2017 Investor Roundtable:General Discussion

[neroden]

while one might have been swayed to buy the dips on these dramatic swings over the last few days... no one could have timed it in advance without relying on luck... 213 to 220 to 211 to 226 in 3 days?... wtf is going on with this stock?

High volatility, good for options traders who know how to trade vol... (of which I am not one)

 

[JGInnovation]

Costco does not make their money selling $55 and $110 membership fees.

I can't claim to be an expert on it but I've heard and read that many times.
Here is an example article: What do Membership Fees Mean to Costco?
I can't comment on the accuracy of the article but their are many articles all saying the same thing about their business model. Its a differentiating approach that makes them difficult to compete against. Amazon is doing something similar with Prime, but I'm not sure if Prime fees track so closely to their profit. I would make a guess that Amazon is running a much more complex model.

 

[NOLA_Mike]

It would be a parallel effort in case the pouch technology advanced faster than cells. An insurance policy, if you will. The fact that they did not pursue the pouch cells indicates to me that they consider cylindrical cells to be the superior solution, confirmed by what we know.

My recollection (and I'm not going to search for the quote) was that Elon said when they began designing the GigaFactory that they had the (somewhat unique) opportunity to design whatever form factor battery they wanted. Based on their research and now extensive experience in building packs they determined that the 18650 was actually pretty close to ideal (an "accident of history"). Slight tweaking lead to the 2070 that we see shooting out of the GigaFactory now which, all things considered (battery construction, pack construction, energy density, etc.) turns out to be the current ideal format for the application.

 

[neroden]

it's quite a long list... but I have a personal opinion based on my software engineering experience that companies are grossly over simplifying and have their time lines way too aggressive for when we might start seeing anything like Tesla Mobility.

I actually agree with you on this and I think it doesn't matter for the stock.

See, autonomy is not part of Tesla's mission. Tesla's mission is to stop fossil fuel burning. But when Model S came out, nearly every reviewer complained that Tesla didn't have the driver-assist feature that the ICE competition had, and the ICE companies started bragging about how their cars would be autonomous and so they would be better than Tesla's....

So Musk quite rightly decided that Tesla needed driver assist and "autonomy" features which were better than all the ICE competition. This is necessary in order to stop people from buying ICE cars. And that's all he has to do in order to achieve the goal: do better than any of the ICE carmakers. It *never* has to get fully functional. It just has to be consistently better than the competitors. And I believe it is and will continue to be.

 

[neroden]

I think most people would agree Tesla's timeline is aggressive (full cross country trip by the end of 2018, they said?), but I also don't think it's anywhere close to 10+ years out like many folk estimate.

I'm biased because I live in the Land Of Obscure Corner Cases, featuring wonderful things like one-lane bridges, blind corners, parking lots made of grass, and so on. I think it'll take 10 years + out *here*.

(The "is the other guy going?" problem at a 4-way stop or a 1-lane bridge seems particularly hard. Frankly most humans are quite bad at it.)

I'm also a bit skeptical because in "shadow mode" the cars are training themselves based on average human driver behavior. Which sucks. I think it's going to be necessary to feed in some data for corner cases based on *expert* human driver behavior before we get good results, and that hasn't been done yet.

 

[neroden]

After buying on the dips over the course of years, I finally have enough shares to sell options! So without any further planned catalyst, I expect the stock to stagnate until the Q4 ER. Took advantage of this lull, and the thinking of the shorts to sell Mar 255's! Should be high enough to not excercise even with a good 2017 forecast (relying on market doubt about TSLA's guidance).

Wouldn't count on it!

And if it expires OTM, then sell the next call option at a higher strike. Rinse and repeat. If it gets called out, sell puts.

Good, you have a backup plan!

The only drawback to this strategy was accumulating enough shares/capital to initiate it.

Edit: Oops. Should've posted this on the trading strategies thread. Sorry Audobon!

 

[Yggdrasill]

Please! Ludicrous post!

That doesn't mean that Tesla intentionally slowed the MX production! The delay obviously cost them a lot of money!

I think the first years worth of delays was a decision on Tesla's side. The rest was scope creep and supplier issues.

 

[neroden]

There's nothing to stop them from trying it - they didn't say the car would do it without an occupant, they said it would do it without driver intervention. No state I'm aware of has any laws against autopilot-type functions being used by a driver.

If they stay on the expressways and avoid the crazier San Francisco and New York streets (cobblestones! streetcars!) they probably won't have too much trouble.

