General Discussion: 2018 Investor Roundtable

[EVMeister]

2018 Nissan Leaf Review

'even though this redesign improves on the original, it offers little beyond an attractive price to distinguish it from its EV competitors.'
'A low-energy effort'
-Consumer Reports

Yeah but to be honest, their praise of the Model 3 wasn't too high either. 2018 Tesla Model 3 Review

Not sure what they have against the screen and I thought the rear seat comfort was purposefully improved? Same for suspension (I see the comments pick up on this). Reading their stuff reminds me of reading pieces from old and stubborn individuals who don't really understand the product they're reviewing. Times are changing, but they are not.

 

[avoigt]

How the problems with Diesel and gas cars are related to EV manufacturing (meaning how to postpone EV's helps resolving those problems)?

As I wrote before its the certification capacities which are the bottleneck and VW decided that GAS and Diesel cars have priority over EVs and PlugIns. Thats how the two are related.

The new WLTP standard requires VW to do new certification for PlugIns. how pure EVs affected I am not certain. Maybe it has to do with the Cadmium that they found in the Cells and therefore have to recall a ton of EVs.

 

[SwTslaGrl]

[google translated]
Tesla abandons Nvidia
09:04, 6 aug 2018

Markets: Hyped Tesla will develop its own semiconductor for machine learning. The new hardware should also be backward compatible with the current generation of Tesla cars.

Tesla abandons Nvidia to develop its own chip optimized for machine learning. It announced CEO Elon Musk during a conference call last week.

Musk stated that the new chip expected to be out next year will deliver a significant improvement over current Nvidia hardware.

The new hardware should also be backward compatible with the current generation of Tesla cars.

Apple veteran Pete Bannon is responsible for Tesla's chip initiatives. He was responsible for the development of the A5 chip for iPhone 5 and has been working on a number of iPhone chips ever since.

According to Musk, Tesla intends to expand the size of the chip department and increase investment in the area as quickly as possible.

Finwire
Tesla överger Nvidia | Placera

 

[avoigt]

Why is this assumed? If they haven't been able to do so yet, and haven't even started a mass-scale battery manufacturing facility, what will change?

Well we all should fairly assume, given that all the money they invest in the I.D. program, it will sooner or later result in some good models that consumer like.

VW has a history and strategy of by purpose not to be a the front runner with innovation. They try to learn from the front runner and make it better. Thats their strategy.

I am very disappointed what they did and do so far though but either way expect models to come out around 2025 at least. They will bring a compliance car out earlier but seem to look more in solid state battery and believe thats where the funding should go.

Thats 7 years from now and Tesla will own and dictate the space and churn out cars in the millions in NA, Europe and China at that time..

At that stage VW will face an up-hill battle with fast shrinking demand for ICE cars and dependency on Batterie suppliers who will dictate prices. I guess the VW board believe that they will dictate the Battery supply prices as they are the ones producing 10 Mio cars p.a..

Unfortunately thats a big miscalculation overlooking that they produce 10 Mio ICE cars but are a small company in EVs. Battery suppliers will take the orders where the money is and VW may pay high prices to produce EVs with negative margin which is not a sustainable business model. All the money VW puts in is only valuable if they have a demand in the millions as well and that point is to be proven.

P.S. for clarity, I talk about the VW brand here not Audi, Porsche ect.

 

[Matias]

In any case, in the best case scenario Tesla sells 1% of new cars after few years. So 99% are sold by traditional manufacturers.

So it is mathematically impossible, that they’re all too late.

 

[Runarbt]

In any case, in the best case scenario Tesla sells 1% of new cars after few years. So 99% are sold by traditional manufacturers.

So it is mathematically impossible, that they’re all too late.

For once, its important to differentiate ICE and EV.

The other may sell 99% of all cars, for now, but those are ICE. its the transition from ICE to EV which make the numbers they sell now irrelevant to what they will sell in the future.

Tesla will soon be selling - 50%(?) of all EVs.. and grow capacity like a madman.

ICE sales will shrink.. when affordable EVs are on the market people dont want ICE.

They will rather drive their old car a few more years until they get their hands on a propper EV.

Do you think legacy ICE producers will be able to go from ICE to EVs in volumr quicker than Tesla does now?

