2017 Investor Roundtable:General Discussion

[ValueAnalyst]

Correct except for minor tweaks plus the improvements due to chemistry improvements.

You've been following this more than me, so I'll adopt your assumption. 4 gigafactories each supplying 1.0m cars still support my 4m car by 2020 forecast, as long as they all come online by mid-2020. Three years from announcement to production is in-line with giga1 timeline.

What I'm really excited about though is how many more gigafactories Elon will announce by or in 2020. With Model 3 producing and other cars (4m x $50,000 asp x 25% gm) ~$50 billion gross profit each year, that could easily support 3-5 gigas per year! And that's excluding any contribution from Tesla Energy.

 

[dirtyofries]

a blip i came across (google translate from Chinese may be "funky" impling permanent magnet motors instead of AC Induction rotating magnetic fields motor,
SA trolls are drooling buckets.and an article is expected implying imminant death, crash, etc
中科三环称特斯拉量产对公司有积极影响_产业在线
cannot copy/paste as it only will do chinese characters (i think)

{edit: also to the reasonably paranoid, keep your malware definitions up to date and re-scan after looking}

Translated:

Recently welcomed by the Tesla Model 3 production version of the model exposure, Tesla official website will be delivered in 2018, priced at 35,000 US dollars. It is understood that this has not really meaningful production models, only the deposit received 400 million US dollars, about 2.75 billion yuan, which may be the most popular models.

Listed companyZhongke Sanhuan has said it has entered the Tesla industry chain, Tesla Model 3 main drive motor is the use of the company's rare earth permanent magnet products, its production will have a positive impact on the company.

 

[Papafox]

i'll try to post some more details on my q1 model over in the 2017q1 thread today. i'm basically having a hard time coming up with negative earnings using reasonable assumptions, but admittedly a large swing comes from the solar city non-controlling interest.

i'm seeing record revenues, record gross profits, record gaap and non-gaap eps, and most likely record to near record gaap gross margin.

i also was checking up on the us tax credit. my modeling indicates that most likely expiration of the $7500 credit will come in q4 2016. the credit actually expires one full calendar quarter after the calendar quarter in which 200k vehicles are hit.

with the model 3 likely production constrained and no possibility for new lookers to get that vehicle, i feel that q3-q4 2016 may see aggressive activity for new s/x. at least this is historically what has been observed with such credit expirations - people buy very aggressively before the expiration and demand slacks after the expiration.

i think this $7500 expiration could push enough people off the fence in q3/q4 to make up for those buyers lost to model 3. i also think you get the iphone/ipad and mac sales effect - that is the popularity of iphone and ipad drove customers into apple stores, who then bought macs while they were browsing and drove up mac sales.

all of this is very important in the context of q1 earnings, because a profitable q1 to me means q3/q4 profits are not out of the question due to strong s & x activity from the subsidy expiration and cross-sale effect. depending on what solar city contributes with its lower cost structure, the nci's, and the solar roof, those factors would likely be enough to offset your higher expense run rate around model 3. keep in mind the production rate for model 3 doesn't really kick up until q4 in the ideal situations, so it's not like we are scaling up for 500k units right away and realizing all that cost without sales coming in tandem.

i keep focusing on these profitable quarters because my intermediate term trading prize is the s&p 500 addition. 4 consecutive quarters of profit basically forces tesla on the list as it meets all the rules.

so q2 becomes highly relevant. if they can eke out a profit in q2 as well as q1, then that makes 3/4 profitable quarters on a gaap basis. and that already will bring at least consideration from the s&p 500 committee. it may be hard to get to a q2 profit due to effects i described earlier. however there are a few offsets that can be shifted across q1 and q2. if i am tesla and i want to help luv's position, i try to report a profit, keeping as many bullets as i can for q2 to report an equal or higher profit, not just for the possible stock impact but also to have strong financial strength projected into the 3 launch. i don't know if they will "manage" eps this way, but i hope so!

Hmm, if Q2 is potentially the weak quarter this year, then maybe Tesla will try something like offering attractive battery upgrade options that will be highly exercised in the second quarter. ; )

 

[zdriver]

Listed companyZhongke Sanhuan has said it has entered the Tesla industry chain, Tesla Model 3 main drive motor is the use of the company's rare earth permanent magnet products, its production will have a positive impact on the company.