Let's say, Santa Monica Pier to the Lincoln Memorial in DC. I think there's nothing particularly weird or tricky on that route.

 

[3Victoria]

I'm biased because I live in the Land Of Obscure Corner Cases, featuring wonderful things like one-lane bridges, blind corners, parking lots made of grass, and so on. I think it'll take 10 years + out *here*.

Well, in your case, we are never going to allow automatous cars, but you can use autonomous donkeys, horses and cows for your transportation needs. If you are rich, you could have a carriage, or if poor a rickshaw or wheelbarrow. If you want an autonomous car, you will just have to move to a less godforsaken area.

 

[neroden]

New research note this morning from Goldman Sachs.

However, the commentary on the Model 3 was more
guarded with Tesla’s expected 2H17 production ramp seemingly hinging
on stamping and seating, whereas the company is performing significant
reconfiguration work on its end at the Fremont facility.

OK, interesting. Stamping should be pretty straightforward, although I know metal can do weird things; must be related to getting the stamping equipment installed.

Seating is an area I was *expecting* to be a problem, since current standard seating construction is pretty hand-labor-intensive and it's not obvious how to make it go quicker.

 

[EinSV]

<snip>
See, autonomy is not part of Tesla's mission. Tesla's mission is to stop fossil fuel burning. <snip>

I had thought that for a long time but on further reflection I believe the Tesla Network could play a major role in accelerating sustainable transport, and is an important part of Tesla's mission.

Since an autonomous, networked BEV can be driven far more miles per day and at lower cost than a non-autonomous ICE vehicle, use of the TN could massively accelerate BEV miles driven versus ICE miles driven.

For example, if a Tesla-Networked Model 3 is driven 45K miles per year it could replace miles driven from the equivalent of three ICE vehicles, instead of just one. I just picked numbers at random but hopefully it makes the point that the Tesla Network could be a major factor in accelerating the phase-out of fossil fuel burning vehicle miles.

 

[neroden]

Question for any resident accounting gurus:

Now that Solarcity is part of Tesla, if stationary storage projects are bought on a PPA basis like in Kauai, how does that affect Tesla's bottom line? If it is financed with non-recourse debt, what is the effect on GAAP profit and cash from operations metrics?

I'm definitely not an accounting guru. I almost had this figured out but apparently the accounting standards changed this year!

 

[SBenson]

it's quite a long list... but I have a personal opinion based on my software engineering experience that companies are grossly over simplifying and have their time lines way too aggressive for when we might start seeing anything like Tesla Mobility.

I actually agree with you on this and I think it doesn't matter for the stock.

See, autonomy is not part of Tesla's mission. Tesla's mission is to stop fossil fuel burning. But when Model S came out, nearly every reviewer complained that Tesla didn't have the driver-assist feature that the ICE competition had, and the ICE companies started bragging about how their cars would be autonomous and so they would be better than Tesla's....

So Musk quite rightly decided that Tesla needed driver assist and "autonomy" features which were better than all the ICE competition. This is necessary in order to stop people from buying ICE cars. And that's all he has to do in order to achieve the goal: do better than any of the ICE carmakers. It *never* has to get fully functional. It just has to be consistently better than the competitors. And I believe it is and will continue to be.

You should watch the Sterling Anderson's TED talk. Towards the end he makes the remark that 1 fully autonomous car can displace 4 or 5 regular cars (as they can be made to run pretty much all the time). So FSD does play a very big role in accelerating the electrification of transport.

I think more importantly you guys are in disbelief. You should look at all of Musk's accomplishments, he achieved things which were generally considered un-accomplish-able by the 'experts'.

When Musk says FSD will come "hell of a lot faster than anyone is expecting", I believe him. When he says it will be 'technically' done (baring regs) by end of 2017, I believe he will get done maybe by end of 2018, but probably not much more.

FSD is mostly AI. Musk has access to some of the very best in the field. He runs openai. Don't doubt Musk's technical chops. That is the last thing you would want to doubt about him.

Any long-term short placed/held after AP 2.0 hardware release is seriously suicidal.

 

[neroden]

They can package and resell any of their PPA contracts via bond-market type of financing. So, they build the equipment and install it and then can claim that the equipment will make a certain amount of money and then sell that "future money" in a type of bond. I bet it's complex to read the contracts. For instance, they can re-sell PPAs on a homeowner's solar PV array based on nameplate PV size and not future production. They just do not indicate if the roof is facing the sun properly, if there is shading or not or the expected PV degradation over time. So, the sale guys at home depot who are selling "would you be interested in a free solar upgrade?" to consumers probably have incentive to just put solar on any roof these days. The PPA agreements will be sold off. I have a neighbor who recently had SCTY install - E and W facing roofs - plenty of huge trees blocking production. Sort of a heartbreaking install knowing that their array will produce so little.

