Tesla Inc (NASDAQ:TSLA) appears to be impervious to gravity. TSLA stock has rocketed nearly 80% higher this year, setting all-time highs seemingly every other day.

And yet, despite enviable stock performance, the exodus of executives continues. A proper braindrain is taking place with key people like the energy sales director, VP of products and programs and the CFO all out at a critical juncture. Just a couple days ago, top Autopilot engineer Chris Lattner announced his departure … just a few months removed from being hired away from Apple Inc. (NASDAQ:AAPL).

None of this seems to be unnerving Tesla bulls, though. The EV (and now solar) company is worth $64 billion by market cap, larger than any other American automaker.

But at these heights, the odds no longer favor the optimists, and investors and traders have numerous reasons to pile into a still robust short-selling crowd around TSLA stock.

Sanity Check

Tesla has dropped “Motors” from its moniker, and CEO Elon Musk has tried to convince people that it’s transitioning into an energy company. But make no mistake: Tesla is an automobile company that competes with other automobile companies.

Companies, I would add, that are actually profitable and have been pushing into the electric category themselves.

Many investors seem to need a reminder of the pieces on the board, so here’s a quick look:

• General Motors Company (NYSE:GM), which is profitable, is helmed by CEO Mary Barra, who believes the Chevy Bolt platform is GM’s future. She has stated in no uncertain terms that a range of vehicles in this category are forthcoming. The Bolt, meanwhile, has won a few major “car of the year” awards (including from Motor Trend), while its sales are decent despite limited availability.
• Volkswagen AG (ADR) (OTCMKTS:VLKAY) already has the e-Golf and e-Up in its lineup and has announced the all-electric I.D. to hit markets by the end of the decade.
• Audi’s E-tron SUV will be available next year with a range of over 310 miles.
• Hyundai is debuting its IONIQ Electric this year and a 200-mile SUV is slated for next year.
• Kia showed off its new Kia Stinger GT at the Detroit Motor Show in January.
• Jaguar has an all-electric I-PACE SUV coming out next year.
• Mazda has announced zero-emission vehicles to be on sale by 2019.

I’ll stop there.

I haven’t even mentioned China yet, but why beat a dead horse? These cars aren’t pipe dreams, either — these are competitors that will be on dealer lots this year or next. Price-wise, many of the sedans will compete with the upcoming Model 3, and they will have more sex appeal that the admittedly somewhat awkward-looking Bolt.

So, it’s no wonder that Musk would like the investing community to believe that he’s building a clean energy conglomerate. However, reality points us to Tesla’s primary, revenue-generating products to be cars. Therefore, to say it’s a futuristic an all-encompassing energy company is disingenuous at best.

What about Tesla’s Battery Business?

But Tesla isn’t just cars — it’s batteries!

Yes, the lithium-ion Gigafactory has just begun producing batteries, but this is a more competitive space than many give it credit for. As it was put to me bluntly by a Chinese factory owner, batteries are commodities where economies of scale rule. Chinese factories will be able to compete on price relative to anything that comes out of a Gigafactory.

With the winds of government policy driving output, including a 2020 target to halve battery costs to below 1 yuan ($0.144) per kilowatt hour, companies like Contemporary Amperex Technology Ltd are rapidly expanding. CATL is already ahead of LG Chem in lithium-ion car battery output and has it sights set on beating out Panasonic and local competitor, BYD. It plans to grow battery capacity to 50 gigawatt hours by 2020, which would make it bigger than TSLA’s  35GWh Nevada factory.

This is just one example in China. Competitors abound in Asia and in Europe alike. For example, Germany’s TerraE has also announced planned construction of a lithium-ion battery Gigafactory. Production capacity of 34 GWh per year is intended by 2028. This is farther out, but the trend remains.

Not only will increasing supply globally put downward pressure on battery prices, but as written by Morgan Stanley, Chinese suppliers are contemplating a price cut of up to 35%-40%. At those levels, they can still turn a decent profit.

But how will Tesla fare? And will its purported price advantage still exist?

Currently, the margins for Energy Generation & Storage are seem to be propped up by SolarCity’s contribution. In Q4 2016, the gross margin was just 2.7% when TSLA was only able to recognize six weeks of Solar City revenue. It shot up to 29% in Q1 2017 when Tesla could recognize the full quarter’s worth. So, it seems that Tesla’s contribution here is actually negative, but that financial finagling with SolarCity numbers is covering that up.

As battery prices continue to decline, margin pressure is inevitable.

Bottom Line on TSLA Stock

Elon Musk is a determined and brilliant man. I’ll give him that. But he’s not immune to the law of financial gravity.

Jim Chanos, the widely respected short seller, has been short TSLA stock the last $150 run-up, and remains so. He estimates Tesla’s cash burn at $750 million to $1 billion per quarter and will be in this range for the next handful of quarters, at least.

In all likelihood, Tesla will have to tap the equity markets again to finish the Gigafactory and get Model 3 production to where Musk has promised. Whether it’s another convertible senior note structure like the 2022 notes, or just common shares, it will probably be dilutive to equity holders. (Note that the prospectus indicates a “conversion price of approximately $327.50 per share of common stock,” so the question is not of will those be dilutive, but how dilutive.)

Musk may have a chance to let out another few tweets trolling short sellers, but it shouldn’t be long before the bloodbath ensues.

As of this writing, Luce Emerson did not hold a position in any of the mentioned securities.