2017 Investor Roundtable:General Discussion

[neroden]

Did you miss this part in the Q4 letter? Maybe it will help you.

Nope, totally worthless. Beyond worthless from Tesla's point of view: expensive.

They need a *CLOSER* service center. Sending a service tech on a 10+ hour round trip (or even a 4+ hour round trip) is not cost-effective.

It's not like I'm living in the wilderness here.

 

[larmor]

Didn't they say today, that they want input from investment banks, etc. IMHO, this appears to be a plea for legitimacy, for example: to get source suppliers to take them seriously or (this is a big or) other auto (ICE) manufacturers using same source suppliers and have orders with quantities in the millions could easily ask their source suppliers not to work with tesla who is order six figure quantity orders... Just pure speculation, west of the rockies...

 

[schonelucht]

The SG&A situation is a mess. SG&A went up by a lot with no appreciable benefit, but I'm hoping that's partly a one-time thing due to integrating SolarCity.

Likely fully due to SCTY. Prior quarter we had SG&A of $337M (TSLA) + $200M (SCTY) = $537M. This quarter we have $456M.

From a capital efficiency point of view, it is better to invest in service/sales center capacity in dense markets like Norway, Hong Kong or California. Complete coverage of the US at acceptable levels may be years away.

 

[schonelucht]

I haven't had the chance yet to listen in to the conference call. Maybe it got answered there. But was there a reason why they didn't give S/X guidance for the second half of this year? I can understand Elon's usual reasoning with the Model 3 ramp having large differences in deliveries if it shifts just a few weeks. But how about S/X? 47 000-50 000 is about what they did the last 6 months of 2016, so did they confirm they don't plan to increase production capacity for the S/X?

 

[mmd]

One part of the call I found interesting, although it probably won't affect the share price at this point, was the backstory info on the Mobil eye divorce. It sounded like their original plans was to use the mobil eye system and the new AP 2 system at the same time, so the transition could be seamless, but mobil eye didn't go along. This makes the production slowdowns due to the switch over, and slow software rollout a lot more understandable. It doesn't excuse it, but it is nice to know they didn't plan it this way from the beginning.

It's a nice story, but Elon said the exact opposite when the divorce actually happened. At that time, he said, MobilEye is too slow and so Tesla wanted to go on its own.

Edit: OK, removed second para. I was using sig deposits at $5k each. BUT...
I averaged the customer deposit for 7 quarters, ending Q1 2015 (till M3 got included in it).
It averages to $278M . Subtracting that from $663M customer deposit at end of Q4'16 leaves $385 for M3 deposits.
IMO, the M3 reservation tally hasn't increased much from the 373K announced last year. It probably has declined, because current S/X deposits should be much higher than the average of 7 quarters ending almost a year ago.

 

[MP3Mike]

It's a nice story, but Elon said the exact opposite when the divorce actually happened. At that time, he said, MobilEye is too slow and so Tesla wanted to go on its own.

Isn't that exactly what Elon just said. Essentially: We wanted to do it on our own and to make the transition painless for our customers we were going to put both sets of hardware in the car so that we could get Tesla Vision up to, or beyond, AP1 feature level before we turned off the Mobileye chip/AP1 and turned on Tesla Vision. At which point then they would dump Mobileye.

$27M drop in deposits for this would imply 10,800 signature Model X delivery in Q4,

Weren't Signature Model X reservations $40,000? If so a $27M drop would only be 650 deliveries, or cancellations.

 

[Snapdragon III]

It's a nice story, but Elon said the exact opposite when the divorce actually happened. At that time, he said, MobilEye is too slow and so Tesla wanted to go on its own.

BTW, did I hear it right that deposits dropped $27M because of lot of Model X signature deliveries?
$27M drop in deposits for this would imply 10,800 signature Model X delivery in Q4, assuming no net decline in total number of S/X reservations and no reduction in 3 reservations. But that is an impossibility, as only 9500 Mx were delivered in Q4, and most were non-sig. Wonder what other reason there could be.

To me this all fits together quite nicely. MobilEye was moving too slow, and Tesla wanted to develop their own system. But they also wanted to keep using MobilEye's system in the transition cars, in addition to their own system. MobilEye probably gave an ultimatum, and was very surprised when when Tesla walked. To me it all seems quite consistent, and explains a lot.

