2017 Investor Roundtable:General Discussion

[Bobfitz1]

Engines aren't generic. Companies produce them in a wide variety of physical sizes and power output. Better examples would be spark plugs, shock absorbers, lugnuts and tires.

Battery cells being made by battery manufacturers in huge factories makes a lot os sense. Duplication of this effort by dozens of car companies makes little sense. The car companies might still need facilities to assemble the cells to fit the (non-generic) configuration of the cars they build.

Li ion batteries for automotive use are not remotely generic and I haven't seen anything suggesting they are headed in that direction.
The specifics of battery design, chemistry and manufacturing are what differentiate the companies that will thrive from those that will die or muddle through the ICE to EV transition. Tesla's most significant advantage over all other current or future EV competitors is their ability to produce the highest performance and best cost per KWh batteries possible. China's battery company ecosystem of many smaller players and factories is fine for producing huge numbers of simple, small and low cost EVs for the Chinese market. That same ecosystem is not likely to produce enormous amounts of best in class cells that VW, Daimer, BMW, GM , etc. will need to reach future production goals.
They have taken the single most important EV success factor out of their hands and left it to chance. Hope is not a plan.

 

[mmd]

Tesla Motors, Inc. (NASDAQ:TSLA) - Loblaw Places Order For 25 Electric Trucks From Tesla
J.B. Hunt, Wal-Mart climb aboard Tesla's electric truck

The signature red color is awesome! Truckers will be blown away. That's also a lot or orders, as Jerome said. I mean, a few tens is massive when in US alone 260K big rigs are sold each year. Were these few deals the hold up for the semi reveal? Nothing else important was shown working that could've delayed the reveal.
Reuters has gone short on TSLA. Sneaked in a piece in that article about a fleet owner for whom Tesla truck doesn't work, is buying 2 hydrogen fool cell semis from Nikola. We were told H2 is dead.

Here is a little different take from GTM.
Why Tesla’s Electric Semi Truck Is the Toughest Thing Musk Has Attempted Yet

These 'orders' are peanuts compared to the $800M powerwall and PP orders received in a week back in 2015. I feel nostalgic today.
Tesla has taken $800 million in reservations for its new storage battery in just one week

BTW, it was disappointing to see the mini pop fizzle even before I could wake up on this coast. Are we missing tt07?

 

[dandurston]

I'm surprised the Founder series Roadster hasn't sold out yet. I thought it would be done in an hour.

Maybe Tesla is taking >1000 because quite a few folks might not follow through with the last 98% of the money.

They could also surprise with "Due to huge interest we're making 10,000 founder series cars" but that would upset all those folks who think they're getting 1 of 1000.

 

[Dwdnjck]

Thank you @DurandalAI. I wish I was wealthy, just to put more into tsla. If I were smarter I would have bought 3 shares each month instead of buying the car...but this is a more fun method of support!

I am going to order a roadster for the same reason.

 

[Dwdnjck]

I'm guessing a lot of rich people will give a $50k deposit to Tesla just to help the cause, then get a refund in a few years. If I was super rich I'd do this. I'd probably reserve a couple.

Will do this Monday.

 

[RobStark]

 

[EnergyMax]

New store opening soon in Chicago and intersection of Rush and Delaware.

 

[techmaven]

So... given what I've gathered so far and the data collection from VIN sightings, here is my latest estimate for Model 3 production.

I think we are seeing the results of fix #1 which is manual production for the zone #1 and zone #2 areas of pack production that Musk referenced during the ER. I'm guessing we are at 75-100 vehicles/week now and therefore the total build for the month of November is somewhere around 400. I am expecting fix #2 to go in and in December, I'm thinking somewhere between 3,000 and 5,000. So for the year, I'm looking at around 4,000 to 6,000 if fix #2 works.

We probably won't get verification that fix #2 works until some time in December. Likely smart money will figure it out before we do, or it might be the moment fix #2 works, they open the configurator for non-employee orders.