Someone called this a few months ago - remember the strange guy that showed up and claimed (with no sources) that Model 3 would use (at least one) PMAC motor?

 

[JRP3]

I still don't buy it without better confirmation than few lines which may not have been properly translated or may not have been correct in the original. Tesla has a lot of expertise in optimizing AC induction motors and inverters so I'd be quite surprised if they switched to the conventionally more expensive PMAC motor.

 

[schonelucht]

it looks like inventory on the tesla inventory search sites is around 600 vehicles.

From a guy who has run the scrapers : inventory is much larger than what the inventory search sites show up. And all loaner and demo cars are effectively inventory too. All total we are talking about 6000 to 10000 cars. Not all of them 75kWh models obviously. But as you said, the step up is putting downward pressure on the full range.

Also do you think they really dropped battery costs $65/kWh from one quarter to another? My best guess would be battery costs for Tesla to be around $130. You are proposing they dropped by 50% one quarter from another? How so? I believe model S/X batteries are still coming from Japan, not the gigafactory so that really can't be it.

Honestly, this quarter I've seen more signals that demand is flagging than the other way around. That's really a very unusual thing for Tesla.

 

[luvb2b]

thanks. i am realizing that my interpretation of the rules is likely too conservative. see :
http://us.spindices.com/documents/methodologies/methodology-sp-us-indices.pdf

Financial Viability. The sum of the most recent four consecutive quarters’ Generally Accepted Accounting Principles (GAAP) earnings (net income excluding discontinued operations) should be positive as should the most recent quarter. For equity real estate investment trusts (REITs), financial viability is based on GAAP earnings and/or Funds From Operations (FFO), if reported. FFO is a measure commonly used in equity REIT analysis.​

so actually it doesn't take 4 consecutive quarters of gaap profitability.

if they hit my 61c gaap eps estimate for q1 17, that puts the last 3 quarters at 0.61, -0.78, 0.14. add those 3 is -3 cents.

that means a remotely positive q2 - even as little as say 10c in gaap eps would be enough to push tesla into qualification. that would happen sometime in august and i'd expect the addition to happen before september 30th 2017 if it all fell into place. that's 6 months earlier than my prior expectation.

Thank you for continuing to bring awareness to the importance of TSLA making the S&P 500 cut list. I personally believe this will be the most significant high-profile independent 3rd-party confirmation that eternally undermines any bear/FUD argument regarding Tesla's overall financial health as a company. It will open the gates allowing additional funds to invest in the company. I strongly believe that Elon/Tesla put high value on achieving a S&P listing status given all the challenges they have faced and all the unnecessary and inappropriate dribble they have had to endure. This will make a win feel like a win................and very publicly make a win look like a win too!

 

[Yggdrasill]

I still don't buy it without better confirmation than few lines which may not have been properly translated or may not have been correct in the original. Tesla has a lot of expertise in optimizing AC induction motors and inverters so I'd be quite surprised if they switched to the conventionally more expensive PMAC motor.

I wouldn't be surprised if they go for permanent magnets in some future motor designs. Heat buildup prevents the current AC motors from being able to output high power over long periods of time. This can be problematic if Tesla wants to go over 200 mph with the next Roadster, or something similar.

I doubt they've used permanent magnets in the Model 3, though.

 

[racer26]

What does this mean?

Elon Musk on Twitter

Is this a 60->75kWh pack swap about to be offered? That sounds like a thing they'd only do if it were 21-70 derived.

 

[luvb2b]

on the battery costs, i am assuming that they haven't incorporated gigafactory batteries into the automotive side yet.

i am going off an old electrek article which suggests the prior $190/kwh will come down to $125/kwh due to the gigafactory:
Tesla is now claiming 35% battery cost reduction at ‘Gigafactory 1’ – hinting at breakthrough cost below $125/kWh
the drop is assumed to be 35% quarter to quarter as gigafactory batteries work their way into car batteries.

i was at my local tesla center yesterday and the day before. i've struggled to get appointments for test drives and "customer education". yesterday the whole place was humming and the sales guy was complaining he was understaffed. they pulled some kid out of the back to take us on our test drive. the guy who was with me was in the market for a luxury suv. afterwards he said he expected tesla was better than some of the others, but he didn't expect it to be "so much better." there are few x's in inventory and i feel like there's probably a lot more unsatisfied demand out there. they've only shipped a total of 37k x's globally after all.

