2017 Investor Roundtable:General Discussion

[ValueAnalyst]

Excellent post. All your points make sense. On point 3, capex needed to start multiple Gigafactories, as well as continue them into the high capex mid and end phases, would be reduced a good deal if Tesla and Panasonic continue partnering as they have to date.
Panasonic has put real skin into the game with both GF1 and GF2. I can't think of any reason why they would not want to continue doing so or why Tesla would not want them to continue providing some of the necessary GF capex for 3 - 5.

Can anyone summarize the cost/benefit division between Tesla & Panasonic? I have a general understanding of it, but I would highly appreciate it if someone could provide specific numbers. I'm not sure if this is publicly available.

 

[Drax7]

Using a linear model to describe an exponential curve is waay too simplistic. It will take time to get to 100% BEVs, but it will a lot closer to 50 years than 200 years.

If no one else will build BEVs, Tesla will do so. They will take the money generated by gigafactory one, and build two new gigafactories. Then they will take the money generated by the three gigafactories and build six new gigafactories. Then they will take the money generated from the 9 gigafactories and build 18 new gigafactories. Again, that's if the other car makers don't pull their weight.

But I think (some) of the large car companies will pull their weight. As I mentioned before, I think VW had a real wake-up call with the dieselgate fraud. And I think the rest will in the near future realize that if they don't get out ahead of this, they will be toast. For some, the realization will come too late, but I think *most* will manage to make the transition.

The German companies are too big to fail, a government bailout is guaranteed if need be.

 

[Yggdrasill]

The German companies are too big to fail, a government bailout is guaranteed if need be.

That's true. But if they go bankrupt, the investors are almost certainly wiped out, even if the goverment decides to pick up the pieces and try to glue them back together. Some assets might be sold off in the process, and the companies will lose importance.

It may be that a bankruptcy will wake them up, and they will embrace the BEV revolution. If not, it won't be long before they are bankrupt, again.

 

[ZenMan]

Interesting to hear that Mark Spiegel has covered some of his short, especially with the following Letter to the Editor in today's Wall Street Journal:

“Tesla Bulls Are Betting on Musk, Not the Car Business” (Business World, April 15), Holman Jenkins wonders if Tesla’s massive market cap may perhaps be justified by its batteries becoming a “near-monopoly standard.” In fact, Tesla’s battery cells are made by Panasonic (within a roof and four walls known as the Gigafactory 1 provided by Tesla). Tesla just assembles them into packs, a business which in Q4 of 2016 (the most recent financial statement available) brought Tesla a double-digit negative gross margin. Storage batteries are in fact a near commodity produced by scores of Tesla competitors, many of which are much deeper-pocketed than Tesla (albeit nowhere near as dominant in the hype department). There will never be a “near-monopoly standard” because a kilowatt-hour of electricity is a kilowatt-hour of electricity.

This is one of myriad reasons why I’m short Tesla’s stock, with the primary one being the massive amount of automotive competition the company will soon face. Yet even before that competition arrives, Tesla will have seen four consecutive quarters (Q3 of 2016 through Q2 of 2017) of zero growth in its money-losing automotive business.


Mark Spiegel​

 

[Drax7]

The point being is that the Germans will always be around, one way or another.
Tooo big to fail is their insurance policy.
It may well explain the mentality of the Grohmann workers.

Martin Eberhard was doing consulting work for VW, that I don't like.

 

[MP3Mike]

I never understand why we must always have an assembly line with the product moving around rather than a building pad with the parts flowing around and general purpose robots coming to stationary built cars* when needed.

I think the same reason that Tesla has stopped using general purpose robots that can change tools and gone to more specialized ones. The robots waste way too much time changing tools out. Not to mention your parts flow is easier. Each part flows to one station, vs. every part having to flow to a lot of stations.

 

[AudubonB]

More on Neroden's mentioning Berkshire Hathaway:

this was in January, 2010; at the time BRK had a market cap of $158bn - it's now at $410bn.

I wonder where Tesla will be in a half century - whether it can come anywhere near the 20.8% compound annual growth Mr Buffet has been able to sustain over 50 years? That $10,000 my father did not invest for me back in 1965 would be some $90 million today.....

 

[Bgarret]

Bloomberg. 1 article. 15 charts. Ballgame.

The Cheap Energy Revolution Is Here, and Coal Won’t Cut It

 

[Snapdragon III]

More on Neroden's mentioning Berkshire Hathaway:

this was in January, 2010; at the time BRK had a market cap of $158bn - it's now at $410bn.

I wonder where Tesla will be in a half century - whether it can come anywhere near the 20.8% compound annual growth Mr Buffet has been able to sustain over 50 years? That $10,000 my father did not invest for me back in 1965 would be some $90 million today.....

I told my Grandmother I had bought Berkshire about 10 years ago, and she came right back with this. "I had this broker who really wanted me to buy 25K worth of Berkshire Hathaway back in 1975 when your Grandpa died. I didn't do it, it seemed like too much." She couldn't believe it when I told her how much that 25k would have grown to.

