2017 Investor Roundtable:General Discussion

[Irishjugg]

They increased their position in Q4 by 420,048 shares or 3.26%, from 12,869,500 to 13,289,548.

Ty

 

[esk8mw]

Anyone can explain this sec filing? exercised options?

Tesla - Amended Statement of Beneficial Ownership

Sure can.

Elon is required to report his holdings on Form 13/G for Tesla because he is a >5% owner of Tesla, just as institutions are required to report (see T. Rowe and Gifford recently reporting big TSLA increases as of 12/31/16). So, shortly after every fiscal year he has to make this filing.

The discussion about options and SCTY is solely because the filing requires you to report "beneficial ownership," which includes shares held outright and options that can be converted to shares within 60 days of the reporting period. In other words, the count must include vested options that have not yet been exercised (or options that will become vested within 60 days).

The filing says he has 2.6m vested options that he has not yet exercised. This is not reporting an exercise - those are reported on Form 4 and must be filed within 2 business days of any action Elon takes on the stock, so you'll never be in the dark as to what Elon's doing with TSLA stock.

 

[Irishjugg]

I agreed with your last post up to here. Sorry, but I reserved during the day before the reveal and I plan on getting a base model. I better have it before Sept of 2018

I don't think that you will. I certainly could be wrong, but Tesla's communications on the matter definitely sound like true base models will be close to last off the line.
Now if you do base model+ battery size upgrade for the closest thing to a base model without being it - then I think you have a good chance.

Keep in mind, mgmt has said they designed the ramp to be cash generating. At a low run rate, cost to produce is much higher than at a large run rate. Making your cheapest model when cost to produce is highest only generates cash if margins are quite high. I don't think it's possible to build your trim at a profit until at least 250k run rate and possibly even higher, I definitely don't see that kind of run rate super early in the ramp.

Also, seems more like you hope I am wrong than that you actually disagree, IMO.

 

[racer26]

Sure can.

Elon is required to report his holdings on Form 13/G for Tesla because he is a >5% owner of Tesla, just as institutions are required to report (see T. Rowe and Gifford recently reporting big TSLA increases as of 12/31/16). So, shortly after every fiscal year he has to make this filing.

The discussion about options and SCTY is solely because the filing requires you to report "beneficial ownership," which includes shares held outright and options that can be converted to shares within 60 days of the reporting period. In other words, the count must include vested options that have not yet been exercised (or options that will become vested within 60 days).

The filing says he has 2.6m vested options that he has not yet exercised. This is not reporting an exercise - those are reported on Form 4 and must be filed within 2 business days of any action Elon takes on the stock, so you'll never be in the dark as to what Elon's doing with TSLA stock.

So.

The 2012 CEO Grant gave 5.2M shares, vesting in 10 equal chunks on 1/10 of the Market Cap goal, + one of the milestones.

Do we know if Elon has exercised *any* of the vested CEO grant options? If so, can we infer which milestones must be complete?

We know the market cap is over the goal, and so all 10 could vest at present.

We know for sure there are 5 completed milestones. There are two more I would currently stick in the maybe pile.

• Successful completion of the Model X Engineering Prototype (Alpha);
• Successful completion of the Model X Vehicle Prototype (Beta);
• Completion of the first Model X Production Vehicle;
• Successful completion of the Gen III Engineering Prototype (Alpha);
• Successful completion of the Gen III Vehicle Prototype (Beta);
• Completion of the first Gen III Production Vehicle;
• Gross margin of 30% or more for four consecutive quarters;
• Aggregate vehicle production of 100,000 vehicles;
• Aggregate vehicle production of 200,000 vehicles; and
• Aggregate vehicle production of 300,000 vehicles.

Can we infer that Model 3 beta is complete?

 

[Irishjugg]

I actually expect Model 3 will be quite different to the previous ramps of S/X. With a highly-automated line, running fast, I suspect it will be more trouble than it is worth trying to juggle the optioning level on cars (when they're already juggling by region, owner/employee status, and reservation date). I suspect you'll start seeing base $35k trim examples within the first 6 months, though they will be a low fraction of the overall mix (because I think they're going to be a small fraction of the ordering mix).

I think there is no reason to believe that Tesla can't sell a $35k Model 3 profitably though. A simple AC induction motor has to be cheaper to build than a complex ICE which contains more moving parts by at least 2 orders of magnitude. I expect the cost of the motor and control electronics is something like $400-800, while the ICE in say a Chevy Cruze (a similarly sized vehicle) is probably more like $2000-3000 (judging by the MSRP of Chevy crate motors for racing of ~$9k for a 2L Turbo inline 4 cylinder). The materials cost of building the car (chassis, interior, brakes, wheels, tires, etc) has to be roughly the same. That leaves the battery to account for. 55kWh * $150/kWh = $8250. It should be about ~$6500 more expensive to build a Model 3 than a Chevy Cruze. That's ignoring any labor cost savings that should come about because Model 3 is built on a highly-automated line while a Cruze is built with mostly manual labor assembly. Cruze starts at an MSRP of $16,620, and a fully loaded one comes out to $28,650.