with cars scheduled to ship in june already, i don't think that demand has dropped enough to matter near term.

on inventory see pg. 78:
tsla-10k_20161231.htm

As of December 31, 2016 and 2015, our inventory consisted of the following (in thousands):
2016 Finished goods 1,016,731

Finished goods inventory includes vehicles in transit to fulfill customer orders, new vehicles available for immediate sale at our retail and service center locations, pre-owned Tesla vehicles, and energy storage products.
​

5k vehicles were in transit last quarter, figure that's 500m in inventory likely headed to delivery.
that leaves 517m total inventory to account for - including energy storage, used cars, and the loaner fleet.
a 10% across the board writedown would be a $52m one-time charge in a given quarter. they've been averaging a $15m charge for inventory writedown each quarter in 2016.

so there could be an unusual charge of about $37-40m in that case, which is more meaningful but not the end of the world. they could cover that with more ap revenues being realized. definitely an incremental negative to q2 though. i'll put more thought into it after i hear the q1 call. thanks for pointing this out.

From a guy who has run the scrapers : inventory is much larger than what the inventory search sites show up. And all loaner and demo cars are effectively inventory too. All total we are talking about 6000 to 10000 cars. Not all of them 75kWh models obviously. But as you said, the step up is putting downward pressure on the full range.

Also do you think they really dropped battery costs $65/kWh from one quarter to another? My best guess would be battery costs for Tesla to be around $130. You are proposing they dropped by 50% one quarter from another? How so? I believe model S/X batteries are still coming from Japan, not the gigafactory so that really can't be it.

Honestly, this quarter I've seen more signals that demand is flagging than the other way around. That's really a very unusual thing for Tesla.

 

[mmd]

Surprise: 70% Of Millenials Do Not Want Electric Vehicles

 

[Thumper]

Any possibility the second motor could be permanent magnet? Seems like asking for supply trouble with the rare earths.

 

[MitchJi]

I'm just going to leave this here.
Upgrade from Model S 60kWh to 75kWh is now priced at $2,000.
$2,000 / 15kWh = $133.33/kWh
If Gigafactory can make cells at a 30% reduction in price compared to the old cells, then we're down to the magical $100/kWh.

And they normally make big margins for pack upgrades.

So just to confirm: you do NOT expect any further improvement than 1.5m/year battery pack production per Gigafactory with "Gigafactories 3, 4, and possibly 5." Is this correct?

You've been following this more than me, so I'll adopt your assumption. 4 gigafactories each supplying 1.0m cars still support my 4m car by 2020 forecast, as long as they all come online by mid-2020. Three years from announcement to production is in-line with giga1 timeline.

Very slight chance. I believe that the only way that they could do if would be if they can figure out how to squeeze more of the separator coating and drying lines into the same area. I believe if they could that they'd do it now.

 

[MP3Mike]

I still don't buy it without better confirmation than few lines which may not have been properly translated or may not have been correct in the original. Tesla has a lot of expertise in optimizing AC induction motors and inverters so I'd be quite surprised if they switched to the conventionally more expensive PMAC motor.

Even one would give them the ability to regen to a stop more easily, and would give them a efficiency boost. But I did think one thing that Elon was proud of is how little rare earth metals they used in making their cars.

 

[Snapdragon III]

After further thinking and reading about the S75 price drop I have a new theory that makes sense to me. I think the main reason might be that they are gearing up for a refresh on the S and X that will bring the new 21-70 batteries to them, and they want the new base battery capacity to be 75k at around the new lowered S75 price. The thinking is that it is better to lower the price now, to avoid disappointing customers that just purchased, when the new refresh comes out in a few months. The increased demand will probably cancel out the lost revenue more or less, and treating customers as well as possible always seems to work out in the end. I still think Elon's comment about model S and X getting the best tech, means that they will get 21-70 batteries before model 3 launch.