 

[avoigt]

Transportation costs are going to drop by 90% with autonomous cars

 

[WarpedOne]

These market share projections and how incumbents will continue to sell ~100 millions of ICE cars per year have one very basic error:
They assume people will totaly ignore there are EVs and will continue to buy ICE in exactly the same numbers.

This will not happen, ICE sell will fall of the cliff. Total number of cars sold in a year will fall off a cliff.
If there is not enough EVs, people will rather wait a little more, save a little more and then buy a better EV.

1M tesla EVs might mean 2% of total market.
And 10% of total profit.

 

[W84M3]

In any case, in the best case scenario Tesla sells 1% of new cars after few years. So 99% are sold by traditional manufacturers.

So it is mathematically impossible, that they’re all too late.

2013: In any case, best case scenario Tesla sells 0.1% of new cars in a few years.

2018: In any case, best case scenario Tesla sells 1% of new cars in a few years.

2023: In any case, best case scenario Tesla sells 10% of new cars in a few years.

...

The End.

(take in mind that within 5 years the world of transport will look completely different with autonomous vehicles and the only winner is a combination with an EV)

 

[KarenRei]

For once, its important to differentiate ICE and EV.

The other may sell 99% of all cars, for now, but those are ICE. its the transition from ICE to EV which make the numbers they sell now irrelevant to what they will sell in the future.

Tesla will soon be selling - 50%(?) of all EVs.. and grow capacity like a madman.

ICE sales will shrink.. when affordable EVs are on the market people dont want ICE.

They will rather drive their old car a few more years until they get their hands on a propper EV.

Do you think legacy ICE producers will be able to go from ICE to EVs in volumr quicker than Tesla does now?

 

[Matias]

For once, its important to differentiate ICE and EV.

The other may sell 99% of all cars, for now, but those are ICE. its the transition from ICE to EV which make the numbers they sell now irrelevant to what they will sell in the future.

Tesla will soon be selling - 50%(?) of all EVs.. and grow capacity like a madman.

ICE sales will shrink.. when affordable EVs are on the market people dont want ICE.

They will rather drive their old car a few more years until they get their hands on a propper EV.

Do you think legacy ICE producers will be able to go from ICE to EVs in volumr quicker than Tesla does now?

This is imho very interesting problem. IIRC there are about 100 milj cars sold every year. If all goes well, Tesla sells about 1 milj cars 2021. So 99 million are sold by others. I don’t believe, that people stop buying cars just because Tesla can’t make more cars.

 

[Matias]

Of course, it is possible, that Tesla sells 1% of cars, but takes much larger share of profits.

 

[neroden]

In February 2016, the FASB issued ASU No. 2016-02, Leases, to require lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. The ASU also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. We currently expect to adopt the ASU on January 1, 2019. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. We intend to elect the available practical expedients upon adoption. Upon adoption, we expect the consolidated balance sheet to include a right of use asset and liability related to substantially all of our lease arrangements. Further, solar leases and PPAs that commence after January 1, 2019, where we are the lessor and are currently accounted for as leases will no longer meet the definition of a lease with the adoption of this ASU and will instead be accounted for in accordance with ASC 606. Subsequently, in July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, and ASU No. 2018-11, Targeted Improvements, to clarify and amend the guidance in ASU No. 2016-02. We are continuing to assess the impact of adopting the ASUs on our financial position, results of operations and related disclosures and anticipate the effect on the consolidated financial statements to be material.

I'm open to guesses from our accounting experts as to how the books will change. Solar leases apparently *will no longer qualify as leases* for financial reporting (they'll be sales with financing, I guess); I'm wondering how this will apply retroactively.

 

[mrdoubleb]

Unfortunately thats a big miscalculation overlooking that they produce 10 Mio ICE cars but are a small company in EVs. Battery suppliers will take the orders where the money is and VW may pay high prices to produce EVs with negative margin which is not a sustainable business model. All the money VW puts in is only valuable if they have a demand in the millions as well and that point is to be proven.

Exactly. Battery production will continue to be supply constrained. Sure, 3rd parties will continue to invest, but if you were them, would you invest so much as to create oversupply and push your own profit margin down? Or would you scale just so as to be competitive with your own competition (other cell producers) and still manage to have customers "fighting" for the supply you have?

At the same time, economies of scale will continue to favor Tesla, as in 50%+ of EV cell production being in 1 hand. They can negotiate much better raw material prices for years ahead. And as some raw materials may be supply constrained as well, it may not just raise prices, but can also dry up supply for others.