If fix #2 does not work, then we stuck at the much lower manual build rate. Maybe another 400 to 500 in December. That won't be good, even if the Semi and Roadster reveals brings in a slew of deposits. The cash situation would be a significant concern then.

 

[sundaymorning]

Look at the line of people ordering roadsters..

 

[neroden]

Great reveal. There is enough special Elon sauce in there to put us in an upward trajectory for the next few months.

...actually I'm not sure about that. I think we don't go on the upward trajectory until Tesla announces how much more reservation money they have. And they've started getting quiet about that. We may not see it until the Q4 report.

Even with fewer Model 3s delivered than desired, however, the Q4 report should scare the hell out of short-sellers. As long as it's a substantial number it destroys the thesis that the Model 3 can't be mass produced.

The Q1 report is of course the real killer.

Shorts will be very annoyed. Especially nice they are taking reservations right now. After Tesla sells out the founders edition that's a $250M free cash injection.

 

[neroden]

Honestly, the new Roadster seems to be a really cool car, and I have no doubt it will sell, as people with money to burn will buy the fastest production 1/4 mile time ever. And I have no doubt the margins will be fat.

I am having a harder time grasping the unbridled optimism about the truck. The information they provided was absolutely not enough to drive a truck purchase for a commercial trucking operation. The only specs they gave were for GVW, with no information about how much the truck weighs, which means a hauler can't figure out how much per ton per mile of actual freight hauled.

They've been privately talking to trucking companies, whose representatives were in a special section of the audience and have already made reservations. I'm pretty sure they told *them* that information.

In addition, the economics being advantageous are entirely driven by electricity prices being considerably lower than the average US price, which means the truck won't make money if the customer is purchasing grid power.

Having run the numbers on this before, it's very clearly *still* got highly advantageous economics (much better than diesel) off of average grid power (12c/kwh). Not so much on Hawaii or California high-priced grid power, but that's a small part of the country.

Also, I'm sure Tesla can install a Megacharger site for any company which wishes to finance one internally. Expect some to do so. Possibly before Tesla installs their own.

In order to make it work, they also have to have the Tesla charging infrastructure in place. I'm not saying it can't happen ever, but it's not in place now, and if you listened to the conference call, they are pulling back capital spending on car infrastructure right now. This would indicate they are not in a position to start investing in truck charging infrastructure. Is there anyone else who isn't mind blown by the truck presentation?

 

[neroden]

Truck production is a hell of a lot more complex than something like the model 3.

Actually, it's a lot easier. They don't need to produce a million trucks per year, which vastly simplifies the production line issues. They know they can make production lines for 100,000 per year. Trucks need to be more reliable than cars, but Tesla's already spent a decade focusing on designing for reliability, so that won't be an issue.

 

[neroden]

Of course, getting money now means less money borrowed, and interest income rather than interest expense, but with the current cheap money, it doesn't matter that much.

While Tesla gets essentially nothing in interest on its spare cash, Tesla actually pays quite a lot in interest due to perceived credit risk, so it does make a difference.

 

[neroden]

The only remaining viable argument for shorts is that Tesla won't be able to execute. But even those who believe that must have a sickening realization this morning. The level of excitement generated by the unveil guarantees to buy Tesla more time, if needed, to get it right. Both directly through an avalanche of new deposits, and indirectly through the creation of incandescent excitement.

Yep. This is what I try to explain to people who think that Tesla will run out of money before executing their plan. Nope. Not going to happen. Financing is simply going to be available, for several years at least.

 

[neroden]

This.

I am 100% long, but I try to be an objective investor. As an investor I'm not too happy Tesla is again promising amazing future products without backing. It gives me the feeling they need the deposit money to fuel the ramp-up of earlier promised goods. To name a few:
- solar roof
- powerpack/powerwall 2
- model 3

Given the timelines of the above products, I am expecting Tesla to not ramp-up the semi in decent numbers by 2021 at the earliest and the Roadster in 2022.