 

[Waiting4M3]

on the battery costs, i am assuming that they haven't incorporated gigafactory batteries into the automotive side yet.

i am going off an old electrek article which suggests the prior $190/kwh will come down to $125/kwh due to the gigafactory:
Tesla is now claiming 35% battery cost reduction at ‘Gigafactory 1’ – hinting at breakthrough cost below $125/kWh
the drop is assumed to be 35% quarter to quarter as gigafactory batteries work their way into car batteries.

i was at my local tesla center yesterday and the day before. i've struggled to get appointments for test drives and "customer education". yesterday the whole place was humming and the sales guy was complaining he was understaffed. they pulled some kid out of the back to take us on our test drive. the guy who was with me was in the market for a luxury suv. afterwards he said he expected tesla was better than some of the others, but he didn't expect it to be "so much better." there are few x's in inventory and i feel like there's probably a lot more unsatisfied demand out there. they've only shipped a total of 37k x's globally after all.

with cars scheduled to ship in june already, i don't think that demand has dropped enough to matter near term.

on inventory see pg. 78:
tsla-10k_20161231.htm

As of December 31, 2016 and 2015, our inventory consisted of the following (in thousands):
2016 Finished goods 1,016,731

Finished goods inventory includes vehicles in transit to fulfill customer orders, new vehicles available for immediate sale at our retail and service center locations, pre-owned Tesla vehicles, and energy storage products.
​

5k vehicles were in transit last quarter, figure that's 500m in inventory likely headed to delivery.
that leaves 517m total inventory to account for - including energy storage, used cars, and the loaner fleet.
a 10% across the board writedown would be a $52m one-time charge in a given quarter. they've been averaging a $15m charge for inventory writedown each quarter in 2016.

so there could be an unusual charge of about $37-40m in that case, which is more meaningful but not the end of the world. they could cover that with more ap revenues being realized. definitely an incremental negative to q2 though. i'll put more thought into it after i hear the q1 call. thanks for pointing this out.

Is the 35% reduction expected for 2170 or 18650? cells or packs?

 

[racer26]

Surprise: 70% Of Millenials Do Not Want Electric Vehicles

Forbes does bad science again? Shocker.

Honestly. Stop citing Forbes as though they're anything but a hired shill to discredit Tesla.

Are millennials considering buying an electric car? No, because they're not considering buying *ANY* car. Furthermore, electric cars are still at a substantial price premium to the cars that a millennial should consider purchasing, which is a 7-10 year old used car.

 

[Snapdragon III]

Translated:

Recently welcomed by the Tesla Model 3 production version of the model exposure, Tesla official website will be delivered in 2018, priced at 35,000 US dollars. It is understood that this has not really meaningful production models, only the deposit received 400 million US dollars, about 2.75 billion yuan, which may be the most popular models.

Listed companyZhongke Sanhuan has said it has entered the Tesla industry chain, Tesla Model 3 main drive motor is the use of the company's rare earth permanent magnet products, its production will have a positive impact on the company.

I don't remember where (Possibly a question at the shareholder meeting?) but I saw a youtube video where Elon was very dismissive of DC motors. The quote was something along the lines of "AC is clearly superior, the only reason anyone uses DC is because they can't figure out the software/power control to use AC" (The preceding is from memory and not a real Musk quote)

 

[dirtyofries]

Forbes does bad science again? Shocker.

Honestly. Stop citing Forbes as though they're anything but a hired shill to discredit Tesla.

Are millennials considering buying an electric car? No, because they're not considering buying *ANY* car. Furthermore, electric cars are still at a substantial price premium to the cars that a millennial should consider purchasing, which is a 7-10 year old used car.

Also, second sentence

However, Tesla, the car manufacturer most closely associated with electric vehicles, is the favored brand of 13 to 19-year-olds.

 

[doctoxics]

I'm just going to leave this here.
Upgrade from Model S 60kWh to 75kWh is now priced at $2,000.
$2,000 / 15kWh = $133.33/kWh
If Gigafactory can make cells at a 30% reduction in price compared to the old cells, then we're down to the magical $100/kWh.

Wow! So, If the upgrade from 60 kwh to 70 kWh is at cost, then Tesla has reached $133/kwh. Could it be that the cost of the 15 kwh is greater than $2,000 and was payed, in part, in the purchase price of the 60 kwh Model S? As though one were paying extra in the original purchase for the option of later getting a software upgrade to 75 kwh. Actually, I am hoping your explanation is correct.