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2017 Investor Roundtable:General Discussion

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Man, Road&Track got left out until someone complained? After they posted this famous editorial? That's rough.

Tesla Model S Autopilot Reliability — Why Americans Should Love Tesla

Nice article, matches the style of Car and Driver back in the day when your English teacher put it on the recommended reading list.

Let's think about music a little bit, and the concept of crescendo.

Nerve endings will saturate. After that, everything else is run off. This applies to information and orchestration.

Tesla has a deal with Motor Trend. (I currently subscribe to Car and Driver AND Road & Track, but have never subscribed Motor Trend - maybe I object to the implications of the word Trend...)

The delay on Road&Track puts enough space in to collect an audience and get a credible second witness impression.

I don't know for sure the reader demographics of the different publications, but I bet someone at Tesla does. That person also knows how to time a crescendo.
 
I don't see anyone here talking about how payment terms times volume generates working capital. Or, in other words, the more cars they make, the less money they need.

Let's try some math.

If we lump all costs of the car into "supplier payments" due in 60 days. Say a car costs $30,000.
And we say it takes 20 days to build the car, and 30 days to receive payment. (50 days) And you sell it for $40,000.

Each car you build burdens you with 10 days of $30,000 in working capital and $10,000 of gross margin.

If you make a car 36 times a year (360 days / 10 days), you hold the $30 K for a full year. (And pocket $360,000)

But they are not making 36 cars a year, but rather more like 360,000 cars. So we need to add some zeros... 4.

So you hold 300 million dollars and pocket 3.6 billion dollars. ( I think the math is right, but it is late here).

Let's see what happens if it only takes 10 days (instead of 20) to build the car, so one car gives you 20 days of $30K working capital. Now you have to deal with 600 million dollars of extra cash.

If you can get paid in 20 days, you are stuck with about a billion dollars in working capital.

But this is brittle. If there is friction in the sales process, like, say, you trip up your customers by demanding $1000 if they refuse to worship the car by washing a black car everyday - now you have introduced a religious argument to your sales process. That adds 10 days to the sales cycle, or more, because they have to pray about it - good stewardship of money and the environment are now in conflict.

Suddenly a billion dollars in working capital disappears, "Poof!"

All because, in pursuit of margin, you added friction and religion and manipulation and control, and all the things that would cause a wife to divorce you, to a sales process, because you have some vision of a smooth running line making a lot of black cars, where in fact, for star-belly reasons you are making almost zero black cars (only for fleet sales, because you don't respect the customer's resale value the way Honda does).

Anyway, if you focus on making time delays small rather margins large, money shows up on your doorstep and green vehicles show up on customer's doorstep. Everybody is happy. It is no longer zero sum.
upload_2017-8-3_0-48-40.jpeg
 
Did anyone hear the Elon JB dialog that said to me, clear as day, that the construction technique on the Model 3 battery is the same as the construction technique on the X and S battery. If you open them up, they will look the same - safety cooling, the same.

But the chemistry is different. An NCA to NMC transition happened on the chemistry, that to the resolution of the audience is not a difference - it is still lithium.

It won't show in the transcript. It only shows in the audio. And with the background understanding of chemistry investment.

Note: I think the NMC will have a longer useful life.

?
 
Did anyone hear the Elon JB dialog that said to me, clear as day, that the construction technique on the Model 3 battery is the same as the construction technique on the X and S battery. If you open them up, they will look the same - safety cooling, the same.

But the chemistry is different. An NCA to NMC transition happened on the chemistry, that to the resolution of the audience is not a difference - it is still lithium.

It won't show in the transcript. It only shows in the audio. And with the background understanding of chemistry investment.

Note: I think the NMC will have a longer useful life.

?
I didn't hear them mention chemistry at all. It would be very surprising if they had switched from NCA to NMC. NMC is less energy dense, which means higher cost per kWh. It also uses more Cobalt, which is problematic.
 
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I didn't hear them mention chemistry at all. It would be very surprising if they had switched from NCA to NMC. NMC is less energy dense, which means higher cost per kWh. It also uses more Cobalt, which is problematic.
All of that new battery guy's work is with NMC.

