2017 Investor Roundtable:General Discussion

[mmd]

Again, fundamental misunderstanding of financial realities. They don't lose money selling cars. They lose money because of heavy investments that are concurrently ongoing. Examples? One of the largest and still fast expanding charge network, R&D for Batteries, 3 new cars (Roadster, Y, Pickup), Tech like FSD, Gigafactory expansion plus some other bits and pieces. It should be pretty clear to anyone that all this cannot be funded with 2 different cars being sold at low volume.

Basic accounting. Capex vs Opex - Difference and Comparison | Diffen

Just take a short look how the biggest car manufacturers from germany all agree that they cannot afford to build a gigafactory. And that is just one little bit of Teslas investment into the future.

Very likely you misunderstood what they said. Show me where they said they CANNOT afford. They don't want to. They don't need $2B in bond sales to build 30% of the white elephant in the midddle of nowhere, whose output is yet unknown after 4 years.

Isn't it funny, that Tesla had to buy a mere 129 MWh of batteries from Samsung for the Australia project. Samsung doesn't have any Gigafactory. There are plenty of battery factories from where other car makers can buy batteries at competitive prices.

 

[aubreymcfato]

What Ferrari has (and it's an asset they really try to nurture with everything they can) is a *story*.
It's the brand, the design, the engine, but also the status symbol they offer. Same you can say, in a smaller scale, for Maserati.
I'm not an expert: I just happen to live in Modena ;-)
Here we have not one but 2 Ferrari museums, and they are a huge turistic attraction, especially for internationals (people come here for two things: food and Ferrari).

This is not to say that the new Roadster will not eat a big piece of their pie (I think it will): but it's something to remember, diehard fans will probably *hate* Tesla Roadsters (unless they get a chance to drive it first).
m2c.

 

[Waiting4M3]

What Ferrari has (and it's an asset they really try to nurture with everything they can) is a *story*.
It's the brand, the design, the engine, but also the status symbol they offer. Same you can say, in a smaller scale, for Maserati.
I'm not an expert: I just happen to live in Modena ;-)
Here we have not one but 2 Ferrari museums, and they are a huge turistic attraction, especially for internationals (people come here for two things: food and Ferrari).

This is not to say that the new Roadster will not eat a big piece of their pie (I think it will): but it's something to remember, diehard fans will probably *hate* Tesla Roadsters (unless they get a chance to drive it first).
m2c.

This got me thinking, with the Roadster doubling the battery size of P100D, would similar doubling apply to Formula E cars, making them comparative with Formula 1 races? Right now the Formula E races are ~1/2 of the length of Formula 1.

 

[MitchJi]

Two things:
- Elon promised the coast to coast drive for end of the year, Q1 2018 at the latest and has repeated this goal in the last earnings call. Postponing this until Q2 2018 would not be good for the (already dropping) faith in Tesla's ability to pull off FSD.
- the coast to coast 'event' cannot go wrong imo. They will try the trip without telling anyone, and if it worked they'll post a video. If it didn't, they'll just try again later. I can't imagine they'd livestream such a feat, given that many things can go wrong, even because of other drivers.

They don’t need to have a full level 5 demonstration to have a successful event.

It’s fine if the driver needs to intervene two or three times over the ~3k miles. IMO that would be an awesome achievement.

I hope that they livestream it. IMO that would give the SP a nice boost.

 

[MitchJi]

I think you are way off here.. Do not think Tesla will build chargers which cost 14.5million.

No need to start out with solarpanels enough to support 100 semi charges a day. Gird connection at first. Shouldnt cost more than the 50stall supercchargerstations. Really doubt these cost that many millions each.

Build out the initial network like this. Then when semi-production is properly on its way, they can think about adding needed batteries and solarpanels.

Add batteries when they have these to spare. Production ramped properly, and price lower. Then when solarpanel production is ramped.. add these. no hurry, at least not until it makes economical sense to get less dependent on grid connection.

