2017 Investor Roundtable:General Discussion

[The Blue Owl]

I am a bit concerned about GigaFactory's ability to produce cells and packs in time. Here are the various data points that sum up to my anxiety:

- TE took an awfully long time to ramp up. Powerwall 2 was introduced in Oct 2016. But it took about an year to ramp up production as per this Electrek article. Even now it is not clear what the rate of production/deliveries is.

- The flagship Australian project is executed using Samsung cells.

- Tesla had production difficulties on the 100kWh packs. IIRC for about 3 months or more.

- Battery VP left in Dec 16. My guess is this person is fired. I don't think many people would leave Tesla on their own at a juncture like this. A massive windfall of success is right around the corner with Model 3 (iPhone moment). Why would anyone voluntarily leave ahead of that.

- SpaceX was doing a dual launch within the same weekend, which is a record. But Elon chose to be at GF instead.

- Here is the language from the Q2 shareholder letter:

"Model 3 drive units as well as battery packs made with our proprietary 2170 form factor cells are being built on new lines
at Gigafactory 1. We are now fine-tuning these manufacturing lines to significantly increase the production rate."

Adjusting this with typical Tesla-language-to-reality factor, this most likely means yield issues, especially given that the battery lines were supposed to be fully automated. I wonder if they are in a situation similar to that of the auto-line in Fremont that @schonelucht gave some insight into with posts above.

What are your thoughts?

Just wanted to give a shout-out to @SBenson for this post from October 9. Even though the low-yield guess was off and the automation turned out to be the problem, this was some excellent reading of the tea leaves at the time.

 

[Waiting4M3]

Just wanted to give a shout-out to @SBenson for this post from October 9. Even though the low-yield guess was off and the automation turned out to be the problem, this was some excellent reading of the tea leaves at the time.

Seems more miss than hit. Tesla said in the conf call that the TE side of GF is doing really well, the Powerwall and Powerpack module assy line is a totally separate line. The 100kwh hour packs for the MS/X uses 18650 cells, so completely different assembly process and separate tools. The issue came from automation supplier who screwed up the programming on the tool, hardly something I would pin on the battery VP.

 

[Bet TSLA]

I actually think Tesla will literally never get to L4. They use the wrong engineering approach.

Okay, I read a good chunk of what you wrote (not all). I think you make a good case that nobody will want to invest the necessary time and money to get to L4 without AI. But so far as I can tell, Tesla is assuming AI. And their approach is to train the AI to be much better than human, using superior senses and reaction time. Given that approach, I don't see what all your writing has to do with anything that's actually going on.

Our current world is one in which anybody who can pass a driving test can take a car out on the road. Once we have an AI that can pass a driving test (yeah, let's make it a really stringent one) then why is it excessively risky to let it drive like any human?

Edit: Sorry I posted here, as it's obviously the wrong place. With any luck a moderator will move it to the right thread.

 

[Waiting4M3]

Just relistening to the conf call, they brought in Grohhman to fix the battery module production automation, may explain the 30% raise they handed out to Grohhman in mid Oct.

 

[anticitizen13.7]

This brings me back to something I wrote about years ago: in the age of iPhone, where yearly updates in the 10s of millions of units are the norm, society has generally gotten more and more impatient for the latest gizmo.

The impatience around the Model 3 ramp is understandable, given that initial deliveries started 3 months ago. My personal take is that I do not expect a huge ramp or good financial results that move the stock significantly, until May 2018 earnings at earliest. I suspect that August 2018 is a more likely target.

Shareholders who are uncomfortable with the uncertainty should sell. I remember the July 2012 through March 2013 ramp of the Model S, and it was a time of high anxiety for shareholders and reservation holders alike. This time likely won't be as bad, given that Tesla has the bedrock of Model S/X and an energy business that is finally ramping, but it will be tough. Anyone who is comfortable with, and can afford the risk, should probably just let their shares sit.

 

[justin w]

In the Q and A section of Elon Musk's conference call, he answered most of the questions with vagueness.. it doesn't give me confidence about this company or where it is heading. another quarterly blowup like this, this company will fall flat like enron

 

[mickificki]

In the Q and A section of Elon Musk's conference call, he answered most of the questions with vagueness.. it doesn't give me confidence about this company or where it is heading. another quarterly blowup like this, this company will fall flat like enron

That was my impression as well. Such a stark contrast from last quarters conference call.

