2017 Investor Roundtable:General Discussion

[ValueAnalyst]

I think a few things from the following exchange were missed by media and some investors. I highlighted the important parts in bold red.

Tesla (TSLA) Q1 2017 Results - Earnings Call Transcript | Seeking Alpha

Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management)

Got it. And then can you just run us through what the capital needs are? Sort of hit that 10,000 unit per week goal, as well as where the battery factory stands in terms of its current capacity versus its expected total capacity, and what the timeline is to get to that total capacity mark?

Deepak Ahuja - Tesla Motors, Inc.

Well, we think pretty good overall about the capital needs and our ability to fund that, to achieve that 10,000 per week capacity...

Elon Reeve Musk - Tesla Motors, Inc.

With internal.

Deepak Ahuja - Tesla Motors, Inc.

Yeah, with internal, right. Exactly. With our own resources and the cash that we generate in our business as we ramp up Model 3 volumes. And overall, and JB can speak up more to that in terms of the cell capacity. That's all lined up to come online just ahead of our needs on the vehicles side as well as on the energy storage side.

Jonathan McNeill - Tesla Motors, Inc.

And we initially forecast about 35 gigawatt hours of cell capacity, and 50 gigawatt hours of pack capacity, and we anticipate to surpass that cell capacity in 2018. So, that's going well, and with the increasing improvements in the production density and speed at the Gigafactory, we actually ultimately believe, and I think we've said this before, that we can fit substantially more capacity than 35 gigawatt hours at Gigafactory 1.

Elon Reeve Musk - Tesla Motors, Inc.

Yeah, and we said publicly that we think cell upward capacity at Gigafactory 1 is likely to exceed 100 gigawatt hours over time.

Jonathan McNeill - Tesla Motors, Inc.

So yeah, so the end status of 35 gigawatt hours is really a passing point at this stage, and we'll continue on from there.

Elon Reeve Musk - Tesla Motors, Inc.

Yeah.

Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management)

Right, okay. And just, Elon you had previously pulled out a target of a million cars per year by 2020. Do you still think that's achievable? And what needs to take place in order to get there?

Elon Reeve Musk - Tesla Motors, Inc.

Yeah, I do. I think we need to come out with the Model Y sometime in 2020 or aspirationally late 2019. And then I think that a million units is quite likely, combined, yeah. Maybe more.

 

[22522]

I think a few things from the following exchange were missed by media and some investors. I highlighted the important parts in bold red.

Tesla (TSLA)

While you are at it, please post the Elon vs. Deepak argument about how many people and who will get the full tax credit?

Who wins that argument, and what the words meant, has more impact on the share price over the next 9 months than any other piece of information I know.

 

[22522]

Have people tried.

Using elevation gain to decelerate the train going into the station (and accelerate the train going out)?

[Kind of like riding into and out of a halfpipe.]

 

[AlMc]

Short Interest:

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
7/14/2017. 27,992,329 11,869,723 2.358297
6/30/2017 27,341,264 6,691,950 4.085695
6/15/2017 29,059,111 10,215,288 2.844669
5/31/2017 30,960,687 5,954,418 5.199616

Copy paste did not work well.Sorry

 

[kenliles]

EM tweet: Testing the Boring Co car elevator
Instagram post by Elon Musk • Jul 26, 2017 at 6:26am UTC

 

[DurandalAI]

I think Gene Munster is right, but leaves out one small but valuable consideration. The residual value of the 3 would be at least 30% higher, which would make it on par with the Camry if you lease it for 5 years. Even if you sell or trade the 3 in after 5 years you get the benefits of the higher residual value. Using TCO+residual also compares favorably to the Carolla over a 10 year period due to fuel and maintenance costs. Adding solar only exaggerates the benefits. I think model 3 will be a huge driver for solar adoption amongst those who don't already have it.

Or what I have planned, which is to use my Model 3 until the fully autonomous ride-sharing takes hold in my area, and then I'll just put my car into the fleet to have it make money, while I buy a new Tesla for myself!

 

[ValueAnalyst]

While you are at it, please post the Elon vs. Deepak argument about how many people and who will get the full tax credit?

Who wins that argument, and what the words meant, has more impact on the share price over the next 9 months than any other piece of information I know.