On the deposits, I think I read somewhere that they were holding some huge Signature X deposits. $40,000?? If that were the case it would take lot less than 10,800 of them.

 

[CyberDutchie]

He did stumble a bit over how to phrase it, but I actually thought "most likely outcome" or whatever the exact words were was pretty strong compared with "our plan" "our goal" or something like that. May be reading too much into it but since most people seem to think these numbers are pie-in-the-sky I thought it was positive.

Yes, basically Elon stuck to the timeline for Model 3 volume production and seems pretty confident about it. That's how I interpreted his statement of "most likely outcome", not at all a hedge.

Now whether the analysts will adjust their spreadsheets based on Elon's confidence remains to be seen.

Adam Jonas is sticking to his very conservative forecast for a Model 3 roll-out. He wrote this in a client note following the call:

Reiterating outlook for Model 3 launch and volume production may be the most important factor from the release. Tesla had every chance to use this opportunity to introduce any level of execution risk (either within or outside of their control) that could impact the timing of the initial launch and the volume ramp. They didn’t. Tesla still targets a production launch at least a few months before our forecast and has reiterated its goal of achieving Model 3 production at 5,000 units/week in 4Q (we don’t expect this before the year 2020) and 10,000 units/week by 2018 (we don’t expect this level of Model 3 volume to achieved before the year 2025). Tesla Motors is a top 3 pick for us in NA Autos & Shared Mobility, yet our forecasts for Model 3 volume are a full 7 years later than the company’s target. In our view, given high levels of execution risk we are assuming a 'soft launch' of Model 3 in 2018 including no more than a small/modest amount of customer deliveries. We assume 2,000 deliveries in the current year.

 

[Bet TSLA]

So isn't it time for the hit pieces to proliferate? This is a fairly mild one from Bloomberg. I'm thinking that a conference call in which the word "bankruptcy" was used twice (that I heard anyway) along with the phrase "capital raise" would be plenty of grist for the doom doom doom mill.

I wonder whether we go up or down tomorrow. Nice positive action after hours, but the hit pieces and analyst BS can make for a hell of a mess. Or maybe we get upgrades and it skyrockets. I don't have any kind of handle on it.

But the business seems to be going fine. I don't think a double over the next couple of years is at all out of the question, mainly depending on execution. Up or down tomorrow is just a blip.

 

[dennis]

[Adam Jonas] Tesla still targets a production launch at least a few months before our forecast and has reiterated its goal of achieving Model 3 production at 5,000 units/week in 4Q (we don’t expect this before the year 2020) and 10,000 units/week by 2018 (we don’t expect this level of Model 3 volume to achieved before the year 2025). Tesla Motors is a top 3 pick for us in NA Autos & Shared Mobility, yet our forecasts for Model 3 volume are a full 7 years later than the company’s target. In our view, given high levels of execution risk we are assuming a 'soft launch' of Model 3 in 2018 including no more than a small/modest amount of customer deliveries. We assume 2,000 deliveries in the current year.

OK, so Jonas continues to sandbag big time. Why?

 

[dennis]

IMO, the M3 reservation tally hasn't increased much from the 373K announced last year. It probably has declined, because current S/X deposits should be much higher than the average of 7 quarters ending almost a year ago.

I know a number of people who made M3 deposits after Tesla stopped quoting the number and I don't know anyone who has canceled their M3 reservation. It is more likely that the number of deposits has increased vs. decreased.

 

[Bet TSLA]

No company can survive being a "one-horse" pony. And you're nuts if you think the M3 will carry the company.

Elon disagrees with you. He has quite explicitly said that once they get to volume production of the Model 3 that all money worries are behind them; the trick is getting there. Even on this call he talked about how they could probably avoid a capital raise getting to Model 3 volume but that it was risky, and that margins on Model 3 are comparable to S (so at much higher volume they are very profitable). If they do a capital raise it will be their last.

 

[NicoV]

At 1:07:25 Elon Musk says that parking (at the factory) is one of his biggest nightmares -- "Where do we park everyone?"

This is why you build rail transportation, dude. Rail seems to be an incredible blind spot for Musk. This should be trivial at Fremont, where all they need is a bridge from the existing train station to the factory and it's already been proposed, but they don't seem to have treated it as a priority. The situation is lot harder in Sparks but still doable.

