2017 Investor Roundtable:General Discussion

[ValueAnalyst]

Wait, what.. I heard from @myusername that they make really nice cars. At that pace, Tesla does not have to grow to be as large as BMW, BMW is going to shrink to be smaller then Tesla.

BMW screwed itself, and Apple, when it rejected the proposed partnership two years ago.

 

[ValueAnalyst]

Great video.

FIRST DRIVE TESLA MODEL 3

That's another very positive review.

 

[ValueAnalyst]

The iPhone ships in 2007. RIM's revenue in 2007 was $3 billion. RIM's revenues grow to a peak of almost $20 billion in 2011, 4 years later. Amazing 7x growth. But in 2013, it's $11 billion, and by 2015, it's back down to $3.3 billion. Now it's $1.3 billion.

Blackberry's device shipments peak in 2011, well after the 2007 intro of the iPhone:

From: iPhone vs BlackBerry

In 2007 and 2008, plenty of people thought Apple's iPhone was destined to fail, or at least just be a small niche product. It wasn't obviously apparent to pretty much everyone that the trajectories would be vastly different until 2010. Stephen Elop’s “Burning Platform” memo wasn't until 2011, when Nokia went from dominance to WTF do we do now?

It isn't always obvious when something new comes along that it will be the disruptor. Sure, the signs are there, but can it really do it? The thought that millions of 12-14 year olds will be entrusted with carrying around $600-1,000 digital devices every day with $15-30 monthly payments was completely absurd to lots of people in 2007/2008. By 2012, not so much.

Thank you for this, but the comparison of Model 3 to the iPhone works only up to a point. Three major distinctions:

• Tesla is and will continue to grow much faster than Apple ever did, so the disruption will be quicker.
• Social media was not as prevalent when iPhone came out, so Model 3 word of mouth is spreading quicker.
• BlackBerry was also an innovative product and its customers loved it, until the iPhone 3G came along. This is not the case with ICE.

Reasoning by analogy is useful up to a point because it saves us time, but we should recognize its limitations so we can switch to first principles when required by circumstances.

 

[Intl Professor]

I'm as big a Tesla fan as the rest of us here and I put my money down as soon as reservations were open.

As did we but I would say unlikely for two reasons not at all appropriate for the responses requested: 1) we don't need two and the other is for a relative who won't commit now, and, 2) we might spring for a Model X. I think that includes a number of us in the middle class income range (me less so for option 2 because I'm aged with a relatively young wife).

 

[ValueAnalyst]

Can someone illustrate the YoY declines in GM/F/BMW sales? That graph would really drive home the Model 3 Effect.

 

[Intl Professor]

They're keeping it close to their chest, but this is what I've gleaned:
- The solar roof is not going to go mass production until middle of next year, so insignificant contribution until 2019.
- Powerwalls and Powerpacks could start making a significant contribution as soon as this quarterly report, but more likely Q1 2018.

Also, great priority sould be placed on battery production for off grid use by utilities to start to nail down that market. Aka, south Australia (I almost typed South Africa).

 

[Oil4AsphaultOnly]

Thank you for spelling things out. It helps.

I need to put meat on the bones of my premises. I agree the skeletons don't support the conclusions.

If people can wait two years, demand is soft and may not support a higher selling price. There is only $1000 on the table right now. Why can't they wait until after the self driving revolution has occurred and reap the benefits of the sharing economy? The cost of transportation is falling right now. Is it the best time to buy an expensive car? Were the deposits actual demand, micro interest free loans, or $7,500 lottery tickets?

I don't know, but I do know that the car is great!

Did Ford leave money on the table whe selling Model Ts for a fraction of the price of other vehicles? Many would say, yes he did. What would you say?

I don't know the answer to all these questions but I do owe more than skeletons.

Thanks.

No, Ford didn't: Model T Facts | Ford Media Center
"THE CAR WAS INTRODUCED WITH A PRICE TAG OF $850. THE MODEL T LATER SOLD FOR AS LITTLE AS $260, BECAUSE FORD PASSED ALONG THE SAVINGS FROM HIS PRODUCTION INNOVATIONS."

Note that Ford still made a profit per model T, because it was a private company back then. The reason it could sell so cheaply was because Henry Ford _invented_ (there's a concept that people don't appreciate these days) the assembly line.

Until Tesla's model 3 line is running at full speed (tooling depreciation expense is spread over per unit built), the barebones model 3 isn't profitable yet. Worrying about demand during the tax-rebate period is an academic exercise (I disagree with that premise) that puts the cart WAY before the horse AND misses the forest for the tree.

