Short-Term TSLA Price Movements - 2016

[Drivin]

The discount on the classic P90D will not show up in gross margins, but will show up in SG&A. Either way, it's money off the table for Tesla.

How does it show up in SGA?

The accounting is the price of the vehicles sold as revenue less the COGS to get to GM.

SG&A is an entirely different bucket.

If it weren't, every company would shove discounts into SG&A as a way to pump up their gross margins.

 

[SBenson]

Elon wasn't aware of the discounts given out in September?
View attachment 196696 View attachment 196697

Musk wanted Tesla to sell like Apple. But as things turned out they are selling like, well, any other automaker... I'm surprised that Musk doesn't know what's going on here. People are getting discounts hand over fist. Tesla folks took Elon's email way seriously (make and sell every car you can). What would have been their other option? Spare capacity? This totally sucks but the harsh reality is becoming to be that Tesla is just another automaker/dealer, not another Apple.

 

[drinkerofkoolaid]

I know this is the age of instant replies through Twitter but EM should be very careful about his tweets.
I think this does hit the headlines and TM/EM comes out with a PR piece tomorrow.
Everyone *knows* TM will discount CPOs at times to move product. The problem is that you can get a brand new car off the lot for less than a custom ordered one. Both are new cars. If you want to parse words: Yes, everyone pays the same for a custom ordered car. That is exactly what he should have tweeted

I don't see anything inaccurate or wrong with his Tweets. It's probably a good thing he responded quickly. For better or worse, Reddit is one way things go viral. Also, a report was released today by analyst who implied Tesla is offering special deals on individual vehicles to move CPO vehicle inventory.

I'd rather Elon address how Tesla's inventory sales work, then have 10 BS journalists write 10 articles speculating about Tesla's inventory sales practice, and use the Reddit comment as an example.

1st Tweet:

Something messed up here. Tesla policy is equal pricing for all. No discounts ever unless a car is a floor model or was damaged.

In other words, Equal Pricing for All = no special deals for anyone. Also, with CPO Models, the price you see is the price you pay. If the owner advisor told the buyer he/she was getting a "special price" the owner advisor screwed up.

2nd Tweet

Am tracking this down ... Super important to be fair. There are zero discounts even for family and friends.

In other words, Elon is looking into the situation and if a mistake was made he will probably personally apologize and make things right.

1) Elon did not confirm or deny that any Tesla employee made a mistake.

2) Elon emphasized that Tesla doesn't offer special prices" for individual models unless the car is a floor model or was damaged.

3) Elon emphasized that he is personally looking into the matter.

4) If a mistake was made, I'm positive Elon will make it right.

5) It's not clear to me if the person who bought the Tesla fully understands the situation.

 

[esk8mw]

I know this is the age of instant replies through Twitter but EM should be very careful about his tweets.
I think this does hit the headlines and TM/EM comes out with a PR piece tomorrow.
Everyone *knows* TM will discount CPOs at times to move product. The problem is that you can get a brand new car off the lot for less than a custom ordered one. Both are new cars. If you want to parse words: Yes, everyone pays the same for a custom ordered car. That is exactly what he should have tweeted

I think Elon missed the point of the Reddit blurb. It sounds like guy bought an inventory car and was told they can only honor the discounted price if he takes delivery by quarter end. I don't think it was a custom order. This is consistent with everything else Tesla has been doing this quarter. To Elon, everything inventory is considered a "floor model" because that's how it's been done in the past. This quarter, the lines are sort of blurred because they basically put every car ever up for sale. Even inventory bound for a store that still had the plastic on it was considered "inventory" and discounted even though it hadn't had a chance to be used as a demo yet.

My guess is Elon wanted to reiterate the fact that they don't offer discounts on new (i.e., custom order) cars to push back on the new media narrative forming to blunt the impact of Q3 deliveries. IMO, he just chose a poor blog posting to respond to because it isn't directly applicable to what he's trying to say.

 

[AlMc]

I don't see anything inaccurate or wrong with his Tweets. It's probably a good thing he responded quickly. For better or worse, Reddit is one way things go viral. Also, a report was released today criticizing Tesla for selling CPO vehicles.

I'd rather Elon address how Tesla's inventory sales work, then have 10 BS journalists write 10 articles speculating about Tesla's inventory sales practice, and use the Reddit comment as an example.

1st Tweet:



In other words, Equal Pricing for All = no special deals for anyone. Also, with CPO Models, the price you see is the price you pay. If the owner advisor told the buyer he/she was getting a "special price" the owner advisor screwed up.

