2017 Investor Roundtable:General Discussion

[electracity]

Was anyone else surprised when Elon gave the 200k production number for 3 & Y combined for China GF? I know it was “at least”, but it still surprised me as did the timeline.

As a starting point. Establishing a Chinese supply chain is as important as building the factory.

One possibility is that Tesla never does large scale production in the free trade zone. With the supply chain established they would be looking for the future removal of the dual ownership requirement in China. I presume that China can't be a significant car exporter today without facing a 25% tariff due to current policies.

But Tesla just can't do high volume production in China before 2022. This is part of "the moat" that existing car companies know protects them from Tesla gaining too much market share. "Alien Dreadnaught" was the wrong strategic approach to the issue of production volume. Tesla has the right IP and design skills but can't make enough cars to monetize their unique capabilities.

If Musk can't turn around his lack of execution he has no chance to tap the capital markets for his dreams. The model 3 out of Fremont was never going to directly finance massive growth.

 

[aubreymcfato]

+2 shares for me!

BTW, Norway sales go fast and steady: in only 4 working days we reached half of Nov.16 total sales.
Let's see how far it goes, but demand is strong with this one.

I personally expect a very good Q4 for them, especially if this pattern remains (meaning: similar Q1 and Q2, great Q3, less but still great Q4)

 

[luvb2b]

that is the section, yes. am i reading that backwards? it means they can always add at least $3b in secured debt? not such a big deal if that's the case. i thought it would be the lower of those numbers but i could be reading it wrong. thanks.

Are you referring to section 4.07(c) from the 10-Q as follows



The way I read it there is a limit up to which Tesla may create new debt without additional guarantees for note holders. That limit is the greatest of 3 amounts. One of those amounts is $3B. That means the limit is at least $3B. Also, the section refers to 4.07(a) which only says that should new debt be higher, the notes in question should be unsubordinated to it.

ugh i hate reading debt term sheets. aggregate debt i though was new debt. i will read again as obviously i have parts of it wrong, if anyone has great clarity on this topic please poste and include my handle to make sure i see it.

You are right. I missed that. I thought it was just new debt but it is not. Sorry @luvb2b ! Anyway, it's Model 3 or bust for Tesla regardless so I agree with you that in practice if this convenant were a problem next year, there are bigger issues anyway...

 

[Waiting4M3]

Was anyone else surprised when Elon gave the 200k production number for 3 & Y combined for China GF? I know it was “at least”, but it still surprised me as did the timeline.

It's also only the automotive part of the factory, I expect there to also be battery side. It's like building a GGF1+NUMMI at the same time. I personally don't see it being done in significantly less than 3 years. GGF1 took 2+ years from breaking ground in mid 2014 to production in 2017. But maybe China will surprise us, such as with their bridge building skills.

 

[avoigt]

German MS and MX registration number for October are out and rather low compared with September but the registrations for 2017 are well on track for ending above 3,000 vehicles in December which is a YoY increase of 53%.

All of those of course without M3. My prediction: in 2018 we see an Tesla registration increase in the 3 digit%.

 

[electracity]

It's also only the automotive part of the factory, I expect there to also be battery side. It's like building a GGF1+NUMMI at the same time. I personally don't see it being done in significantly less than 3 years. GGF1 took 2+ years from breaking ground in mid 2014 to production in 2017. But maybe China will surprise us, such as with their bridge building skills.

They will be looking for a better deal for cell production than they got with Panasonic in Sparks. Since Tesla can always unload cell volume with Tesla Energy they should be able to get a larger capital commitment from the cell producer in China.

 

[Ulmo]

I wonder whether they will do an interior refresh before emerging from Model 3 production hell? I assume that they want all of their top production and engineering resources available to work on the Model 3. While an interior refresh is not the most difficult task imaginable, I would think it would take considerable attention to make sure all goes smoothly in production. Since Model S and X demand seem to be doing just fine, why not hold off for another quarter or two and keep "all hands on deck" for the Model 3?

That's why I originally wanted incremental S&X improvements as they came available in earnest last year; now's a bad time to do it. Now, S&X have been the same for a very long time and the refresh cycle at Tesla is going to look downright slow. But, at this point, there's no time to worry about that since everyone needs to get this Model 3 going. Once that's done, Tesla can strategize all it wants.