I also expect (and fear) that before all the products above are generating decent revenue (and Tesla is cash flow positive), they will do another "unveil event" that will show the Model Y, and maybe some other model.

Don't want to be the buzzkill, but Tesla has got to be able to pay for all these production costs, let alone the promised "megacharging" infrastructure that will include vast amounts of solar panels and powerpacks.

TLDR; Just as investors stopped worrying about Tesla being able to pay for the coming production hell (M3, solar, Tesla energy), they took on another financial challenge without making 100% sure they will achieve 30% margin on the M3. This worries me a little bit.

If it's any comfort, I'm pretty sure 25% margin on the Model 3 is enough to get them to profitability, provided they manage to get to sufficient volume.

 

[neroden]

The Amazon comparison may be overused but I consider it valid. As long as investors are willing to keep piling on, let the expansion continue. Tesla will become a monster in 5 years the likes of Amazon and everyone who didn’t invest before 2018 will wish they had done so. The mission is important to me, I’m willing to risk 20% of my net worth in Tesla.

I believe I'm over 35% of family wealth in Tesla at this point. (To clarify, average purchase price is under $220.) My "time to diversify" limit is 50%.

 

[schonelucht]

Cramming 200 kWh into that size of car also implies some improved battery tech.

I am wondering if the Roadster that was shown already had the 200kWh pack. Or if this is progress they will realise by 2020. After all, current tech caps the maximum they can stuff into the much larger Model 3 at 75kWh.

 

[neroden]

There is always going to be another reveal. There is no choice because nobody is picking up the baton and getting in-the-trenches serious.

To be absolutely clear about this, the electric bus companies did pick up the baton, which is why I think Tesla is not even trying to make a bus. They're only going to go into the markets nobody else is going into.

Musk originally planned to not invest in electric cars at all -- he saw the EV-1 and first generation RAV4-EV and figured GM and Toyota would do it! It's only *after* they "killed the electric car" that he invested. He's *only* going to invest in sectors where he has *evidence* that the other guys *aren't* going to invest seriously. Incredibly smart, actually.

Elon warned them (and you - investors) a number of years ago starting with the Gigafactory build announcement and then again a couple years ago in Europe. Tesla was never suppose to do all of this by itself, but because nobody was copying, Elon said ‘screw it! I’ll make you copy or you’ll die’. And recently we’ve been told the motivation and the tactic behind in - down with bullies via a punch in the nose.

So, you’ve got two choice to relieve your investing angst, sell or change your mindset. I’m not worried about my investment because I fully understood and accepted what was (hopefully - because there was no guarantee) going to happen. This was a go big or go home bet for me, for many here, and for Elon.

 

[neroden]

One thing I think almost every analyst missed about the Semi is that Tesla is not limiting itself to short-haul trips but is going after the high-end of the market -- long-haul hard-core trucking. This is where the potential operating cost savings per year are highest, and the potential revenue streams for Tesla are therefore the greatest. This is the same playbook as the Roadster/Model S -- target the top end of the market first.

*Cough*

If you'll note, they aren't even trying for the "sleeper cab" / "tandem driver" market. Musk didn't mention it, because that's the one market where the semi doesn't charge fast enough, and it would also require a different cab design. That's the very top high-end of the semi market. However, it's also a very small part of the market, and fundamentally not important.

 

[neroden]

Agree and the only one that seems remotely reasonable is that somebody else has a major battery breakthrough that makes LiIon immediately obsolete.

-Jim

Actually the only major risk I see on the horizon for Tesla is potential mismanagement of the service /aftermarket support side, which is really weak compared to the stellar engineering/manufacturing side. If another company with inferior electric cars (BYD? Renault?) gets a reputation for better service, that would be significant. We'd get a lot of early warning though.