IMO the concerns that you were responding to are backwards. I believe that the $0.07 kWh figure means that Elon-Tesla is confident that they will be able to make a small profit or at least break even at that price. If they use existing supercharger,locations they will be greening those at the same time.

 

[MitchJi]

That's certainly nice, but the Semi pricing does nothing to alleviate my margin concerns. At 150k-200k USD there's no way Tesla has good margin. If Tesla isn't going to make money on the Semi, and they aren't going to make money on the megachargers, where the hell will they make money?

Elon’s goal is 25% margins. He might be willing to break even on the electricity but there’s no way in heck that they aren’t making ~20-25% on the semi’s! What that really means is that the other OEM’s are in deep trouble.

 

[MitchJi]

Tesla releases ‘expected price’ of semi electric truck: $150,000 to $200,000

"In my opinion, this is all hinting at a major battery breakthrough for cost and energy density that is enabling those new electric vehicles. I don’t see any other way that they can achieve anything close to what they are claiming based on current specs."

I'll have to agree with Fred. Assuming Tesla hasn't gone completely crazy, there has to be a battery breakthrough in the works.

NO! It means that Tesla’s battery pricing when they complete the Gigafactory are much lower than most of the us expected. Everyone thought that my estimates of costs being about $75 per kWh were crazy. It turns out that I was too high!

 

[MitchJi]

Wrong assumptions you made:
1) the semi business is low volume
2) the semi business is low margin

We don't know the cost for TSLA to produce the semi, so we don't know the margin. Period.

We,know that the margins will be at least 20%.

 

[hobbes]

For everyone who can´t wait (like me): a walkthrough of the Model 3 design studio
(via TheTeslaLife (@TheTeslaLife) | Twitter)

 

[MitchJi]

What Ferrari has (and it's an asset they really try to nurture with everything they can) is a *story*.
It's the brand, the design, the engine, but also the status symbol they offer. Same you can say, in a smaller scale, for Maserati.

This is not to say that the new Roadster will not eat a big piece of their pie (I think it will): but it's something to remember, diehard fans will probably *hate* Tesla Roadsters (unless they get a chance to drive it first).
m2c.

Ferrari sells about 7k cars. You need to add Porsche, BMW, Mercedes, Lamborghini, corvette etc.

 

[Anstandswauwau]

Ferrari sells about 7k cars. You need to add Porsche, BMW, Mercedes, Lamborghini, corvette etc.

There are no BMW or Mercedes in the same market as the Tesla Roadster. Neither in terms of scope nor base price.

Porsche sold about 45.000 cars (911 + 718) that can - theoretically - be compared to the Roadster. However, most of these Porsches start at a significantly lower base price and they are marketed as a sporty everyday car, so one could argue that those are not really in the same market as the Roadster.

Porsche's high performance cars that can be compared to it are probably in the low 10.000s per year. And this is with one of the most loyal and wealthy customer base of any car manufacturer

 

[aubreymcfato]

Ferrari sells about 7k cars. You need to add Porsche, BMW, Mercedes, Lamborghini, corvette etc.

Of course, Tesla Roadster will hurt all of these.
My question, personally, is: how much?
I'm not a car person enough to state for sure, what I can say is that Ferrari doesn't sell only "velocity", but a whole mythology/story that they are crafting every day.
What I just wanted to day is simply that it's unlikely that Tesla manages to eat all 7k Ferrari's per year, but only some of those: some people will prefer the story to the specs, at least for a few years.

 

[EinSV]

Summarizing some of the points made by others and adding a few of my own, Tesla’s aggressive pricing on the Semi program could potentially be explained by some combination of the following:

1. GF1 battery costs at full capacity will be lower than almost everyone has predicted
2. GF3 battery and powertrain costs at scale will be significantly lower than GF1 as it benefits from manufacturing breakthroughs on batteries and drivetrains
3. Battery breakthrough that can be applied to GF3 and (hopefully) GF1
4. Tesla is applying lessons learned in Model 3 design to find ways to cut costs in other areas of Semi manufacturing
5. Tesla is taking a long term view on charging costs and plans for rapidly decreasing costs for solar plus storage to make $0.07/mile profitable when the Semi program is at scale
6. Tesla takes a page from Amazon and accepts break-even in the short run to create and scale the Semi EV market
7. Tesla plans for 25%+ GMs once the program is at scale OR after market is established and initial Megacharger network buildout has occurred (which could be a gap of several years)

My guess (just a guess) is that 1-5 plus 7 all are playing some part in this. Not sure about 6. One “guess” that I feel relatively confident about is that Tesla will target 25%+ GMs eventually on the Semis and that the program is expected to generate cash relatively quickly once production is at scale.

