TSLA Market Action: 2018 Investor Roundtable

[bdy0627]

P will not be the mass market car generating most orders. Spreadsheet indicates P to be about 11% of overall orders after 6/27 and that excludes all SR demand still waiting, so the real number for P could be between 5-8% of all orders.
I don't see how P test drives would change orders dynamics dramatically. I have my order in, but if I was a new customer considering Tesla for the first time and I just had a test drive, I would think "ok, this car is fast, but its out of reach for me financially. And those I can afford could be significantly slower/worse (nobody saw non-PUP yet)...I probably need to wait to see the equivalent of a car I can afford..." The way those P cars could be helpful is to validate whether the inside space is adequate, they didn't need to be P for that though. I think having RWD/AWD available for test drives instead of P could be more helpful.

Choosing the P3D is also about getting the full tax write off, and getting a Tesla sooner rather than later. Many customers don't want to configure until they can test drive the model 3. They will be able to test drive all right, but it will be the P3D. That combined with the sooner than later argument and the related full tax write off will likely sway a substantial percentage of customers to go P3D instead of just AWD.

 

[Moderatefan]

Choosing the P3D is also about getting the full tax write off, and getting a Tesla sooner rather than later. Many customers don't want to configure until they can test drive the model 3. They will be able to test drive all right, but it will be the P3D. That combined with the sooner than later argument and the related full tax write off will likely sway a substantial percentage of customers to go P3D instead of just AWD.

P currently has 1 month priority over RWD/AWD and you pay $11k extra. Even if that 1 month puts you in a different tax credit category(I think 1 month is a gamble when you're talking on the order of 4-5 months wait). So you lose $3,750. Paying $11k on top does not seem to justify this.

I'm sure a lot of people will jump on it, but lets not forget at that price point they are potential S buyers, so their P purchase is not a major win for Tesla.

That is aside from conversation about ability to test drive the configuration you want to buy, which seems like it will be possible in P.

 

[RobStark]

I'm sure a lot of people will jump on it, but lets not forget at that price point they are potential S buyers, so their P purchase is not a major win for Tesla.

.

M3P is more profitable than $80k S and soon it will be much much more profitable.

 

[xhawk101]

P currently has 1 month priority over RWD/AWD and you pay $11k extra. Even if that 1 month puts you in a different tax credit category(I think 1 month is a gamble when you're talking on the order of 4-5 months wait). So you lose $3,750. Paying $11k on top does not seem to justify this.

I'm sure a lot of people will jump on it, but lets not forget at that price point they are potential S buyers, so their P purchase is not a major win for Tesla.

That is aside from conversation about ability to test drive the configuration you want to buy, which seems like it will be possible in P.

Note thatt it will be possible for them to emulate The Standard Version as well as the short-range version for test drives.

 

[Remus]

P currently has 1 month priority over RWD/AWD and you pay $11k extra. Even if that 1 month puts you in a different tax credit category(I think 1 month is a gamble when you're talking on the order of 4-5 months wait). So you lose $3,750. Paying $11k on top does not seem to justify this.

I'm sure a lot of people will jump on it, but lets not forget at that price point they are potential S buyers, so their P purchase is not a major win for Tesla.

That is aside from conversation about ability to test drive the configuration you want to buy, which seems like it will be possible in P.

I am guessing somehow Tesla does not seem to care about P3D cannibalize model S.

 

[Duffer]

Test drive vehicles will definitely improve orders. My wife is up next for a car and she won’t buy until she test drives (and her 2000 Toyota Echo dies). Sure I could get a friend to come by and let her test drive their M3 but not everyone has that access. P or not, the public is not as stupid as most paint them to be. Everyone knows a SR M3 is just slower with less range. The test drive for my wife is not about POWER. It’s about seat position and comfort, mirror positions, and pedal reach. She’s only 5’ tall.

And in my wife's case, overall vehicle size. She's been driving her BMW E30 since grad school and is somewhat concerned about driving a "larger" car. She thinks the Model 3 is "cute" so that should help in convincing her to take a test drive.

I have some dry powder to play with. I guess it's time to bring out the tea leaves to determine what tomorrow's MMD will be.

 

[keydiver]

I am guessing somehow Tesla does not seem to care about P3D cannibalize model S.

No, I don't think they do. The people that need a bigger car, like me, will still get the S. Tesla's objective all along has been to get to the Model 3, the mass manufactured, more affordable car. If all they cared about was a larger premium sedan or SUV, they would have stopped with the S and X and just continued to crank out 100,000 of them a year. IMHO, they probably care very little about cannibalization, especially when the margins on the high end Model 3 are going to be very good.

 

[bdy0627]

P currently has 1 month priority over RWD/AWD and you pay $11k extra. Even if that 1 month puts you in a different tax credit category(I think 1 month is a gamble when you're talking on the order of 4-5 months wait). So you lose $3,750. Paying $11k on top does not seem to justify this.

I'm sure a lot of people will jump on it, but lets not forget at that price point they are potential S buyers, so their P purchase is not a major win for Tesla.