 

[schonelucht]

They will be looking for a better deal for cell production than they got with Panasonic in Sparks. Since Tesla can always unload cell volume with Tesla Energy they should be able to get a larger capital commitment from the cell producer in China.

Maybe. But at what cost? This quarter, Tesla storage revenue was $44.5M but cost of goods was $59M.

 

[Bobfitz1]

They will be looking for a better deal for cell production than they got with Panasonic in Sparks. Since Tesla can always unload cell volume with Tesla Energy they should be able to get a larger capital commitment from the cell producer in China.

Your comment re Tesla getting a better deal than with Panasonic gave me a thought for discussion. For GFs yet to come is Tesla forever partnered up with Panasonic for cell manufacture? Am I wrong that battery chemistry improvements are either Tesla IP or joint IP with Panasonic? The next round of improvements are likely to come from Tesla's partnership with Jeff Dahl's research team. So I'd think next major chemistry tweaks aren't Panasonic IP at all. Now that Grohmann is owned by Tesla is it impossible that the cell manufacturing lines
could not be redesigned and improved, cutting Panasonic out of that? Elon and JB seem to be great believers in the benefits of vertical integration. Why not pull in the single most important part for the cars and TE?

 

[erthquake]

Your comment re Tesla getting a better deal than with Panasonic gave me a thought for discussion. For GFs yet to come is Tesla forever partnered up with Panasonic for cell manufacture? Am I wrong that battery chemistry improvements are either Tesla IP or joint IP with Panasonic? The next round of improvements are likely to come from Tesla's partnership with Jeff Dahl's research team. So I'd think next major chemistry tweaks aren't Panasonic IP at all. Now that Grohmann is owned by Tesla is it impossible that the cell manufacturing lines
could not be redesigned and improved, cutting Panasonic out of that? Elon and JB seem to be great believers in the benefits of vertical integration. Why not pull in the single most important part for the cars and TE?

From what I understand, the Panasonic portion of the Gigafactory is closed off to Tesla people, and vice-versa. There's still a lot of IP that Panasonic protects, and rightly so. Panasonic uses a chemistry developed with or by Tesla. The Grohmann group is dealing with assembling the cells into the battery packs. They could get the cells from Samsung for all they care.

As I understand it, Tesla would have to make a significant investment in time and money to manufacture their own cells. That seems to be a foolhardy move since cells are quickly becoming commoditized. Tesla's moat is in adding value to those cells by rapidly assembling them into modules for use in TA and TE battery packs.

Tesla will let someone else take the hit for racing to the bottom for making the cells cheaply. That way, Tesla isn't vulnerable to a breakthrough in battery tech/format.

 

[3Victoria]

Panasonic manufacturing prowess is excellent. By partnering with them Tesla avoided R&D and manufacturing hell ... a good decision. Making a similar deal with another company for a new GF would likely be a good idea, since it gets away from a single supplier, although Tesla seems perfectly capable of obtaining cells, with Tesla IP, from other suppliers wiyhout a special partnership.

 

[jackdillio]

tesla is going to hit 350 mark by the end of this wk. i doubled down to my current position. a no brainer play. tesla will lose out strongly by the end of the day..

 

[jbcarioca]

tesla is going to hit 350 mark by the end of this wk. i doubled down to my current position. a no brainer play. tesla will lose out strongly by the end of the day..

When I hear “no brainer” I always suspect the subject action will be “no brained”.
I hope this one isn’t. I’m long but constantly question my choice.

 

[dc_h]

I wonder whether they will do an interior refresh before emerging from Model 3 production hell? I assume that they want all of their top production and engineering resources available to work on the Model 3. While an interior refresh is not the most difficult task imaginable, I would think it would take considerable attention to make sure all goes smoothly in production. Since Model S and X demand seem to be doing just fine, why not hold off for another quarter or two and keep "all hands on deck" for the Model 3?

What’s the lead time on model refresh? There is a supply chain change that has to be planned in advance. Could Tesla have a Model 3 benchmark to be hit prior to S/X refresh?

