2017 Investor Roundtable:General Discussion

[jbcarioca]

As off-topic as much of today's postings:

ref. #24348 - can someone please tell me why a clay model has a license plate on it?!?!?!?

"I pulled you over because your windshield was obscured...."

Responding in an equally OT manner. Sometimes people add plates to illustrate what various types of plates will look like, e.g. EU standard vs NA rectangles. I've only seen a handful of clay models. The ones I have seen have had plates, one was different types front and rear. All the ones I have seen have been painted, after a fashion, also. frankly I have no idea how they did the painting on clay. Either way the few I have seen were clearly inferior to mockups on a screen. Thus, I'll speculate not too many clay models are being used these days. They were insanely expensive and looked really unrealistic. Just my opinion, but were I in charge I'd not use them anymore.

 

[kenliles]

ARK has a series of reflective articles of interest, summarized as follows

The Auto Industry Is In The Throes Of Upheaval
The ground is shifting under the auto industry. Here are some recent illustrations from last week:

• DNA Matters: This week, the WSJ published an article highlighting the difficulty that Volkswagen's CEO is facing as he repositions the company for an electric future. Some executives fear that he is “driving the nails into our own coffin.” In ARK’s view, traditional original equipment manufacturers (OEMs) will have great difficulty repositioning their companies as electric and autonomous vehicles evolve and, ultimately, dominate.
  
  
• Ridesharing Disrupts: ARK’s research suggests that both ridesharing and autonomous taxis could cause major problems for auto loans. At the end of last week, Capital One restructured its commercial taxi medallion loans, citing the role that Uber and other ridesharing services are playing in the industry.
  
  
• Auto Industry Consolidation Begins: This week, Toyota announced that it will acquire roughly 5% of Mazda. Together, they will build a $1.6 billion factory in the U.S. as they research and develop electric vehicle (EV) technology. ARK’s research suggests that the transition to EVs will consolidate the industry to a small extent, but that the transition to autonomous vehicles will consolidate the auto industry dramatically.
  
  
• Used Cars Suffer: Surprisingly, in a weak market AutoNation opened its first used car center, purportedly to evade the restraints that OEMs have placed on auto retailers. In ARK’s view, the used car market could deteriorate dramatically during the next few years with the introduction of autonomous taxis. As individuals increasingly forgo personal vehicles in favor of autonomous taxis, the supply of used cars could surge as the demand for them collapses.

 

[scaesare]

Responding in an equally OT manner. Sometimes people add plates to illustrate what various types of plates will look like, e.g. EU standard vs NA rectangles. I've only seen a handful of clay models. The ones I have seen have had plates, one was different types front and rear. All the ones I have seen have been painted, after a fashion, also. frankly I have no idea how they did the painting on clay. Either way the few I have seen were clearly inferior to mockups on a screen. Thus, I'll speculate not too many clay models are being used these days. They were insanely expensive and looked really unrealistic. Just my opinion, but were I in charge I'd not use them anymore.

They actually apply a mylar-type film to the clay to give the appearance of paint.

 

[Causalien]

I agree with this post 110%. The borrowing capacity of Tesla is underestimated. If Model 3 production goes as planned, I expect credit rating agencies to upgrade their ratings and outlook on the company by the end of 2017 and again by the end of 1Q18.

Disagree with full on debt binge. Rates are going up. Stock raise is more prudent at $400. We are a generation that has forgotten about what it is like to live in a riaong rate environment.

Amber Heard splits from PayPal billionaire Elon Musk | Daily Mail Online

Good decision Elon.

 

[AudubonB]

forgotten about what it is like to live in a riaong rate environment..

Do tell.

 

[TradingInvest]

1.6m annual production by 2023?!

6,000 Model 3's in 2017?

310,000 total cars delivered in 2018?

Osborne on both Model S AND Model X?

Model Y at end-2019?

Tesla Energy growth slower than Automotive?

$11B revenue in 2017?

Profitability in 2021 or later?

"Elon Musk stands to earn $1.6B in stock options if he can achieve 10 milestones by 2022" - didn't he already earn most of this incentive?

This model is insanely conservative, and he sounds very confused.

There's an extreme gap between what Tesla said it will do in 2018 and what even the most bullish sell-side analysts are projecting. A very wide gap, the size of which I've never seen before. This is really odd.

Gene Munster has decades of experience making estimates for companies like Apple. I followed him for a long time. His mind works.

His estimates are conservative, but things rarely go smooth as planned. Being a little bit conservative is better than being too optimistic then get caught off guard.

My estimates are in ( ):

1.6m annual production by 2023?! (my estimate is 4.1 million, love the simplified Model Y strategy. I am shooting for perfection execution. I know that rarely happens in real life, waiting for eggs on my face.)