2nd Tweet



In other words, Elon is looking into the situation and if a mistake was made he will probably personally apologize and make things right.

1) Elon did not confirm or deny that any Tesla employee made a mistake.

2) Elon emphasized that Tesla doesn't offer special prices" for individual models unless the car is a floor model or was damaged.

3) Elon emphasized that he is personally looking into the matter.

4) If a mistake was made, I'm positive Elon will make it right.

5) It's not clear to me if the person who bought the Tesla fully understands the situation.

My very simplistic answer: A CEO needs to be more careful what he tweets.
IMO ( yep opinion ). He would be better served responding when he has ALL the facts. If that takes a couple hours to check with his sales team, so be it.
Aside: This is one of the reasons TM/TE needs a COO

 

[drinkerofkoolaid]

You rushed to defend Elon before reading the details on Reddit.
Lots of buyers received discounts on non CPO's, Elon may not be aware by his tweet.
Op's purchase was not a CPO!
He purchased a 90D but it won't arrive until next week so they offered a 70 loaner.

So, my owner adviser called last night and confirmed my inventory car will not be delivered on Friday as they were shooting for. I ordered on the 17th of this month. They are asking me to finalize the sale on Friday regardless of the car being here and pushing the sale through. They are offering to then send me home with a loaner car until my car actually comes in. This is obviously frustrating but sounds like others are going through the same thing. He insinuated that if I don't agree to this then the discounted pricing we already agreed on wouldn't be honored so I guess the deposit I put down only holds me to the terms of the sale not them. I think if I really pressed them on that they would fold but not entirely sure. I am obviously very eager to get my car but any Tesla is better than what I am currently driving and finalizing the sale would at least remove any risk on my side of losing the pricing or my current car breaking down etc. I am kind of concerned about how my insurance company is going to handle this situation. I am also a little concerned about finalizing sale of a car I have never actually seen. They did reassure me that when my car gets here if I see any issues with it they will resolve them. Still a big purchase to treat in this way. Anyone else being told similar things or in the same situation? Did you press them on anything? I am probably going to try and get something out of this on their side since they are also going to try and send me home with a 70 when I ordered a 90D so I will be paying for more car than I am leving there with which is also annoying. Any advice on what I could ask for as compensation for the whole situation?

Weird situation : teslamotors

I didn't rush to defend Elon. I simply pointed out that his comments were very reasonable. Elon did not confirm or deny the accuracy of the info the post, and said he is personally looking into what happened.

Regarding your last point.

It's possible the person bought a 1 year old 90D and was offered a relatively new 70, with a similar or higher $ value as a loaner until the 90D arrived. His complaint appears to be that 70 is less than 90 and is therefore less expensive. This isn't necessarily the case.

Furthermore, I read the other posts and I have no idea what you are talking about. If Tesla changes the algorithm for how "inventory" vehicles are priced, it effects all inventory vehicles equally. This does not mean Tesla offers "special prices" to anyone.

As Elon stated in his Tweet, Tesla does not negotiate on price unless the vehicle is damaged or is a floor model.

 

[Hogfighter]

Concerning 1 and 2: I firmly believe that it will move the SP. It isn't LOGICAL that it should, since they are merely hitting their stated goals. And yes, one could argue they are just dressing up their financials for a quarter. But this is also telegraphed and per plan. TSLA skepticism is SO LOW that just hitting stated goals is ready to be perceived as a win. Consider that the Q2 results were terrible and the market shrugged it off-- the low bar expectations were met. The new TSLA narrative is that they miss goals, deliveries, lose money yada, yada yada. If they have and impressive quarter it will shift the narrative back to a company that can-do.

Steak, rather than sizzle.

Sure, the plan will be to go back to red ink but that's the plan. TSLA is trading at a near term "loser" discount. With good news skewering several Bear arguments the valuation will adjust upward.

Entirely possible. My assumption is that Q3 won't convince bears to change course, and will view it as TSLA taking another gulp of air before going back down.

My belief is that TSLA will remain healthy enough through S/X sales, plus the rapid acceleration of TE that seems largely ignored by the masses, to succeed in ramping the 3....which provides the base in the stock price.

We'll know soon enough! Exciting times.

 

[drinkerofkoolaid]

My very simplistic answer: A CEO needs to be more careful what he tweets.
IMO ( yep opinion ). He would be better served responding when he has ALL the facts. If that takes a couple hours to check with his sales team, so be it.
Aside: This is one of the reasons TM/TE needs a COO

I agree with all of your points, except for your last one.