 

[Krugerrand]

Before my time.

Yes of course and I’m royalty.

 

[electracity]

Your comment re Tesla getting a better deal than with Panasonic gave me a thought for discussion. For GFs yet to come is Tesla forever partnered up with Panasonic for cell manufacture? Am I wrong that battery chemistry improvements are either Tesla IP or joint IP with Panasonic? The next round of improvements are likely to come from Tesla's partnership with Jeff Dahl's research team. So I'd think next major chemistry tweaks aren't Panasonic IP at all. Now that Grohmann is owned by Tesla is it impossible that the cell manufacturing lines
could not be redesigned and improved, cutting Panasonic out of that? Elon and JB seem to be great believers in the benefits of vertical integration. Why not pull in the single most important part for the cars and TE?

Presumably Tesla owns most/all of the IP on the cell itself, and Panasonic owns the IP on the machine that makes the cells.

If Tesla remains capital constrained on their growth plans further vertical integration just slows growth.

 

[DurandalAI]

tesla is going to hit 350 mark by the end of this wk. i doubled down to my current position. a no brainer play. tesla will lose out strongly by the end of the day..

$350 by week end? Nope, I don’t think so. If so, I will be pleased, but I don’t see it happening. Care to elaborate why you feel it will hit $350 by the end of this week?

 

[Reciprocity]

My thought on the refresh has always been that it would be timed as a demand lever and cost reducer related to the phase out of the tax credits. I also thought that it would go along with a change to the 2170 cells, purely for cost savings. I dont know if anyone at Tesla anticipated that the credit would end 1 year so early, but it seems logical that it would be on chopping block given the changes at the top, Energy department and the EPA. We have all debated endlessly on this forum, but the savings from 2170 and the economies of scale that come with adding the Model 3, cheaper Aluminium and other raw materials as well as more leverage with Tier1 suppliers that could help S/X as well as Model 3. Could see savings from a simplified dash with only one screen instead of two. This is where the HUD comes in, replacing the screen and all the associated wiring. And before anyone says that Elon said they had no plans for 2170 in S/X, he also said that 2170 was about cost not performance.

They may not need to make the move to 2170 at this point because they have already done a lot to lower the price while improving the value at the cost. Buts its nice to know that they have the ability to drop the price another $5k without any loss in margin, while also leveraging their investment in GF1. I get that there is a commitment to Panasonic, but this is something that Panasonic and Tesla would have previously agreed upon. Tesla is not going to run the business into the ground to protect Panasonic's profits and they would have discussed this exact situation.

 

[DurandalAI]

My thought on the refresh has always been that it would be timed as a demand lever and cost reducer related to the phase out of the tax credits. I also thought that it would go along with a change to the 2170 cells, purely for cost savings. I dont know if anyone at Tesla anticipated that the credit would end 1 year so early, but it seems logical that it would be on chopping block given the changes at the top, Energy department and the EPA. We have all debated endlessly on this forum, but the savings from 2170 and the economies of scale that come with adding the Model 3, cheaper Aluminium and other raw materials as well as more leverage with Tier1 suppliers that could help S/X as well as Model 3. Could see savings from a simplified dash with only one screen instead of two. This is where the HUD comes in, replacing the screen and all the associated wiring. And before anyone says that Elon said they had no plans for 2170 in S/X, he also said that 2170 was about cost not performance.

They may not need to make the move to 2170 at this point because they have already done a lot to lower the price while improving the value at the cost. Buts its nice to know that they have the ability to drop the price another $5k without any loss in margin, while also leveraging their investment in GF1. I get that there is a commitment to Panasonic, but this is something that Panasonic and Tesla would have previously agreed upon. Tesla is not going to run the business into the ground to protect Panasonic's profits and they would have discussed this exact situation.

I doubt the change over to the newer cell format will happen with the S&X until they have the automation with the 3 battery packs well ironed out. Personally I don’t see them making the change in 2017, and likely not in 2018. Just my opinion though.

 

[Johann Koeber]

tesla is going to hit 350 mark by the end of this wk. i doubled down to my current position. a no brainer play. tesla will lose out strongly by the end of the day..

I hear you, but I do not understand.

Why?