When I try to match the chemistry investment behavior with the last two data containing sentences, a "does not compute" happens.

Please take a look at his work, consider the fraction of Tesla's business that is mobility based, and help me understand. Maybe a reference on the cost and density studies would help.
http://www.a123systems.com/nmc.htm

I know the order of the letters is supposed to reflect relative concentrations.

Edit: this article from the journal of the electrochemical society compare several chemistries including NCA and NMC

Voltage Fade of Layered Oxides: Its Measurement and Impact on Energy Density

"Despite its initial voltage fade, the Li- and Mn-rich NMC exhibits the highest oxide-specific energy density among the materials of interest."

The Tesla battery guy fixed fade.

Just trying to make stuff line up.
 
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Gene is not a new Tesla admirer. He's been super bullish for a long time. Check out how well he does with his picks compared to the moron from Goldman.

I know his name from AAPL conference calls and he always appeared to have a better grasp on what is going on then most other analysts, especially Trip Chowdry who is the David Tamberino of AAPL.
 
All of that new battery guy's work is with NMC.
Which suggests his research will be used in the Tesla energy products, not vehicles. (My understanding was that the research primarily focused on durability, which is the most important property of the Tesla Energy products.)

When I try to match the chemistry investment behavior with the last two data containing sentences, a "does not compute" happens.

Please take a look at his work, consider the fraction of Tesla's business that is mobility based, and help me understand. Maybe a reference on the cost and density studies would help.
http://www.a123systems.com/nmc.htm

I know the order of the letters is supposed to reflect relative concentrations.

Edit: this article from the journal of the electrochemical society compare several chemistries including NCA and NMC

Voltage Fade of Layered Oxides: Its Measurement and Impact on Energy Density

"Despite its initial voltage fade, the Li- and Mn-rich NMC exhibits the highest oxide-specific energy density among the materials of interest."

The Tesla battery guy fixed fade.

Just trying to make stuff line up.
You could look at the NCA 18650 cells vs the NMC 18650 cells. The Powerwall 1 used two NMC modules (or 888 cells) for 6.4 kWh. The 100 kWh pack uses sixteen NCA modules (or 8256 cells) for ~102.4 kWh. Basically, NMC was 7.2 Wh/cell, NCA is ~12.4 Wh/cell. That means the NCA 18650 cells have ~72% better energy density than the NMC 18650 cells.

I think they've reduced the difference going to the 21-70s, but I very strongly doubt NMC could improve to the point where it's close to NCA. That's why I'm very doubtful Tesla would go for NMC on vehicles.

Just to underline the difference, I expect that Tesla is using roughly 3840 cells for the long range Model 3. If they have gone for NMC, they would need around 5100 cells, by my estimation. The pack would weigh and cost ~33% more using NMC.
 
Just to clarify on my disagree. I agree that Tesla could be profitable in Q2 2018, but I disagree on the dividend. When a company issues a dividend, they're publicizing that they don't have anything they could do with that money to grow the company. Apple did that after Jobs' passing, and I'd imagine TSLA doing that after it becomes a $1T company and owning a profitable chunk of the transportation-as-a-service space and energy market, but not before. Any unspent profit will simply become part of a war-chest to battle the remnants of the fossil fuel gangs

I used to agree with that statement, but (I think) there are other reasons for paying dividends. There are funds/individuals who can't invest in companies who don't pay dividends, for example. I'm not too knowledgeable/confident in this area, but I know the subject is not as simple as the sentence I bolded above.
 
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Jeez... clickbait much?
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So twice as many people have cancelled a Model 3 order as will actually buy a Chevy Bolt this year. Or any other manufacturers' EV. Ten times as many have reserved a Model 3 as have cancelled.

Seems like a pretty good problem to have.
 
"Positives in the latest updates include the mass-market Model 3 sedan’s production starting as planned, and Model S pre-orders coming in at about 500,000 — up from a prior level of 373,000, said Efraim Levy, senior equity analyst at CFRA Research, in a note."

:rolleyes:
 
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Not entirely sure what to learn here! Besides deleverage when high and load up when low, but determining those figures are an entirely different beast. High relative to what it's been and miss out on the big run?