6,000 Model 3's in 2017? (I can't pinpoint S curve, 5,000~20,000, but doesn't make a difference)

310,000 total cars delivered in 2018? (90,000 S+X; 250,000 Model 3)

Osborne on both Model S AND Model X? (Minimal, the effect will be countered by more Tesla awareness and near perfect autonomous feature)

Model Y at end-2019? (agree, R&D, buildings and production lines will take time, nothing is smooth in real life)

Tesla Energy growth slower than Automotive? (hard to tell, both will grow at high rate, battery supply will be the bottleneck)

$11B revenue in 2017? (mine is $10.8 B, assume the Model 3 S curve will delay a bit)

Profitability in 2021 or later? (agree.)

Anyway, it's exciting time. No wonder Elon said "I have never felt so good about Tesla". Me too.

 

[ValueAnalyst]

Disagree with full on debt binge. Rates are going up. Stock raise is more prudent at $400. We are a generation that has forgotten about what it is like to live in a riaong rate environment.

I'm not sure why people think I'm suggesting a "full on debt binge."

Tesla is a $25B total asset, $60B market cap, $10B run-rate revenue company today.

In one year, Tesla will be a $40B total asset, $100B+ market cap, $30B+ run-rate revenue company.

I'm suggesting borrowing non-dilutive debt of $2B to start four to five Gigafactories simultaneously very soon.

The return on investment on a Gigafactory is nose-bleedingly high (~infinite), and vast majority of cost is in years 3 to 5 of construction.

Basically:

Your salary is $250k. Your house is worth $1m with a $200k mortgage (i.e. $800k equity), I'm saying borrow $20k to build another $1m house.

And if you don't do it, your neighbor will do it, because the opportunity is now becoming apparent to everyone.

In layman's terms, that's the cost/return/risk Tesla has in its hands.

And y'all are making it sound like I'm saying borrow $1m at 10% interest rate to invest in 2% US treasuries...

 

[DragonWatch]

Still not getting it, but good to see them trying

The Problem With Electric Cars? Not Enough Chargers — The Wall Street Journal

Interesting article, yet a yawn catcher. We are planning a trip from Olympia (WA) thru Sacrameto to Fremont (visit birth place of our MX) and wish father-in-law (Minden, NV), near GF, happy 90 B'day. Most of the trip shows SCs along the route except Nevada:-( Therefore, range angzity without making a 100 mile round trip to Gardnervill in Nevada. My son-in-law has suggested taping into the electric dryer socket should our road trip socket (standard charging cable w/3 socket adapters) fit that configuration.

While we have an X, I am eagerly waiting for the ePickup from Tesla. That vehicle would only be used locally and seldom. We are planning out our solar configuration at our to become our permanent residence. We will be selling off the current permanent home which has solar (net metering) within a year. Part of my point addressing the articles failure to think out side the denial mind set is that we will be adding an external charging station for the ePickup (Tesla), and guests. There was a super SEXY car port design a few years ago by BMW ~ wish I had the pic to share. Build it and they will come, probably not in a BMW

 

[Alketi]

Munster's 2023 1.6M annual production likely assumes 750K M3 + 750K MY + 100K MS/MX, or some rough combination therein. It's a fairly linear extrapolation.

In reality, the vehicle market in 2023 is impossible to predict.

2023 is very possibly beyond the L5 self-driving inflection point, which will change the entire transportation dynamic forever and would result in essentially unlimited demand for a $40K L5 robotaxi. However, if L5 is not reached, then Munster's more conservative numbers could be in play.

IMO, 2019/2020 are more meaningful projections for Tesla, where some sort of linear extrapolation for 3/Y are possible.

 

[EinSV]

What Elon said was that they could expand to 1M in Fremont, but probably shouldn't because it would make more sense to build cars closer to where they are delivered. Maybe they are rethinking that with 500,000+ reservations before the car is even available to test drive. I think demand will determine how many they make in Fremont. My best guess is that they will expand to as many as possible possible based on us demand alone.

He did say things along those lines in 2016, but when asked about the one million per year estimate in May at the Q2 earnings call (not SH meeting as I had thought), he suggested it was dependent on Model Y production:

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

My assumption is that the more recent comments more accurately reflect Tesla's current thinking on how they plan to meet (or exceed) the 1M in 2020 target. Their comments on the Q3 call about changing the Model Y design to accelerate production seem to reinforce that the 1M in 2020 goal relies at least in part on ramping up Model Y production so it is a significant contributor in 2020.

 

[3Victoria]

Well, I must compliment all contributors for a most informative and entertaining morning read, and watch! (PST time zone)
Kudos, and keep going

 

[ValueAnalyst]

ARK has a series of reflective articles of interest, summarized as follows

The Auto Industry Is In The Throes Of Upheaval
The ground is shifting under the auto industry. Here are some recent illustrations from last week:

• DNA Matters: This week, the WSJ published an article highlighting the difficulty that Volkswagen's CEO is facing as he repositions the company for an electric future. Some executives fear that he is “driving the nails into our own coffin.” In ARK’s view, traditional original equipment manufacturers (OEMs) will have great difficulty repositioning their companies as electric and autonomous vehicles evolve and, ultimately, dominate.
  