Your wish is my command.

Tesla (TSLA) Q1 2017 Results - Earnings Call Transcript | Seeking Alpha

Jeffrey Osborne - Cowen & Co. LLC

Got it. Maybe just in the interest of time, the second question I had is just on it would be helpful given that there's hundreds of thousands of people that have put their deposit on the Model 3. Can you just update us on what the cumulative U.S. vehicles sold that you have relative to the 200,000 number to get that $7,500 tax credit? You mentioned elasticity of demand at certain price points and certainly there's a large contingent of people that put a deposit that unfortunately won't get that benefit. So it'll be nice just to be able to track that metric, so as the Model 3 launches in the coming months, we can see which folks will get that, and what the impact the demand is for those that don't.

Elon Reeve Musk - Tesla Motors, Inc.

I think most people are going to be able to get it that have put down a deposit. And, yeah, it's sort of the credit rolls off – it's not like a complete (01:05:19) rolls off over time. And we are prioritizing U.S. production, which also helps us to keep things simple because we're not making many versions of the car for many different countries. Yeah, so I mean I think provided some of these – I don't know, I guess it's probably most people putting down a deposit would be able to get the full tax credit.

Jeffrey Osborne - Cowen & Co. LLC

Is there a way you could just give us what the cumulative numbers thus far in the U.S. quarter to date – sorry, inception to date?

Elon Reeve Musk - Tesla Motors, Inc.

No. Here's the problem, if we do that, then people run off and make all sorts of conclusions based on that that are not predictive of the future, because you can't test drive Model 3. If you come into our stores and you want to buy a Model 3, you could buy a Model S or Model X instead. We antisell the Model 3. But our net reservations continue to climb week after week. No advertising, antiselling, nothing to test drive, still grows every week.

Deepak Ahuja - Tesla Motors, Inc.

And maybe we will probably under the present regime, the federal income – the tax credits on the car continue even after we hit the 200,000 limit. And they continue for several quarters but at a slightly lower, depleting scale, so it's going to be beneficial for customers even beyond the 200,000 mark.

Elon Reeve Musk - Tesla Motors, Inc.

Yeah, absolutely. And I should perhaps touch again on this whole notion of – it's almost like over the years there's been all these sort of irritating articles like Tesla survives because of government subsidies and tax credits. It drives me crazy. Here's what those fools don't realize. If Tesla is not alone in the car industry, but all those things would be material if we were the only car company in existence. We are not. There are many car companies. What matters is whether we have a relative advantage in the market. And in fact the incentives give us a relative disadvantage.

Tesla has succeeded in spite of the incentives not because of them. But these incentives have limited lifetime and limited scale. Like, for example, the federal tax credit and then that caps out of the 200,000, the CARB credits, which, because the CARB rules are relatively weak, we can sell – there are some quarters where we can't even sell CARB credits. And when we can, it's maybe $0.50 on a dollar or something like that, whereas the other car companies get to fully absorb the value of the CARB credit. So just for example gives GM roughly – from my count, $7,000 to $10,000 advantage over Tesla for their Chevy Bolt.

That's why you shouldn't ask like why, well, GM appears to be losing $10,000 a car on the Bolt. No, they're not. They are making it up on CARB credits. But they get the full retail value of the CARB credit, whereas we get the wholesale value when we're lucky. But the CARB credits are only effective at a production rate of about 20,000 to 30,000 vehicles a year. So that's why you'll see, mark my words, it's not going to be any higher than that for the Chevy Bolt. That's on order of 25,000 units a year, or 0.10% of our initial production rate for the Model 3, or 0.05% of what Model 3 will be next year.

So Tesla's competitive advantage improves as the incentives go away. This continues to be something that is not well understood. And for that sake – I hope somebody doesn't mention those Nevada tax credits, which for the Gigafactory, it makes it sound like we got a $1.3 billion check from the State of Nevada. We did not. Those tax credits are made up – the vast majority is just sales and use tax abatement on equipment in the Gigafactory. Taxes that otherwise wouldn't have been there because there was just a bunch of rocks there before. And you don't get a lot of taxes from rocks. So that's why it's essentially a no-lose proposition for the state. And in order for us to actually earn $1.3 billion in tax credits for the Gigafactory, we have to generate over the course of 20 years about $100 billion in output from the Gigafactory. So it's worth about like 1%. Don't look a gift horse in the mouth and we appreciate it, and that's nice. But this is obviously 1% is not the difference between success and failure output of the factory. But a lot of articles provided it in the past tense. Tesla received $1.3 billion. No, we haven't. We did not receive that. If somebody wants to send us that, great we'll take it. But looking at the bank now I don't see it there. That's because it's just sales and just tax payment over 20 years. So the key takeaway is that Tesla's competitive advantage improves with scale. It doesn't get worse.