$6500 + $16,620 < $35,000, ergo, it should be possible to build a base trim Model 3 with a larger profit margin than a base trim Chevy Cruze, even if you assume no savings from the Alien Dreadnaught.



Remember everyone, that factory in the desert is a mirage. A potemkin village. It will never produce anything of note. TSLA is going to ZERO!

Your argument requires a low cost to produce (the Cruze in your example). The Cruze is only so cheap to produce because they produce so many of them (including other models on the same platform). Tesla be producing in massive volume right away, so cost will be much higher. Also, self driving hardware, touch screens, etc. will be included on every model 3 drive the base cost above the quite Spartan base Cruze.

I'm not saying it's impossible, but I do think it's unlikely. I don't think even Tesla has a low enough battery cost yet to build base model 3's profit with a low run rate. I don't think this is a controversial statement either.

 

[jhm]

Upon further review, the market considers that Tesla may be worth more than $270.

 

[racer26]

Your argument requires a low cost to produce (the Cruze in your example). The Cruze is only so cheap to produce because they produce so many of them (including other models on the same platform). Tesla be producing in massive volume right away, so cost will be much higher. Also, self driving hardware, touch screens, etc. will be included on every model 3 drive the base cost above the quite Spartan base Cruze.

I'm not saying it's impossible, but I do think it's unlikely. I don't think even Tesla has a low enough battery cost yet to build base model 3's profit with a low run rate. I don't think this is a controversial statement either.

The primary cost savings of a high run-rate a la GM, though, comes from reducing the labor cost. The materials cost is pretty much static once over a relatively low threshold, because the materials are commodities, for the most part.

Alien Dreadnaught savings should cover at least some of that, if not all of it and then some.

I obviously agree a base Cruze is fairly spartan. A friend actually owns one I've ridden around in. The fully loaded Cruze at $28k though, has many of the same class of premium fittings I would expect on a base Model 3. $28k + $6500 = $34,500. Should be possible to build for around the same profit margin as a fully loaded Cruze.

We know for a fact, because we've been told, that Tesla's battery pack cost before GF is < $190/kWh.

Even assuming a pessimist case of $190/kWh - that only makes my numbers worse by about $2200.

 

[JBRR]

So.

The 2012 CEO Grant gave 5.2M shares, vesting in 10 equal chunks on 1/10 of the Market Cap goal, + one of the milestones.

Do we know if Elon has exercised *any* of the vested CEO grant options? If so, can we infer which milestones must be complete?

We know the market cap is over the goal, and so all 10 could vest at present.

We know for sure there are 5 completed milestones. There are two more I would currently stick in the maybe pile.

• Successful completion of the Model X Engineering Prototype (Alpha);
• Successful completion of the Model X Vehicle Prototype (Beta);
• Completion of the first Model X Production Vehicle;
• Successful completion of the Gen III Engineering Prototype (Alpha);
• Successful completion of the Gen III Vehicle Prototype (Beta);
• Completion of the first Gen III Production Vehicle;
• Gross margin of 30% or more for four consecutive quarters;
• Aggregate vehicle production of 100,000 vehicles;
• Aggregate vehicle production of 200,000 vehicles; and
• Aggregate vehicle production of 300,000 vehicles.

Can we infer that Model 3 beta is complete?

Market cap milestone hasnt been hit yet. Needs to be 43.2B on a rolling six month historic average.

"Market capitalization for purposes of milestone achievement will be determined based on a rolling six month historic average (based on trading days only). The market capitalization for a particular trading day is equal to the closing price multiplied by outstanding shares of common stock as of the end of such trading day."

 

[racer26]

Market cap milestone hasnt been hit yet. Needs to be 43.2B on a rolling six month historic average.

"Market capitalization for purposes of milestone achievement will be determined based on a rolling six month historic average (based on trading days only). The market capitalization for a particular trading day is equal to the closing price multiplied by outstanding shares of common stock as of the end of such trading day."

Maybe not to unlock the 10th milestone.

Definitely high enough to unlock all of the completed ones + 2 more though.

 

[austinEV]

We're having a party
A stockmarket party.
Tesla is rising
That's nothing surprising
To those who post here.

Is that a failed limerick? You can't rhyme party with party.

Upon further review, the market considers that Tesla may be worth more than $270.

Quite surprised its in the green. Consolidation would be a victory; green is crazy cherry on top.

 

[Waiting4M3]

...
The fully loaded Cruze at $28k though, has many of the same class of premium fittings I would expect on a base Model 3. $28k + $6500 = $34,500. Should be possible to build for around the same profit margin as a fully loaded Cruze.

We know for a fact, because we've been told, that Tesla's battery pack cost before GF is < $190/kWh.

Even assuming a pessimist case of $190/kWh - that only makes my numbers worse by about $1800.

Your math shows that the cost to build a base M3 is about the same as the selling price of a loaded Cruze, not sure how that infer that the profitability on the 2 are similar.