  
• Ridesharing Disrupts: ARK’s research suggests that both ridesharing and autonomous taxis could cause major problems for auto loans. At the end of last week, Capital One restructured its commercial taxi medallion loans, citing the role that Uber and other ridesharing services are playing in the industry.
  
  
• Auto Industry Consolidation Begins: This week, Toyota announced that it will acquire roughly 5% of Mazda. Together, they will build a $1.6 billion factory in the U.S. as they research and develop electric vehicle (EV) technology. ARK’s research suggests that the transition to EVs will consolidate the industry to a small extent, but that the transition to autonomous vehicles will consolidate the auto industry dramatically.
  
  
• Used Cars Suffer: Surprisingly, in a weak market AutoNation opened its first used car center, purportedly to evade the restraints that OEMs have placed on auto retailers. In ARK’s view, the used car market could deteriorate dramatically during the next few years with the introduction of autonomous taxis. As individuals increasingly forgo personal vehicles in favor of autonomous taxis, the supply of used cars could surge as the demand for them collapses.

What the heck does Toyota get from partnering with Mazda?

 

[Alketi]

Great article today by the Guardian: The car is dead, long live the car, thanks to Tesla | John Naughton

The ICE obituaries have begun. They should reach a drum-beat by this time next year.

 

[GoTslaGo]

Disagree with full on debt binge. Rates are going up. Stock raise is more prudent at $400. We are a generation that has forgotten about what it is like to live in a riaong rate environment.



Good decision Elon.

TSLA also inherited a bunch of debt from SolarCity.

 

[22522]

In trying to figure out how to bridge the end of the $7.5K tax credit, Cramer saved the day:

Jim Cramer Reveals the Real People Buying Tesla's Stock

Tesla lives on goodwill more than money.

The more people buy the car, the more people buy the stock.

The best way to support the stock price through the transition, is to...

Sell a lot of cars before the transition.

 

[sundaymorning]

I thought they were sweet together.

Amber Heard and Elon Musk have split after a year of dating: Report

 

[EinSV]

Please note that Elon said 500k cars in 2020 until it became apparent demand for Model 3 is much larger than company thought.

Model 3 demand is again proving much larger than predicted: 1,800 net reservations per day even after a significant rise in estimated ASP.

Let's just say I'm looking forward to Gigafactory announcements later this year...

I don't agree with the bolded statement. By May 2017 Tesla had a good handle on Model 3 demand -- the 1800/day figure was a few days after the handover event when there was a lot of publicity and I don't think it is a meaningful number as far as projecting future growth in reservations.

Having said that, 455,000+ reservations is undoubtedly the tip of the iceberg and I am confident Model 3 demand will quickly exceed one million vehicles per year at current pricing.

I do think Tesla will try to squeeze more volume out of Fremont beyond 10k Model 3 per week but as Elon has also said it would be better to have production closer to the place of delivery. So investing in Model 3 production in Europe and/or China GFs makes more sense than trying to wring every last Model 3 out of Fremont, and is more consistent with Tesla's recent statements about its future plans IMO.

So I expect Model Y production starting sometime in 2019 to help Tesla exceed 1M vehicles in 2020. And overseas production added soon (exact timing TBD) to get well beyond that.

 

[Lessmog]

Tesla is planning to produce 500k cars in 2018 witch is close to maximum capacity for fremont factory, how can they possibly ramp to 1 million cars by 2020? Must take more than 2 years to build next gigafactory?

What Elon said was that they could expand to 1M in Fremont, but probably shouldn't because it would make more sense to build cars closer to where they are delivered. Maybe they are rethinking that with 500,000+ reservations before the car is even available to test drive. I think demand will determine how many they make in Fremont. My best guess is that they will expand to as many as possible possible based on us demand alone.

OK, maybe I misremember, but I think one limit of Fremont is the paint shop capacity, due to the max amount of solvents released.

The Bay area has been pretty heavily polluted with many kinds of organic solvents like xylene, toluene etc since the 60's wild expansion in semiconductor industries and this stuff has rather nasty health effects on populations exposed to them in air or water. I recall a hair raising narrative some 30 - 35 years back by a Dr Ladue or Larue, M.D. about how companies bought tons of it, stored in underground tanks and without any clue of their consumption rate simply ordered more and more when they ran low. How much evaporated? How much leaked into the water tables? Nobody seems to know -- but background concentrations are still high.

So this looks like a well founded, hard limit. Nevada appears to be a bit more Wild West when it comes to permits ...

 

[Drumheller]

What the heck does Toyota get from partnering with Mazda?

Maybe Toyota wants to learn how to make cars that are fun to drive. Toyota makes good quality cars, but they have to be the most boring cars I've driven.

 

[Starno]

I thought they were sweet together.

Amber Heard and Elon Musk have split after a year of dating: Report

I've seen her instagram and some recent picture of her ... the least we can say is that she seems to enjoy a lot the company of other men in a pretty intimate level ...

So maybe that's a good thing they split.