 

[ValueAnalyst]

Tesla Model 3 is equipped with a driver-facing camera for Autopilot and Tesla Network

This is my opinion, not a fact: Tesla Network is coming sooner than some here expect.

 

[22522]

No, Ford didn't: Model T Facts | Ford Media Center
"THE CAR WAS INTRODUCED WITH A PRICE TAG OF $850. THE MODEL T LATER SOLD FOR AS LITTLE AS $260, BECAUSE FORD PASSED ALONG THE SAVINGS FROM HIS PRODUCTION INNOVATIONS."

Note that Ford still made a profit per model T, because it was a private company back then. The reason it could sell so cheaply was because Henry Ford _invented_ (there's a concept that people don't appreciate these days) the assembly line.

Until Tesla's model 3 line is running at full speed (tooling depreciation expense is spread over per unit built), the barebones model 3 isn't profitable yet. Worrying about demand during the tax-rebate period is an academic exercise (I disagree with that premise) that puts the cart WAY before the horse AND misses the forest for the tree.

The quote says that Ford did, that is what "Passed along the savings" means.

It seems you disagree with the premise of worrying about demand after the incentive expires.

I cannot really go with the "demand will never be an issue at the $50K price" premise. I suggest we ignore each other.

 

[Oil4AsphaultOnly]

The quote says that Ford did, that is what "Passed along the savings" means.

It seems you disagree with the premise of worrying about demand after the incentive expires.

I cannot really go with the demand will never be an issue at the $50K price. I suggest we ignore each other.

Did you miss the part where he started at $850? It took another 15 years of production innovation (for the exact same car) before the price could be brought down to $260. The quote shows that Ford priced his product so that he didn't lose money.

If you're worried about the demand for a $50k model 3 (which starts at $35k) AFTER the tax incentives have expired, then nothing I say will help you see the logical fallacy of that line of thinking.

 

[RobStark]

Interestingly, Leaf and Bolt sales in July are both good. It's playing out the way many of us thought it would, EV's are not competing with each other, they're taking sales away from ICE

The sales numbers are not good.

Bolt has not reached a sales rate for 25k American sales per year.

LEAF sales are not atrocious given that LEAF 2.0 is around the corner. That does not equal good.

 

[MartinAustin]

I wonder why

 

[Gerardf]

I wonder why
View attachment 239153

As I also stated in the other thread, the Germans might also be starting to suffer from the sliding Euro US$ rate (while Tesla will profit from that).

The exchange rate was 1,07 in January, today above 1,18.

 

[The Blue Owl]

VW’s CEO Knows the Future Is Electric—His Company Isn’t So Sure
Matthias Müller is being buffeted by managers who remain skeptical of his push to downgrade the internal-combustion engine

Almost immediately after taking over in September 2015, Mr. Müller presented a plan to move beyond VW’s huge business in diesel and gasoline vehicles and generate at least 25% of sales from electric cars. He argued VW needed to create a “significant share of revenue” from apps and services.

“What are you doing?” demanded one angry executive during a meeting of top managers last fall, referring to the CEO’s stress on shifting beyond conventional vehicles, according to people present. “You are driving the nails into our own coffin.”

Such exchanges have been frequent and continue to this day, say some company insiders.
​

This is required reading for all those "when-the-giants-wake-up-Tesla-is-toast" analysts. It turns out it's hard to wake up when you're in denial.

 

[tander]

IIRC, Ford started the Model T's at a higher price (highest?), and over time began to drop the price. Someone posted that data a while back. Maybe @RobStark ?

That was probably me, don't remember what post. Musk tends to concentrate more on dropping costs than prices, and it would be a funny day for the stock price when they announce they are dropping the price, but if they wanted to advance sustainable transport... even further that would be a great way to do it, and it wouldn't be the first time they took a page out of Henry Ford's playbook.

Thank you. I would like to see that, and will look. But did he ever leave any money on the table? And if he did, what did he get for it?

He dropped the price of the model T every year for like 7? years in the 20's?. He basically got total market domination, and made horse and buggies and all of their subsidiary industries obsolete in a very short time period. Basically he did leave money on the table in the short term, they could have raised the price every year, but they basically chose long term volume over short term profit, and instead of competing with the competition, they effectively just removed it.

July 2017 Plug-In Electric Vehicle Sales Report Card

Putting this in perspective, in Sep, 1500 M3 would already be around top 5 in US EV sales, and it's not even close to finish ramping yet, by the end of Dec the M3 could be at a Toyota Camry volume, outselling 3-series, A3/A4/S3/S4, C-class combined

Another perspective I think should be added is that the current M3 public production estimates are not necessarily the same as internal goals. My guess is that unless there is a strategic reason to delay the M3 (which I'm pretty certain there isn't), those public goals have a lot of leeway built into them for supplier problems etc., and audacious as they sound are likely meant to underpromise, while internally they are likely trying to and probably will end up overdelivering. That could mean hitting 20,000 a month early by days, weeks, or even months.

