selling to lock in profits.
At 5 p.m., the dollar stood at ¥111.35-35, down from ¥111.51-51 at the same time Wednesday. The euro...
Tesla may have just hurt Elon Musk's own case in his battle with the SEC, according to J.P. Morgan.
"The now clear incongruence of CEO outlook statements with official company guidance may hurt the perception of management commentary, eroding investor confidence and potentially placing additional pressure on the shares," J.P. Morgan analyst Ryan Brinkman said in a note to clients late Wednesday.
"Full year delivery guidance was stated in the release to have been 'reaffirmed' at the prior level of 360,000 to 400,000 units, in our view undermining a key tenet of CEO Elon Musk's legal defense against the SEC — that his February 19 tweet that Tesla will make around 500,000 vehicles in 2019 was not new information needing pre-approval," Brinkman said.
Tesla shares fell more than 10 percent in premarket trading Thursday morning.
Though the government claims that Musk's tweet violated his agreement not to post material information without first seeking approval from company lawyers, the CEO has claimed that the information was innocuous and did not need to be vetted. He will try to convince the court that he did not violate an October fraud settlement and should not be held in contempt.
But Tesla's press release Wednesday night may undermine that argument with the latest production updates.
"Despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, US orders for Model 3 vehicles significantly outpaced what we were able to deliver in Q1. We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019," the press release said.
Said Brinkman: "Even if it could be argued that official full year guidance somehow increased from 360-400K deliveries at the time of the shareholder letter to 350-500K of the Model 3 alone just hours later, to 420-600K total production on February 28 — and now back down to 36-400K deliveries — the choppiness and inconsistency of this communication would still in our view erode investor confidence."
MIT, one of the top universities in the United States, said the move followed a new review of international projects or partnerships that pose an "elevated risk."
"MIT is notaccepting new engagements or renewing existing ones with Huawei and ZTE or their respective subsidiaries due to federal investigations regarding violations of sanction restrictions," Maria Zuber and Richard Lester, the university's vice president for research and associate provost respectively, said in a letter to the school community on Wednesday.
The administrators also said that the universityhad determined that working with certain countries — particularly China, Russia and Saudi Arabia — "merit additional faculty and administrative review beyond the usual evaluations."
Any projects involving funding from people or entities from these countries, or MIT faculty or students doing work there, would face further review, they said.
The university added that it would "revisit" its collaborations with Huawei and ZTE(ZTCOF) over time, and could revise the list of countries as circumstances change.
Huawei, one of the world's biggest providers of telecom equipment, smartphones and other devices, is under international scrutiny as the United States leads an effort to curb the company's ambitions to become the global leader of 5G, the next generation of wireless technology.
Washington has been urging allies to restrict or ban the use of Huawei equipment in their 5G networks, alleging Beijing could use the company's products to spy on other nations. Huawei denies that any of its products pose a national security risk.
US prosecutors have also accused Huawei and its chief financial officer, Meng Wanzhou, of violating US sanctions on Iran. Huawei and Meng deny the charges.
It is unclear what partnerships Huawei and ZTE currently have with the university. MIT didn't respond to a request for additional comment outside of regular business hours. ZTE declined to comment on the university's statement.
"We're disappointed by MIT's decision, but we understand the pressure they're under at the moment," a Huawei spokesmantold CNN Business.
"We believe that scientific research is carried out for the benefit of all mankind, and should be free from the influence of geopolitics. Huawei denies the allegations of the US government, and we trust the US judicial system will ultimately reach the right conclusion," he added.
As of August 2018, Huawei was listed as a member of MIT's Media Lab consortium, which has more than 80 members that include other major tech companies such as Cisco(CSCO), Intel(INTC) and Salesforce(CRM).
The consortium provides the bulk of the lab's annual budget of about $75 million to conduct research on technologies such as "wearable computing, tangible interfaces, and affective computing," according to MIT's website.
University officials said that the new review process would pay special attention "to risks related to intellectual property, export controls, data security and access, economic competitiveness, national security, and political, civil and human rights, as well as potential impacts on the MIT community, consistency with MIT's core values, and alignment with MIT's academic mission."
ZTE, a Shenzhen-based firm that also makes smartphones and telecommunications equipment, was banned from buying components from American companies for several months last year. The ban was tied to ZTE allegedly breaking US sanctions on Iran.
Last month, Stanford University also suspended its partnership with Huawei, temporarily prohibiting the acceptance of gifts "and other support" from the company, according to its student newspaper.
"We are sensitive to the federal government's concerns about technologies being appropriated by other countries to the detriment of U.S. national security," a campus spokesperson told The Stanford Daily.
What do you do when your Tesla's screen goes black? Well, you take it to Twitter and have Elon Musk solve the problem for you, of course.
It probably also helps if you're famous.
On Wednesday, Sheryl Crow queried the Twitterverse about her Tesla's screen misbehaving.
"Help! Who knows what to do when your @Tesla screen goes black and the reset doesn’t work? Return it and get your money back??," she tweeted.
It does sound like a nasty problem, but it's actually quite easy to solve. According to Musk, Tesla's Night mode, when brightness is at 0 percent, is too dark during the day, and the company will update the software to remedy this. For now, the solution is to change your screen preference from Night mode to auto, sayeth Musk.
Night mode with 0% brightness is actually too dark during the day. This is ultimately our fault. We will update our software so that 0% brightness is always usable relative to ambient conditions.
Although it's unclear who gave her the right advice, Crow later tweeted that she managed to solve the problems by changing the car's settings.
Problem solved! LOVED all of your creative responses. Best one was suggesting my kids take a look... which would have been helpful since my kid was the one who changed the settings / caused it to go black in the first place! I knew I should have interrupted school...
Tesla’s Model S and Model X sales crashed by around 50% during the first quarter. A possible explanation is that buyers are waiting for an anticipated hardware upgrade and a possible design refresh.
Amongst those 63,000 deliveries, only 12,100 were Model S and X vehicles and for the first time, Tesla didn’t even release the split between those models.
It represents a 56% decrease over the 27,550 units delivered during the previous quarter and 44% drop versus the same period last year.
Those are a significant reduction in sales, but Tesla didn’t off a clear explanation for it in its announcement.
Electrek’s Take
We were aware that Model 3 deliveries would be down this quarter due to the market introduction in Europe and China, but Model S and Model X numbers are a bigger surprise.
Model 3 has been out for over a year now and there’s never been any strong evidence that it was cannibalizing sales of Model S or Model X.
It’s not clear if we are starting to see that happening or if there are other factors at play.
Personally, I think it might have more to do with buyers anticipating changes with those vehicle programs.
When Tesla announced Supercharger V3, we noted that it would negatively affect Model S and Model X sales since Tesla couldn’t confirm the charge rate for those vehicles.
It hinted at a needed upcoming upgrade to take advantage of the capacity of those new charging stations. I believe many buyers are waiting for that upgrade.
Furthermore, we reported last year that Tesla is planning a Model S and Model X interior refresh and some buyers could be waiting for that too, but our sources at the time said that it was planned for around June or July 2019.
Either way, it is becoming clear that Model S and Model X demand has fallen drastically in the last few months and it explains Tesla’s constant price changes to try to attract new buyers.
Do you think those upcoming updates are going to bring back demand to the usual ~20,000 units per quarter or even push demand higher? Let us know in the comment section below.
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