I disagree there. Tesla at this point wants to steer as many customers as possible to the P3D, even over the standard S. Margins may not be there yet for the P3D, but they will be getting there over the next several months.

 

[dc_h]

Would you please elaborate on the factual and tangible signs that you see to support "Tesla is mostly locked out of debt capital raising?"

Thank you in advance.

i am not sure there is any formal cut off, but bond price and anger at dissing the bigs on his call seems to have poisoned the well until Tesla doesn’t need money. Hopefully that is soon, then they’ll be lining up to give him better terms and there’ll be pressure to upgrade the debt rating.

 

[Moderatefan]

I disagree there. Tesla at this point wants to steer as many customers as possible to the P3D, even over the standard S. Margins may not be there yet for the P3D, but they will be getting there over the next several months.

I did not see the margins data that many seem are so confident about. I think in general S generates 25% gross margin, 3 expected to generate 15% in Q3, 20% closer to EOY and maybe catch up to S in the next year.
So, we were mostly talking about the near future(this year) - that once people test drive a 3, they will put an order in and then everything is super-rosy.
I don't know if P in Q3 will generate >25% margin versus <15% for RWD to average 15.
Some people seem super-confident based on number of likes, so they must have detailed data on how much each option cost and what is the margin on top of that option to be sure that the option's % margin exceeds average margin on the car.

 

[Seesaw]

But really will a new plant in China be that expensive anyway? I doubt it would be much more than a billion, and they could spread that out over a few years.

 

[mershaw2001]

Seems tesla is falling off a small cliff in after market trading- down 5-6 dollars.

 

[generalenthu]

Seems tesla is falling off a small cliff in after market trading- down 5-6 dollars.

You have Trump to thank for a new round of tariffs. futures are cliff diving.

 

[2virgule5]

let’s have them beat timeline for once

You mean, like when I was originally supposed to get my model 3 end 2019 and got it early 2018?

 

[mongo]

I did not see the margins data that many seem are so confident about. I think in general S generates 25% gross margin, 3 expected to generate 15% in Q3, 20% closer to EOY and maybe catch up to S in the next year.
So, we were mostly talking about the near future(this year) - that once people test drive a 3, they will put an order in and then everything is super-rosy.
I don't know if P in Q3 will generate >25% margin versus <15% for RWD to average 15.
Some people seem super-confident based on number of likes, so they must have detailed data on how much each option cost and what is the margin on top of that option to be sure that the option's % margin exceeds average margin on the car.

EAP alone is 8% GM with a 60k ASP.
P base is 11k over AWD for motors with more testing and an interior option. That is basically pure profit, 17.5% GM on a 63k P.
P EAP is 16k of free-ish options on a 68k car or 23.5% GM ignoring base model gross margin.

 

[Lbkmxp100d]

You mean, like when I was originally supposed to get my model 3 end 2019 and got it early 2018?

Same here.

 

[Zhelko Dimic]

...
Don't tell me Americans don't think about the price of gas.

I keep hearing about all the uber rational Norther Europeans that strongly look at TCO when buying a car. Now they are going to overpay for future fuel savings on Model 3? Even if it doesn't pan out on the number crunching relative to typical small engined hatchback?

Your conviction in your own theories is impressive, considering you argue forcefully against people that have actual first hand experience.
At first I was annoyed; upon reflection, I find this to be very useful skill/mindset. I wish I had it.
In life, it's probably much more important to be convincing, than to have considered and correct opinion.
You know, CEO/Leader vs. Engineer type of thing.

 

[PaulusdB]

I am guessing somehow Tesla does not seem to care about P3D cannibalize model S.

I agree on that, but expect to see some ‘Modellpflege’ on S and X in the near term. It doesn’t make economical sense to introduce those upgrades at this point in time, but upgraded (battery) specifications are an engineer’s pride, aren’t they?

 

[Duffer]

RE: the MS vs P3D discussion.

1. MS was designed/marketed as a luxury EV which validated the brand and helped generate revenue either directly via sales or by loans that were used to create infrastructure as well as for M3 R&D (cash burn we keep hearing about)

2. Model 3 was the "game changing" car Elon wanted to make from the beginning. However, without the MS and MX it would have been extremely difficult/impossible to bring the Model 3 to market.

3. P3D buyers being potential MS buyers. From the perspective based strictly on the purchase price, possibly. However, using BMW as an example. The BMW M3 and their 5 series prices overlap. Does this mean that the 5 series sales have been hurt by people buying the M3? No, and for the same reason. Both BMW's M3 and Tesla's P3D are a niche market.

 

[Cosmacelf]

Would you please elaborate on the factual and tangible signs that you see to support "Tesla is mostly locked out of debt capital raising?"

Thank you in advance.

The last time I checked, Tesla 7 year corporate bonds were trading at about 8% interest. This is expensive. It isn’t that Tesla is shut out of the bond market, just that the bond market is charging Tesla quite a bit of interest for its bonds. Tesla could indeed raise money (who knows how much?) at these rates, it just thinks it is too expensive right now. I suspect that if it waits a few more months, these bond rates will come down. I suspect the Tesla CFO also thinks this...