 

[Causalien]

An repeat of Model S. Same comments from shorties too.

Like someone else said, it took until summer next year for it to be resolved. So if you bought jan calls, better roll it to jan 2019 and possibly sell around oct 2018.

 

[Waiting4M3]

Regarding the 10K/wk target, they really danced around it a lot, keeping bringing up that parts of the line can already run 6K-7K/wk, and can be cheaply tweaked to make a little more. I wonder if they're considering abandoning the plan to add a 2nd line to get to the hard target of 10K/wk, instead make minimum investment to crank the 1st line up to 7K or somewhere close to 10K/wk, getting the most bang for their buck, and then use the money/space/time that is freed up instead to accelerate MY production ramp.

 

[3Victoria]

Regarding the 10K/wk target, they really danced around it a lot, keeping bringing up that parts of the line can already run 6K-7K/wk, and can be cheaply tweaked to make a little more. I wonder if they're considering abandoning the plan to add a 2nd line to get to the hard target of 10K/wk, instead make minimum investment to crank the 1st line up to 7K or somewhere close to 10K/wk, getting the most bang for their buck, and then use the money/space/time that is freed up instead to accelerate MY production ramp.

My understanding from the call was that they would re-evaluate the possible tweaks to increase the production. I expect that if that is not promising, then they would simply duplicate the line. Agree, they will attempt 'best bang for the buck' - whatever that is.

 

[Mkorpal]

I'm late to the party. Won't be able to listen to the call until tomorrow, but the letter looks exactly as expected. No real surprises is good.

 

[myusername]

they won't fill the M3 reservations until mid to late 2019... they took reservations in 2016... that's crazy. 500k in 2018 is now impossible. 500k in 2019 is unlikely as well. 1m in 2020 is impossible... which means @ValueAnalyst question of "is 10m/year in 2023 possible?" answered...

when will this company that is valued higher than large auto companies even come close to any one of their size? how about profitably?... BMW, 2m+/year... at this point that looks to be somewhere in the 2022 to 2023 range... nearly all of the manufacturers are working on plans for competition... by this time Tesla will be a small fish in a sea of EV manufacturers.

the best case scenario for Tesla is that it begins to survive on its own and becomes a decent fraction of the size of BMW in the next 5 years.

which means the current valuation for Tesla is completely insane.

 

[SteveG3]

(snip)
... at this point that looks to be somewhere in the 2022 to 2023 range... nearly all of the manufacturers are working on plans for competition... by this time Tesla will be a small fish in a sea of EV manufacturers.

(snip)

So, you think "Tesla will be a small fish in a sea of EV manufacturers" by 2022-23.

Pretty clear you think they will be far far far under 50% of EV market share by then.

Could you share with us what year you think Tesla will be under 50% market share for long range EVs, excluding China?

 

[MartinAustin]

Wasn't my point. I worked at Lockheed and managed hundreds in an organization with tens of thousands in a company with hundreds of thousands. The only time you let that many folks go at the end of the year especially when things are behind is when there is a RIF. You do not jam your HR group and the same managers you need to catch up, who are apparently in OT "hell", with interviews etc during the holidays. I don't care who you site. It's not the right or best way to do it.

It's never a good time to let hundreds of workers go... whether you're in HR (who are usually planning the Christmas party at that time!) or not

Tesla's HR department is massive and constantly recruiting and interviewing. A well-oiled machine. Their workload won't stop, reduce, increase or swell in any way as a result of that event.

 

[RobStark]

Just relistening to the conf call, they brought in Grohhman to fix the battery module production automation, may explain the 30% raise they handed out to Grohhman in mid Oct.

In Germany, OEM engineers make X amount and tier 1 suppliers make significantly less.

Tier 1 engineers interact with automakers and have a chance to get hired by OEMs by demonstrating their competence.

When Tesla bought Grohmann Engineering they took the Grohmann engineers off work for other OEMs. Reducing their chances of getting hired by BMW,Mercedes Benz, Volkswagen etc. Now they work exclusively on Tesla projects. Now, Tesla Grohmann Automation engineers wanted to be compensated like OEM engineers.

And now they are.