The next earnings call should be interesting if the analysts ask the right questions, including: How large is the expected production? How soon do they expect to be at scale? What are expected margins?

I doubt they’ll reveal the number of reservations but obviously that would also be a useful data point.

 

[NicoV]

Of course, Tesla Roadster will hurt all of these.
My question, personally, is: how much?
I'm not a car person enough to state for sure, what I can say is that Ferrari doesn't sell only "velocity", but a whole mythology/story that they are crafting every day.
What I just wanted to day is simply that it's unlikely that Tesla manages to eat all 7k Ferrari's per year, but only some of those: some people will prefer the story to the specs, at least for a few years.

I guess the roadster will get buyers that never considered buying such (price, performance) a car, just like with the Model S and X. No point in guessing the demand by calculating how much market share could be taken from ferrari and other supercar vendors.

 

[aubreymcfato]

I guess the roadster will get buyers that never considered buying such (price, performance) a car, just like with the Model S and X. No point in guessing the demand by calculating how much market share could be taken from ferrari and other supercar vendors.

Agree.
I just responded to forecasts of "Tesla will eat the whole very-fancy-car market in a beat", because I think it won't be true (not all of it, at the moment ;-).

 

[RobStark]

Porsche's high performance cars that can be compared to it are probably in the low 10.000s per year. And this is with one of the most loyal and wealthy customer base of any car manufacturer

This can be said of just about any $70k plus car. Mercedes S Class, Lexus LS, BMW M5/6, Aston Martin etc.

Yet, Tesla managed to crash that party.

 

[RobStark]

I guess the roadster will get buyers that never considered buying such (price, performance) a car, just like with the Model S and X. No point in guessing the demand by calculating how much market share could be taken from ferrari and other supercar vendors.

Like Model S it will be both. Conquest sales plus people that would never consider buying something so wasteful as a 500hp plus ICE car. Now that we have a supercar with ~VW Polo carbon emissions or less a lot more people will be willing to buy.

 

[Anstandswauwau]

This can be said of just about any $70k plus car. Mercedes S Class, Lexus LS, BMW M5/6, Aston Martin etc.

Yet, Tesla managed to crash that party.

Mindshare-wise maybe, but not in absolute sales numbers. Yet!

At least not in Asia and Europe

 

[RobStark]

Mindshare-wise maybe, but not in absolute sales numbers. Yet!

At least not in Asia and Europe

Tesla has sold 11,299 Model S in Europe so far this year.

Tesla Europe Registration Stats

And 6498 in China so far this year.

EV Sales: China

In this price class, I call that crashing the party.

 

[EinSV]

While I would not be surprised if Tesla’s battery costs were $75 kWh or below by the early 2020s, I don’t think it would be correct to conclude that solely from relative pricing on the 500 and 300 mile versions of the Semi, any more than it would be correct to conclude anything about Tesla’s battery costs from the price difference of the LR and standard Model 3.

As with the Model 3, Tesla can set the optimal price points of different models based on many factors aside from relative cost, as long as the program as a whole meets its profitability targets.

In the case of the Semi, Tesla may be willing to accept lower margins initially on the 500 mile version to ensure the addressable market is as large as possible and establish itself in the long haul trucking market, which is essential to support the Megacharger network and the hardest nut to crack in terms of competing with ICE. It also may make fleet purchases more appealing for companies that can use both the 300 and 500 mile versions and will have the greatest impact on reducing GHG emissions.