I think people are missing one new technology on the M3: Tesla is not completely correct that there is no new tech in the M3 compared to MS/MX. The design is supposed to be more manufacturable, this to me is the new innovation that Tesla will be pushing with the M3. I think this is the car that is designed with the "machines that make the machines" in mind. If it works it will allow them to churn out the M3 much quicker and cheaper, but it could also work out like the FWD. This is the mother of all make or break, to me.

 

[racer26]

Your math shows that the cost to build a base M3 is about the same as the selling price of a loaded Cruze, not sure how that infer that the profitability on the 2 are similar.

I think people are missing one new technology on the M3: Tesla is not completely correct that there is no new tech in the M3 compared to MS/MX. The design is supposed to be more manufacturable, this to me is the new innovation that Tesla will be pushing with the M3. I think this is the car that is designed with the "machines that make the machines" in mind. If it works it will allow them to churn out the M3 much quicker and cheaper, but it could also work out like the FWD. This is the mother of all make or break, to me.

No, my math shows the differential cost to build a base Model 3 (the ~$6500 in additional battery cost not covered by savings from electric motor instead of ICE) over a loaded Cruze (which is a similar size, and so should use a similar quantity of raw materials, and have similarly specified braking and suspension components). Presupposing that the fully loaded Cruze has a profit margin greater than zero, it would follow that a base Model 3 should also have a similar profit margin, since the price delta is approximately equal to the cost delta.

Additionally, Tesla has a $994 advantage on advertising spending. Tesla (TSLA) Only Spends $6 Per Car on Ads, Versus $1000 for the Industry - Chowdhry

 

[Irishjugg]

Alien Dreadnaught savings should cover at least some of that, if not all of it and then some.

You know this is several years away right?
The current factory is version 0.5. AD IS version 2 or 3. The planned timing for major releases was 2 years, so AD Is a minimum of 4 years away at current plan.

 

[kenliles]

for those in previous posts discussing the timing of the G-Factory parking lot:
Instagram post from yesterday 9Feb2017
Instagram photo by Wendy Scott • Feb 9, 2017 at 9:09pm UTC

 

[racer26]

You know this is several years away right?
The current factory is version 0.5. AD IS version 2 or 3. The planned timing for major releases was 2 years, so AD Is a minimum of 4 years away at current plan.

Full AD, yes. Remember, Elon also said that he expects AD1.0 to outstrip the fastest production lines in existence today by a fair margin. I expect AD 0.5 to take enough humans out of the process flow to compensate and equal the fastest production lines today (obviously, not on Day 1, but once Model 3 is falling out at the designed rate - ie. by mid 2018).

 

[esk8mw]

So.

The 2012 CEO Grant gave 5.2M shares, vesting in 10 equal chunks on 1/10 of the Market Cap goal, + one of the milestones.

Do we know if Elon has exercised *any* of the vested CEO grant options? If so, can we infer which milestones must be complete?

We know the market cap is over the goal, and so all 10 could vest at present.

We know for sure there are 5 completed milestones. There are two more I would currently stick in the maybe pile.

• Successful completion of the Model X Engineering Prototype (Alpha);
• Successful completion of the Model X Vehicle Prototype (Beta);
• Completion of the first Model X Production Vehicle;
• Successful completion of the Gen III Engineering Prototype (Alpha);
• Successful completion of the Gen III Vehicle Prototype (Beta);
• Completion of the first Gen III Production Vehicle;
• Gross margin of 30% or more for four consecutive quarters;
• Aggregate vehicle production of 100,000 vehicles;
• Aggregate vehicle production of 200,000 vehicles; and
• Aggregate vehicle production of 300,000 vehicles.

Can we infer that Model 3 beta is complete?

I believe he has not exercised any options from this award and I do not expect him to do so until there's less than a year left on the award (as he did with the last award) - so 2021 or so.

Re: milestones, they have previously achieved MX alpha, MX beta, MX production, 100k production and m3 alpha. So, 5/10. This data actually shows that 200k production and M3 beta were not achieved by 12/31/16, otherwise he'd be vested in more than 5/10ths of the award.

 

[Thumper]

Maximizing profit of initial production M3s seems like it should start with 4WD models. I'm surprised at the rumor that they would start with 2WD. Seems unlikely to me.

 

[AudubonB]

Is that a failed limerick? You can't rhyme party with party.

Oh, Austinmonkey.
Bad, bad monkey!
Go to your room, sit down, watch this and do not return to the forum until you've down this homework.

and, for extra credit, this:

 

[austinEV]

For the people responding to the troll, please remember to quote the message so the rest of us don't see it. Thanks!

 

[DurandalAI]

Maximizing profit of initial production M3s seems like it should start with 4WD models. I'm surprised at the rumor that they would start with 2WD. Seems unlikely to me.

RWD rollout first is because it simplifies production, giving them more time to work out the kinks on AWD. Remember Model S was RWD first as well, before rolling out AWD. It makes sense to me.