Now, 5 months from now, there will be thousands of Model 3's on that parking. What if they dedicated a certain area of that parking lot to Model 3, and let the employees drop of their car at the entrance of that area, and let it auto park with the highest possible density in that area? And put a movie of that on youtube?

 

[dennis]

I haven't had the chance yet to listen in to the conference call. Maybe it got answered there. But was there a reason why they didn't give S/X guidance for the second half of this year? I can understand Elon's usual reasoning with the Model 3 ramp having large differences in deliveries if it shifts just a few weeks. But how about S/X? 47 000-50 000 is about what they did the last 6 months of 2016, so did they confirm they don't plan to increase production capacity for the S/X?

They didn't address S/X production, even when questioned about what S/X would be in the second half. IMO Tesla knows that 2017 is all about Model 3 and cash. They don't need to increase S/X production and in fact probably don't want to risk disrupting current production in order to increase it. They also don't want to do unnatural acts to increase demand and potentially impact gross margins, especially since they need to get them back to where they have been historically.

I view holding S/X production flat at around 25K/quarter is a way for Tesla to de-risk 2017. it reduces the execution risk to Model 3 quality and ramp.

 

[erthquake]

Now, 5 months from now, there will be thousands of Model 3's on that parking. What if they dedicated a certain area of that parking lot to Model 3, and let the employees drop of their car at the entrance of that area, and let it auto park with the highest possible density in that area? And put a movie of that on youtube?

Mic drop.

 

[mmd]

Yes, basically Elon stuck to the timeline for Model 3 volume production and seems pretty confident about it. That's how I interpreted his statement of "most likely outcome", not at all a hedge.

Now whether the analysts will adjust their spreadsheets based on Elon's confidence remains to be seen.

Adam Jonas is sticking to his very conservative forecast for a Model 3 roll-out. He wrote this in a client note following the call:

Reiterating outlook for Model 3 launch and volume production may be the most important factor from the release. Tesla had every chance to use this opportunity to introduce any level of execution risk (either within or outside of their control) that could impact the timing of the initial launch and the volume ramp. They didn’t. Tesla still targets a production launch at least a few months before our forecast and has reiterated its goal of achieving Model 3 production at 5,000 units/week in 4Q (we don’t expect this before the year 2020) and 10,000 units/week by 2018 (we don’t expect this level of Model 3 volume to achieved before the year 2025). Tesla Motors is a top 3 pick for us in NA Autos & Shared Mobility, yet our forecasts for Model 3 volume are a full 7 years later than the company’s target. In our view, given high levels of execution risk we are assuming a 'soft launch' of Model 3 in 2018 including no more than a small/modest amount of customer deliveries. We assume 2,000 deliveries in the current year.

This is really weird. The biggest sell side Tesla bull is more pessimistic about M3 than Tesla bears

 

[Leo9]

To be honest, i'm not really happy with this ER.

I don't like the H1 guidance of "just" 47-50k deliveries.
It basically implies no growth at all from H2 2016.

How can Tesla claim"record orders" during Q4 and still projecting flat numbers. I don't get it.

 

[dennis]

This is really weird. The biggest sell side Tesla bull is more pessimistic about M3 than Tesla bears

He's obviously sandbagging. I can't figure out why.

 

[dennis]

To be honest, i'm not really happy with this ER.

I don't like the H1 guidance of "just" 47-50k deliveries.
It basically implies no growth at all from H2 2016.

While there is little to no sequential growth with this guidance, it does represent 61%-71% YoY growth. Tesla doesn't need to grow any faster than that in 1H17, especially with Model 3 coming in 2H17.

 

[NicoV]

Mic drop.

By parking cars so close together (in a row) that the doors can't open anymore, you're getting probably 25% more capacity.
Half of the parking space in a parking lot is wasted because every car needs to be able to drive away without requiring any movement of the other cars. If the other cars could move out of the way, you'd only need a few empty spaces here and there to make space as the departing car moves through the sea of cars, while the other cars just move up one column.
So based on a first principles reasoning, any car park can get 200% to 250% higher capacity if you drop the requirement that humans have to drive the car. It could be the alien dreadnought of car parks.
Anyway, a problem that keeps Elon awake at night is bound to be solved in a creative and high tech way.