I agree with your strategy, and I would add that the prices at which one "deleverages when high and loads up when low" should be based on a consistent fundamentals-based system that minimizes emotional swings. I think being relatively successful in long-term investing is not SpaceX science, but the key is to recognize emotional swings and minimize their effect on investment decisions. This book has been helpful to me in many areas of my life.

I don't blame anybody for my trading mistakes, but I'm not blinded enough by my love for the company that I didn't see "the stock price is higher than we have any right to deserve" which was somewhat amended by a tweet saying he meant the stock price was high relative to where it's been (uhm, okay seems kinda obvious 3xx is higher than 2xx, absolutely no reason to even point that out) His specific words were very hard to retract imo. Regardless of the intent, absolutely the bears will twist it and run with it! That's what they do.

I'm all for Tesla and Elon, not putting my money anywhere else. But don't think every single thing they do/say are ideal, especially for trading purposes. Whom one is speaking to also seems irrelevant with social media these days and easily used out of context. Still many other things he could have said. Production hell brings back memories of serious production issues, supplier issues, hubris :)
It's a fresh start on new product lines, with much more experience and designed for ease of manufacturing. It cannot be production hell like it was for the X. (Sounded pretty damned positive on the ER call not one week later.)

I do try to take in any meaningful bad news, I don't just research Tesla to further my bias. It's still the most promising stock I am aware of for the next decade! TBH probably most fun company to research and follow anyways.

I agree that Elon sounded more positive on the call than less than a week ago. Even more importantly, he clearly has recently worked on his messaging to investors. This is extremely positive for long-term investors. There were a few examples of this on the call, especially in his opening remarks (I'd be surprised if investor relations didn't have their hands on that), and the following is one that made me go "aha!":

What we have ahead of us, of course, is an incredibly difficult production ramp...

[immediately followed by]

Nonetheless, I think we've got a great team, and I'm very confident that
we will be able to reach a production rate of 10,000 vehicles per week towards the end of next year.


This is a very different rhetoric than what investors got during the Model 3 deliveries event, and it is a one that may have made the difference between down 7% and up 7% in extended trading.

There are many examples of successful entrepreneurs failing at leading fast growing and maturing companies (Travis Kalanick, early Steve Jobs etc) only to be pushed out by the corporate types (ugh) who are better at schmoozing and politicking. Elon's transition from an extremely successful founder/entrepreneur who, when faced by an obstacle, goes over it, under it, around it, or through it by pure emotion and ambition, to a Chief Executive Officer that sets the tone throughout a global corporation that will continue to grow without him is an important one.

Anyways, barring macro news, looks like green light for TSLA to kick some further ass?

Let's.
 
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One point I don't think anyone here has commented on yet: at the very end, Elon indicated that the cross-country autopilot demo is still on track for the end of the year. There has been a lot of scepticism about this, given the slow AP2 roll-out, but it seems that their internal software must be in good shape.
 
One point I don't think anyone here has commented on yet: at the very end, Elon indicated that the cross-country autopilot demo is still on track for the end of the year. There has been a lot of scepticism about this, given the slow AP2 roll-out, but it seems that their internal software must be in good shape.

"if it is not, at the end of the year, it will be very close," but yes, generally on track.

Some here have pointed out that there will be a delay between the demo ride and release to customers in part due to regulation. Both houses of the Congress will vote on related proposed legislation this later this year, and this is something investors and customers should follow closely.
 
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Pulling from Market Action

I'm always open to 2 cents, even unsolicited.



I agree that there are cost and timing benefits to building the Model Y on the same platform as Model 3, but what about the comments from just the last earnings call (paraphrasing): "sedan should be built on a sedan platform, SUV should be built on an SUV platform." Isn't part of the reason why Tesla ran into issues building Model X because they used the same platform as Model S?

Interesting. In the days of body on frame v.s. unibody, that meant something. But all of Tesla's vehicles are unibody/ skateboard. I'm guessing the compromise was ride height, ground clearance and wheel base. Squeezing 3 rows of seating in a 2 row platform is challenging. If they had made it longer, the Falcon doors power monoposts would not have been so needed for access. Would also have also allowed more cargo room.
 
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