In this case, Elon didn't provide a comment about the event, but made it clear that he was personally looking into what happened.

Update:

The person on Reddit just clarified that he was mistaken when he said he received a "special deal" and emphasized that his owner advisor has been one of the best parts of the entire process, and was available any time, night or day, to answer any questions he had.

**Wow so this kind of blew up in an unexpected way for sure. Guess this is my 15 mins of Reddit "fame".Hi Elon I think the whole comment above was taken pretty harshly when that was not my intention. I tried to clear that up in comments below but not sure that sticks for whatever reason. I was never threatened on my deal changing in any way and even saying they insinuated was probably a bad choice of words. I am not getting some special deal others aren't getting (trust me I wish) nor is anyone saying any part of my purchase would change whether I finalize this Friday or wait until sometime next month.

I'm sure the world has moved on at this point but I also just want to say that the whole process with Tesla has been incredible smooth, no pressure, very information heavy process that will ultimately put other dealers out of business. My Owner Adviser has easily been the best part of this entire process and has been available any time night or day for whatever stupid question I had. He also was very understanding as I struggled to make up my mind on the purchase which most dealers wouldn't have tolerated.

Based on his comments, it's clear the buyer misspoke and wasn't clear on how Tesla handles sales, specially that Tesla doesn't offer "special prices" to anyone.

I think the comments/guesses I included in my prior posts about this matter have all turned out to be correct .

 

[theschnell]

Entirely possible. My assumption is that Q3 won't convince bears to change course, and will view it as TSLA taking another gulp of air before going back down.

My belief is that TSLA will remain healthy enough through S/X sales, plus the rapid acceleration of TE that seems largely ignored by the masses, to succeed in ramping the 3....which provides the base in the stock price.

We'll know soon enough! Exciting times.

It won't convince most bears, but it might convince a lot of fence-sitting potential longs...

 

[RobStark]

This totally sucks but the harsh reality is becoming to be that Tesla is just another automaker/dealer, not another Apple.

Apple has 18% of the smart phone market and falling.

Tesla has 20% of the $70k-$150K sedan market and rising.

Tesla wants to increase its market share ~5% this quarter to prove something to Wall Street and raise more capital. To do that Tesla needs to discount. If Apple needed to raise its market share 5% it would also need to discount its product.

But Apple has $250B in cash and cash equivalents and has zero need to raise capital and has nothing to prove to Wall Street in the short term.

 

[brian45011]

, Elon may not be aware by his tweet.

If China is any precedent, heads may roll.

"Okay. Next question is, you guys have been able to negotiate around using kind of the dealer network, state franchise laws in the U.S. I think your point is well taken, that non-Tesla salespeople might not be qualified to properly promote the brand and so forth. The question is with that in mind, how do you get comfortable with selling vehicles to resellers in China that presumably don't have your best interest in mind or promoting the brand?

Elon Musk

We're not really selling to resellers anywhere in the world. So it may be possible that someone's claiming that they're a reseller of Tesla, this is a false claim.

John Lovallo - Bank of America Merrill Lynch

Okay. I'm just saying because when I looked on T-Mall for instance the first two lines of cars or first two rows of cars were actually all resellers or listed as resellers as least.

Elon Musk

Thanks for telling us that. We will make sure that is removed.

http://seekingalpha.com/article/264...-results-earnings-call-transcript?part=single

 

[dandurston]

I think it's pretty clear that when Elon says "no discounts ever", "equal pricing for all" and "no discounts even for family and friends" he is referring to discounts at the individual level. He's saying the gal that comes in and pushes hard for a bargain isn't going to get a better price than then next gal that doesn't employ sales theatrics. This negotiation is the worst part of traditional dealers and what Tesla wants to avoid. He isn't saying Tesla will never have widely available discounts (e.g. end of season clearance events).

Largely this has been true. The discounts on cars (e.g. 75D) have been generally available for all to see on the Tesla website (and other sites like EV-CPO). Yes the discounts change over time, but not from person to person based on negotiation.

There is, of course, some evidence of individual discounts. Most notable is the waiver of documentation fees for those who ask, although the counter point here is that this is not a discount on the car but rather the paperwork (ultimately just semantics though). Besides this there's been only a little evidence of successful negotiation. I suspect Elon is not on board with this and we won't see it much more.