 

[SPadival]

I am actually somewhat relieved that the main bottleneck is in the battery module assembly line and not in the stamping, welding, final assembly etc. Otherwise, imagine the torrent of "I told you so"s from the so called traditional auto manufacturers and "experts" who claim that Tesla does not know how to manufacture cars.

Also, I have not seen any other manufacturer use robots for fixing dashboard and seats in final assembly. Correct me if I am wrong here, Is this a world first?

 

[jelloslug]

I am actually somewhat relieved that the main bottleneck is in the battery module assembly line and not in the stamping, welding, final assembly etc. Otherwise, imagine the torrent of "I told you so"s from the so called traditional auto manufacturers and "experts" who claim that Tesla does not know how to manufacture cars.

Also, I have not seen any other manufacturer use robots for fixing dashboard and seats in final assembly. Correct me if I am wrong here, Is this a world first?

I have not seen that either. It's standard practice to use robot arms to hold the seats and dashboard but it is manually actuated by workers and bolted in by the same people.

 

[justin w]

they won't fill the M3 reservations until mid to late 2019... they took reservations in 2016... that's crazy. 500k in 2018 is now impossible. 500k in 2019 is unlikely as well. 1m in 2020 is impossible... which means @ValueAnalyst question of "is 10m/year in 2023 possible?" answered...

when will this company that is valued higher than large auto companies even come close to any one of their size? how about profitably?... BMW, 2m+/year... at this point that looks to be somewhere in the 2022 to 2023 range... nearly all of the manufacturers are working on plans for competition... by this time Tesla will be a small fish in a sea of EV manufacturers.

the best case scenario for Tesla is that it begins to survive on its own and becomes a decent fraction of the size of BMW in the next 5 years.

which means the current valuation for Tesla is completely insane.

I have to say that they are extremely overvalued. Selling 100k model S and X, then expect your market cap to be at 50 to 100bil, just doesn't cut it. It is all fundamental economics here. your product has to be in massive exponentially production mode and you also need tons of customers to buy your s.h.1.t. (superb monthly sales). if you achieve both of these, your stock will go UPPPP.


A FULL year had pasted and they only produced 200-300 model 3s (and plus they are all for corporate employees). Everyone holding on to their reservation has to be thinking, "what the hell are they doing for a whole year and only produced a measly 300 cars "

 

[myusername]

So, you think "Tesla will be a small fish in a sea of EV manufacturers" by 2022-23.

Pretty clear you think they will be far far far under 50% of EV market share by then.

Could you share with us what year you think Tesla will be under 50% market share for long range EVs, excluding China?

the first question is... when will EV sales be an actual impact on the global market?... they are not today... Tesla's "dominance" in a portion of the market that is so small is basically useless to extrapolate on... although that's the line being touted here... 50% of 0.2% is not a thing.

0.5% is ~400k/yr... when will Tesla hit that number?... i'm guessing they'll sell that much in 2020.

if EVs take off over the next 2 years, then ALL manufacturers will have at least one EV available if not a line... so my answer to you is, 2019-2020.

and Tesla will be selling cars along with competition of all sorts... and GMs will not be 25% to 30%... and Tesla will trade at sub 1 P/S.

 

[SteveG3]

the first question is... when will EV sales be an actual impact on the global market?... they are not today... Tesla's "dominance" in a portion of the market that is so small is basically useless to extrapolate on... although that's the line being touted here... 50% of 0.2% is not a thing.

0.5% is ~400k/yr... when will Tesla hit that number?... i'm guessing they'll sell that much in 2020.

if EVs take off over the next 2 years, then ALL manufacturers will have at least one EV available if not a line... so my answer to you is, 2019-2020.

and Tesla will be selling cars along with competition of all sorts... and GMs will not be 25% to 30%... and Tesla will trade at sub 1 P/S.

Thank you for providing an answer. So, even despite all the Tesla killer articles, articles claiming we are on the verge of seeing Tesla buried in an avalanche of competition, you do not see Tesla falling to below 50% market share until 2019-2020. For context, VW and Toyota lead by a wide margin in gasoline car market share... about 10-12% each.

Would you call VW or Toyota small fish in the gasoline car market? If not, it seems you are saying Tesla will be far below 12% market share of EVs (outside China), by 2022-2023.