A company like VW is used to suppliers bending over backwards just to be able to business with them. Also, due to the size of their purchase, they can negotiate prices so low as to almost make supplier bankrupt. But the above 2 forces work against this in this particular case.

As for the solid state battery breakthrough: waiting for the magic fairy dust is a big gamble. Sure, it may pay off, but I would imagine Tesla is not sitting idle either. What`s the guarantee VW gets there first? What`s the guarantee even if they bring it out first it will be competitive with Tesla`s 2025 cell technology? What`s the guarantee Tesla can`t replicate that technology quickly without braking patents? It`s not like the entire Gigafactory cost goes down the drain if they have to switch to solid state.

 

[SebastianR]

They assume people will totaly ignore there are EVs and will continue to buy ICE in exactly the same numbers.

This will not happen, ICE sell will fall of the cliff. Total number of cars sold in a year will fall off a cliff.
If there is not enough EVs, people will rather wait a little more, save a little more and then buy a better EV.

1M tesla EVs might mean 2% of total market.
And 10% of total profit.

This very much! Of course some cars will need to be replaced since they are falling apart. But those are not the cars that are sold new. What will happen is, that certain segments just won't sell any more cars until enough EVs are available. Other segments will do just fine.

What I find interesting to consider is the developing world: for the past decades folks in Europe and the US could pretty much rely on shipping cars to the developing world as used cars. I wonder if there will be a tipping point in which buying, repairing and running a used car from a rich country will lose out against using a locally produced EV / an electric (cargo-) bike etc.

This might all be a few years out but I think it will happen.

This is really an asymmetric struggle: Tesla would gain massively if the overall car market would collapse in absolute numbers. So they don't mind destroying the market. Incumbent car makers have no interest in destroying the market and want to keep volumes up. That's why incumbent car makers will be last on a) EVs and b) autonomous cars.

 

[colettimj]

These market share projections and how incumbents will continue to sell ~100 millions of ICE cars per year have one very basic error:
They assume people will totaly ignore there are EVs and will continue to buy ICE in exactly the same numbers.

This will not happen, ICE sell will fall of the cliff. Total number of cars sold in a year will fall off a cliff.
If there is not enough EVs, people will rather wait a little more, save a little more and then buy a better EV.

1M tesla EVs might mean 2% of total market.
And 10% of total profit.

Don't forget that some may find a used EV more attractive than a new ICE.

 

[Krugerrand]

This is imho very interesting problem. IIRC there are about 100 milj cars sold every year. If all goes well, Tesla sells about 1 milj cars 2021. So 99 million are sold by others. I don’t believe, that people stop buying cars just because Tesla can’t make more cars.

I see that even though you’ve gone long (for now), you still don’t understand what is happening nor how it’s likely to progress. But this certainly does explain why you clung to your short position so long.

What you’ve laid out in this post and the previous is not what’s going to happen.

No. I am unable (incapable/not skilled enough) to explain it to you but perhaps someone else will tackle the challenge and have the right combination of words for you.

 

[Krugerrand]

Of course, it is possible, that Tesla sells 1% of cars, but takes much larger share of profits.

That’s a step forward. Keep going.

 

[Matias]

This very much! Of course some cars will need to be replaced since they are falling apart. But those are not the cars that are sold new. What will happen is, that certain segments just won't sell any more cars until enough EVs are available. Other segments will do just fine.

What I find interesting to consider is the developing world: for the past decades folks in Europe and the US could pretty much rely on shipping cars to the developing world as used cars. I wonder if there will be a tipping point in which buying, repairing and running a used car from a rich country will lose out against using a locally produced EV / an electric (cargo-) bike etc.

This might all be a few years out but I think it will happen.

This is really an asymmetric struggle: Tesla would gain massively if the overall car market would collapse in absolute numbers. So they don't mind destroying the market. Incumbent car makers have no interest in destroying the market and want to keep volumes up. That's why incumbent car makers will be last on a) EVs and b) autonomous cars.

Is there historically any example, where customers have stopped buying some product (for years perhaps), because they know, that there would be better product and waited for that?

 

[mongo]

Is there historically any example, where customers have stopped buying some product (for years perhaps), because they know, that there would be better product and waited for that?

iPhone/IBook (in terms of self-Osbourne)
Samsung Note/ Galaxy

Tesla S/X/3 (in terms of other cars)