 

[drinkerofkoolaid]

Elon wasn't aware of the discounts given out in September?
View attachment 196696 View attachment 196697

Yes, Elon was aware. There is a big difference between Tesla reducing the price of certain inventory models (across the board) and a Tesla employee giving an individual customer a "special price." I suggest you read the updated Reddit post. I included it in my prior post. The person who made the thread admits was mistaken when he said he was offered a special price. Case closed.

 

[SBenson]

We can split hairs all day long... But the simple fact is Tesla sales model, what ever it calls, this idea of "inventory discounts" is very non-apple and rather a slippery slope to be a auto dealership model. Maybe Musk didn't know and I hope it never happens again.

 

[SBenson]

Tell me when I can get a discount on a current apple device, just because they have excess inventory or surplus capacity.

 

[drinkerofkoolaid]

We can split hairs all day long... But the simple fact is Tesla sales model, what ever it calls, this idea of "inventory discounts" is very non-apple and rather a slippery slope to be a auto dealership model. Maybe Musk didn't know and I hope it never happens again.

Tell me when I can get a discount on a current apple device, just because they have excess inventory or surplus capacity.

Apple most certainly does sell CPO devices. The section of the Apple website is called "Special Deals". No idea what you're talking about.

Refurbished and Clearance iPad, Mac, and Apple TV - Apple

 

[esk8mw]

We can split hairs all day long... But the simple fact is Tesla sales model, what ever it calls, this idea of "inventory discounts" is very non-apple and rather a slippery slope to be a auto dealership model. Maybe Musk didn't know and I hope it never happens again.

But demos/floor models have always gone for less than custom orders (which have never been discounted). They are just going for a bigger discount this quarter. Older, lightly used stuff is always going to sell for less than a brand new custom order. I believe there were very few plastic-wrapped inventory cars being sold at a discount (demo refreshment cars because many stores sold everything, including all floor models to show customers!). I don't think this means Tesla changed the sales model, they just put literally everything up for sale for a quarter.

In fact, the massive amounts of inventory were already pulled from the website, days ago. Also, any discounting/lease terms are not valid unless delivery is actually taken by EOQ. Together, it is a pretty strong indicator that this was a one-off, IMO.

 

[geneclean55]

Apple most certainly does sell CPO devices. The section of the Apple website is called "Special Deals". No idea what you're talking about.

Refurbished and Clearance iPad, Mac, and Apple TV - Apple

Apple has also offered calendar-limited deals on full-priced items in the past. Black Friday

 

[esk8mw]

Tell me when I can get a discount on a current apple device, just because they have excess inventory or surplus capacity.

Go buy a 5S or whatever last year's model is. Or one that's been used for 4 months. I bet it's a different price than a brand new one.

I just took delivery of one of these. It was a P90DL manufactured in May with 2000 miles on it. Of course it had a discount!

 

[dha]

Elon Musk on Twitter

@SteveBatzer @GoodDayM Corrective action taken. Seems to be limited to a small number of cases, but thanks for letting me know.

First, I'd like to congratulate you on an excellent quarter so far! This is likely to be the best quarter ever in Tesla history thanks in large part to your efforts.

That said, it is absolutely vital that we adhere to the no negotiation and no discount policy that has been true since we first started taking orders ten years ago. This is fundamental to our integrity and we maintained this policy even through the terrible depths of the great recession of 2008/2009.

It is fine to have a discount on cars that have been floor models, were used in test drives or were damaged before delivery. All we are doing there is assigning an accurate price to the vehicle. However, there can never - and I mean never - be a discount on a new car coming out of the factory in pristine condition, where there is no underlying rationale. This is why I always pay full price when I buy a car and the same applies to my family, friends and celebrities, no matter how famous or influential.

The acid test is that if you can't explain to a customer who paid full price why another customer didn't without being embarrassed, then it is not right. We either win in a way that is fair and right or we lose with our honor intact and accept the consequences.

Also, I have asked our finance group to make sure that we only count a car as delivered in a quarter if it is actually delivered. Title transfer alone is irrelevant. Finance will also be reporting every case of a car sold for less than list price, along with the reasoning for doing so, which I will be reviewing personally.

Although this appears to be limited to a small number of cases worldwide, it needs to be zero cases.

I'm sorry for the draconian language, as I am super grateful for your hard work, but there is nothing that matters more than our integrity as a company. Customers need to know with absolute certainty that they can always trust Tesla to do the right thing.

Thanks,
Elon