 

[Reciprocity]

Or what I have planned, which is to use my Model 3 until the fully autonomous ride-sharing takes hold in my area, and then I'll just put my car into the fleet to have it make money, while I buy a new Tesla for myself!

Im buying every AP2 car I can afford right now, including 2 Model 3s, so I am right there with you. Getting a S90D in two weeks. Red and Tan fully loaded.

 

[ValueAnalyst]

I think a few things from the following exchange were missed by media and some investors. I highlighted the important parts in bold red.

Tesla (TSLA) Q1 2017 Results - Earnings Call Transcript | Seeking Alpha

Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management)

Got it. And then can you just run us through what the capital needs are? Sort of hit that 10,000 unit per week goal, as well as where the battery factory stands in terms of its current capacity versus its expected total capacity, and what the timeline is to get to that total capacity mark?

Deepak Ahuja - Tesla Motors, Inc.

Well, we think pretty good overall about the capital needs and our ability to fund that, to achieve that 10,000 per week capacity...

Elon Reeve Musk - Tesla Motors, Inc.

With internal.

Deepak Ahuja - Tesla Motors, Inc.

Yeah, with internal, right. Exactly. With our own resources and the cash that we generate in our business as we ramp up Model 3 volumes. And overall, and JB can speak up more to that in terms of the cell capacity. That's all lined up to come online just ahead of our needs on the vehicles side as well as on the energy storage side.

Jonathan McNeill - Tesla Motors, Inc.

And we initially forecast about 35 gigawatt hours of cell capacity, and 50 gigawatt hours of pack capacity, and we anticipate to surpass that cell capacity in 2018. So, that's going well, and with the increasing improvements in the production density and speed at the Gigafactory, we actually ultimately believe, and I think we've said this before, that we can fit substantially more capacity than 35 gigawatt hours at Gigafactory 1.

Elon Reeve Musk - Tesla Motors, Inc.

Yeah, and we said publicly that we think cell upward capacity at Gigafactory 1 is likely to exceed 100 gigawatt hours over time.

Jonathan McNeill - Tesla Motors, Inc.

So yeah, so the end status of 35 gigawatt hours is really a passing point at this stage, and we'll continue on from there.

Elon Reeve Musk - Tesla Motors, Inc.

Yeah.

Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management)

Right, okay. And just, Elon you had previously pulled out a target of a million cars per year by 2020. Do you still think that's achievable? And what needs to take place in order to get there?

Elon Reeve Musk - Tesla Motors, Inc.

Yeah, I do. I think we need to come out with the Model Y sometime in 2020 or aspirationally late 2019. And then I think that a million units is quite likely, combined, yeah. Maybe more.

I'm surprised this post is getting so many likes. Aren't y'all already reading these earnings transcripts and SEC filings already?

If not, you definitely should be. Cover to cover, once a month each.

 

[DurandalAI]

That's why you shouldn't ask like why, well, GM appears to be losing $10,000 a car on the Bolt. No, they're not. They are making it up on CARB credits. But they get the full retail value of the CARB credit, whereas we get the wholesale value when we're lucky. But the CARB credits are only effective at a production rate of about 20,000 to 30,000 vehicles a year. So that's why you'll see, mark my words, it's not going to be any higher than that for the Chevy Bolt. That's on order of 25,000 units a year, or 0.10% of our initial production rate for the Model 3, or 0.05% of what Model 3 will be next year.

I'd wager that they'll only hit 20,000 to 30,000 for the Volt and Bolt combined, within the CARB states, since both of them earn CARB credits. In fact, thanks to the Volt, GM will run through their BEV tax credits within a 6-9 month period from when Tesla does.
US Federal $7,500 Electric Vehicle Credit Expiry Date By Automaker
After that, Nissan is next to likely have their tax credits expire, with the rest of the automakers having lots of room after that.