They're keeping it close to their chest, but this is what I've gleaned:
- The solar roof is not going to go mass production until middle of next year, so insignificant contribution until 2019.
- Powerwalls and Powerpacks could start making a significant contribution as soon as this quarterly report, but more likely Q1 2018.

Is there a source for the solar roof delay? I was still under the impression that they were starting production soon but haven't really been keeping up with it?

No, Ford didn't: Model T Facts | Ford Media Center
"THE CAR WAS INTRODUCED WITH A PRICE TAG OF $850. THE MODEL T LATER SOLD FOR AS LITTLE AS $260, BECAUSE FORD PASSED ALONG THE SAVINGS FROM HIS PRODUCTION INNOVATIONS."

Note that Ford still made a profit per model T, because it was a private company back then. The reason it could sell so cheaply was because Henry Ford _invented_ (there's a concept that people don't appreciate these days) the assembly line.

Until Tesla's model 3 line is running at full speed (tooling depreciation expense is spread over per unit built), the barebones model 3 isn't profitable yet. Worrying about demand during the tax-rebate period is an academic exercise (I disagree with that premise) that puts the cart WAY before the horse AND misses the forest for the tree.

Not to be a stickler but I read up on this quite a bit a while back; Ford did leave money on the table in the short term, he could have raised the price every year but chose volume over high margins, and he didn't invent the production line he just basically did it on steroids for that era. And regarding the m3, I think it's entirely possible that it will be profitable once they are cranking out maybe a couple thousand per week, that's what this car and everything about it has been designed to do, be easy to make and quick to get to profits, it's a very different situation than any of their previous cars, and Tesla can pretty much demand good prices from suppliers from the start this time around.

VW’s CEO Knows the Future Is Electric—His Company Isn’t So Sure
Matthias Müller is being buffeted by managers who remain skeptical of his push to downgrade the internal-combustion engine

Almost immediately after taking over in September 2015, Mr. Müller presented a plan to move beyond VW’s huge business in diesel and gasoline vehicles and generate at least 25% of sales from electric cars. He argued VW needed to create a “significant share of revenue” from apps and services.

“What are you doing?” demanded one angry executive during a meeting of top managers last fall, referring to the CEO’s stress on shifting beyond conventional vehicles, according to people present. “You are driving the nails into our own coffin.”

Such exchanges have been frequent and continue to this day, say some company insiders.
​

This is required reading for all those "when-the-giants-wake-up-Tesla-is-toast" analysts. It turns out it's hard to wake up when you're in denial.

It must be really hard to turn that super tanker of a company around, diesel has been their bread an butter for so long, he's asking 600k+ employees to go from being die hard meat eaters to vegetarian.

 

[elasalle]

Not sure if this was already posted here ..
Reviewers of Tesla’s Newest Vehicle Are Unanimous: “The Model 3 Has No Competition”

 

[SBenson]

Tesla's Longtime Battery Technology Director Kelty Departs

 

[RobStark]

That was probably me, don't remember what post. Musk tends to concentrate more on dropping costs than prices, and it would be a funny day for the stock price when they announce they are dropping the price, but if they wanted to advance sustainable transport... even further that would be a great way to do it, and it wouldn't be the first time they took a page out of Henry Ford's playbook.

He dropped the price of the model T every year for like 7? years in the 20's?. He basically got total market domination, and made horse and buggies and all of their subsidiary industries obsolete in a very short time period. Basically he did leave money on the table in the short term, they could have raised the price every year, but they basically chose long term volume over short term profit, and instead of competing with the competition, they effectively just removed it.

River Rouge was not built on Razor thin margins for Ford products.

Not gouging customers is not the same is giving the product away.

 

[Alketi]

Tesla's Longtime Battery Technology Director Kelty Departs

Wow, interesting.

 

[schonelucht]

Tesla in 2014 was a completely different company with much smaller organization, less mature processes and control procedures, dependent on one product, much less revenues, tied to second-tier suppliers, much less visibility into Model 3, zero visibility into Gigafactory, zero manufacturing experience, 100% dependent on equity secondaries, and so on. I can go on with this list longer than Dennis Kimetto can run.

Go on with that list all you like and I will counter with one thing : it's still the same CEO.

PS : just to clear up the possible misunderstanding. It's a great thing Elon's still the CEO. He is what makes the company. Which is also why the 2014 experience is still very, very relevant in 2017.