Well, maybe the trees are old and will die and have to be chopped down eventually. ;-)

 

[Turing]

I'm *still* expecting mass production to be delayed until September, because even with Tesla harassing all suppliers to deliver on time, *someone* is going to screw up *something*. This was basically Elon's point when he said that the July 1 was not achievable and that if he know which part was going to hold it up, he'd fix that, but he doesn't know.

I can just see them needing to get a new supplier due to a shortage of something dopey like lug nuts or fabric glue, discovered at the last minute, causing a three-month delay.

What you're pointing out -- that all the *major* components seem to be well in line and ready to go -- is, however, why I am extremely optimistic about full M3 production happening in Q4 2017.

It seems like WS is being overly bearish on Tesla's chances of getting model 3 to 1-2k/wk by the end of 2017. I'm more concerned with getting from 2k to 10k/wk, and what everything involved in that process will look like.

 

[neroden]

BTW, "we sell every car we make" is a tautology. Everyone does.

Absolutely false. I remember seeing unsold, new, 2008 cars on dealers' lots in 2011.

 

[neroden]

So I just remembered Tesla buying a body stamping parts company in May 2015.

A first in Michigan: Tesla buys Grand Rapids auto supplier

Now we know body stamping is among the longest leadtime items for M3 ramp. I'm sure glad they made that purchase in 2015.

Yep. I remember when they bought the tool & die company, I went "ooh, with an in-house tool and die company, they can go as fast as possible on making new dies". It was definitely a necessary move to mitigate risk of delays to Model 3.

 

[Bgarret]

So, Vgrishpun posted a link to this article regarding potential 'black swan' risks for oil in 2017.

Why oil investors may suffer the ‘black swan’ potential of Elon Musk in 2017

Slipped in among 1. Trade Wars, 2. Natural Disasters and Fukushima-like tragedies 3. Riots, Invasions and Country-wide defaults, and Terrorism is......Elon Musk.

You know you have arrived when your roll out of a product could be as impactful as ballistic missile testing, global trade wars and economic recession.

I'm sure the Chevy Bolt and Toyota Mirai were like #14 & 15 on this list.....so close, but just missed.

 

[racer26]

I had thought that for a long time but on further reflection I believe the Tesla Network could play a major role in accelerating sustainable transport, and is an important part of Tesla's mission.

Since an automonomous, networked EV can be driven far more miles per day and at lower cost than a non-autonomous ICE vehicle, use of the TN could massively accelerate BEV miles driven versus ICE miles driven.

For example, if a Tesla-Networked Model 3 is driven 45K miles per year it could replace miles driven from the equivalent of three ICE vehicles, instead of just one. I just picked numbers at random but hopefully it makes the point that the Tesla Network could be a major factor in accelerating the phase-out of fossil fuel burning vehicle miles.

I suspect that this too, was planned far before any of us had even had the thought.

Tesla knows they can't produce enough cars to meet the demand without building more factories, and that's going to take time. The only way to make a greater impact than 500k cars/year until more factories are built, is if those 500k cars each displace an average of greater than 1 ICEV each. TN allows a car to increase its utilization factor from 5-15% up into the >50% range easily.

 

[neroden]

Yep, take a look at it from a Gas Station perspective and it becomes easy to see. Different business model - Tesla isn't selling markup on the energy but a flat fee access to the system (embedded in the car purchase) that they are happy to open up to other manufacturers. The analogy I see here is like a Costco that makes their money on their membership fees, where product markup is all to cover overhead. As well it is fundamentally a different and smaller market since most of your charging is at home. Gas Stations certainly can't compete by installing charging stations the markup would need to be ridiculous to have a car fill up a space for 30mins.

Clarification: gas stations ALREADY make no money on gas.

It's run as a loss leader to get people into the convenience stores.

Well, they often make a little gross profit, but I've read that it's under 1%. This certainly does not cover the capital costs of the tanks and pumps and so on, let alone the liability costs for spills.

They will be happy to get rid of the tanks and pumps and replace them with maintenance-free Superchargers which have no environmental liabiilties. Just as long as it brings people into the convenience stores.

Tesla's already got deals with at least two regional chains to do exactly this (Sheetz is one of them)