If I were a well-funded evil genius, I would simply convince various people to start up car companies that I invest in. Then they merely outsource all vehicle production to Tesla to engineer/assemble, have some minor body and badging changes done, and sell vehicles until the tax credit expires... Rinse & repeat.

 

[ValueAnalyst]

If I were a well-funded evil genius, I would simply convince various people to start up car companies that I invest in. Then they merely outsource all vehicle production to Tesla to engineer/assemble, have some minor body and badging changes done, and sell vehicles until the tax credit expires... Rinse & repeat.

Chinese venture capitalists had the same idea you laid out, only to see the government switch up the incentives to shake out weak players.

95% of China's Electric Vehicle Startups Face Wipeout

 

[ggies07]

I'm surprised this post is getting so many likes. Aren't y'all already reading these earnings transcripts and SEC filings already?

If not, you definitely should be. Cover to cover, once a month each.

Oh I do, I just liked it for the positive energy it has in it

 

[scaesare]

EM tweet: Testing the Boring Co car elevator
Instagram post by Elon Musk • Jul 26, 2017 at 6:26am UTC

Geez they iterate fast.

Love it.

 

[Krugerrand]

if Henry Ford built every car by hand... one at a time... how many horses would have this replaced?

You're like talking to a wall only way less intellectually stimulating because the wall a) sticks to what it knows, b) doesn't change its position, and c) serves a purpose.

 

[Reciprocity]

Didn't see this posted. The car elevator is cool. The floor that moves.
Instagram post by Elon Musk • Jul 26, 2017 at 6:26am UTC

Still not buying that this is going to be the way final solution works. The elevators add so much complexity and cost for very little value. I still think ramps would more economical and would allow for a lot more volume of cars to get into and out of the system. I could see lifts in areas where space is very tight and a long or circular ramp wouldnt be possible. I will happily eat a giant plateful of crow if im wrong, but I think Elon is doing what Elon does and that is to make his show piece a true marvel that will blow people away and more importantly, legislators and government offices. And yes, I think its almost a forgone conclusion that some sort of tunnel system will exist. I could see Elon doing what he did with Hyperloop where he just proves the concept and gives it to the world to execute. I mean he is only one man and SpaceX is enough to keep any human business for more then a lifetime. Tesla just adds another lifetime. Elon is an Alien not a cat, he does not have 9 lifetimes.

 

[Krugerrand]

How do you say Cosa Nostra,Omerta,Racketeering,and State's Witness in German?

singt wie ein Kanarienvogel (Sings like a canary)

 

[ggr]

One of the headlines about the car elevator said something about the driver being scared... but I'm pretty sure there was no driver in that car! Unfortunately I can't find the article any more.

 

[Krugerrand]

EM tweet: Testing the Boring Co car elevator
Instagram post by Elon Musk • Jul 26, 2017 at 6:26am UTC

I can hear the complaints now; 'Well, that's doesn't work nearly fast enough', "What if someone drives into the hole left by the elevator, or worse a person falls in?" Etc., etc., etc...

Edit: Didn't read far enough in the thread - "It adds way too much complexity and cost for little value."

 

[Krugerrand]

I'm surprised this post is getting so many likes. Aren't y'all already reading these earnings transcripts and SEC filings already?

I only have a few likes to give away each day. Since it's early in the day I want to see what else people post before just giving my likes out willy nilly.

 

[WhiskeySauer]

Supposedly Said by CEO of Mercedes:

• "Many engineers from Volkswagen and Audi; are completely terrified of Tesla."
• "Most car companies will probably become bankrupt. Traditional car companies try the evolutionary approach and just build a better car, while tech companies (Tesla, Apple, Google) will do the revolutionary approach and build a computer on wheels."
• "Around 2020, the complete industry will start to be disrupted. You don't want to own a car anymore. You will call a car with your phone, it will show up at your location and drive you to your destination. You will not need to park it, you only pay for the driven distance and can be productive while driving. Our kids will never get a driver's licence and will never own a car."

https://www.linkedin.com/pulse/must-read-article-how-our-lives-change-dramatically-20-delahunty