 

[Lump]

Anyone attending the Berkshire Hathaway shareholder meeting next weekend?

 

[Ovulation]

More on Neroden's mentioning Berkshire Hathaway:

this was in January, 2010; at the time BRK had a market cap of $158bn - it's now at $410bn.

I wonder where Tesla will be in a half century - whether it can come anywhere near the 20.8% compound annual growth Mr Buffet has been able to sustain over 50 years? That $10,000 my father did not invest for me back in 1965 would be some $90 million today.....

Don't worry about that, in 50 years we will all live in a post-capitalist society plugged into a hive mind. It's kind of funny that the capitalists in Silicon Valley try to make a basically anti-communist propaganda piece (Star Trek: The borg) true.

 

[Ovulation]

I recently stumbled into an very good made and insightful Tesla podcast (no I have nothing to do with it). In their last episode they echoed my line of thinking of why Tesla value is justifiably, considering the scope of the car market and Teslas margins. Check it out, do you find any flaws in the arguments?

54 – Tesla's Valuation

I love their podcast.

Yes it's a interesting podcast, quite a lot research seems to go into it, not just in that piece

 

[Waiting4M3]

I never understand why we must always have an assembly line with the product moving around rather than a building pad with the parts flowing around and general purpose robots coming to stationary built cars* when needed. Some robots would be generally used often such as place gasket, glue, weld, feed wires, solder, clip bolt and screw, etc., but other specialty robots could move around to give room for other specialty robots to also move around. This way, space could be used more efficiently, by having the entire 3D to 4D space used up by flowing parts. The entire floor would be nothing but parallel build pads, with each build pad being one whole vehicle. Because of the spaces involved, it would be easy to allow large size vehicles in this format. In this way, the assembly line never slows down because of something else in the chain of product assembly; the only slowdowns would be when parts become unavailable, and that just means vehicles being built that don't need that part will be the ones to complete first and the factory will output less, not stop.

* The cars would probably be mounted on robots that could move it around as needed within its build pad, but wouldn't take the car away until it was finished (or delayed).

Based on my experience with semiconductor fabs, it's a little like the production pad model that you mentioned. There are hundreds of processing steps, and different technology nodes (14nm vs 28nm) have different steps. Each step has dozens of tools available to process them. When a box of wafer comes up to the next step, the fab automation SW looks for the next open tool and assigns it, and an overhead conveyor grabs the wafer box and put it on the tool (overhead track saves space overhead, hehe), and the automation SW tells the tool what processing recipe to use depend on the technology node and what kind of chip it is. There is no concept of a "linear" line, only linear processing sequence for each wafer box. Each box can jump ahead or be held back based on their priority, every tool is always working, maximizing utilization. Semi fabs have been running this way for many years, a few hundred people can run a huge fabs. Yes there will still be bottlenecks if the # of tools is not balanced at each step vs the overall thruput, but that calculation is easily manageable, and you avoid have a one of a kind tool, so that one box on one single tool will not hold up the whole line.

 

[erha]

Don't worry about that, in 50 years we will all live in a post-capitalist society plugged into a hive mind. It's kind of funny that the capitalists in Silicon Valley trey to make a basically anti-communist propaganda piece (Star Trek: The borg) true.

Or just don't worry because in 50 years, Tesla will be the worlds largest company on a par with what you would get if you today combined Exxon, all German automakers, and the largest power stations in each country. The future is bright

 

[Thumper]

If I understand it correctly, robots use stepper motors or encoders to keep track of the motion and position of the robot arm. The assembly must be positioned accurately relative to the robots at a station for the operations to proceed. If we move the robots instead of the assembly, it is more difficult to get each robot perfectly positioned relative to the assembly. This suggest that moving robots makes everything more difficult. Could Tesla use vision instead of dead reckoning of stepper motors/encocers to solve this problem. Teslavision?

 

[racer26]

If I understand it correctly, robots use stepper motors or encoders to keep track of the motion and position of the robot arm. The assembly must be positioned accurately relative to the robots at a station for the operations to proceed. If we move the robots instead of the assembly, it is more difficult to get each robot perfectly positioned relative to the assembly. This suggest that moving robots makes everything more difficult. Could Tesla use vision instead of dead reckoning of stepper motors/encocers to solve this problem. Teslavision?

Ehhh.

Speaking as a guy who designs and builds robots (albeit at a different end of the spectrum) for a living? Not exactly.

There are many techniques to ensuring things are where the robot expects them to be, or else making the robot able to accommodate a range of input, so long as its within the design tolerances. Years ago I built a robot that threw Nerf balls for a competition - the density of the foam a Nerf ball is made from is not nearly as uniform as you might expect from ball to ball, and that meant the thrower (which compressed the ball through a spinning wheel) wouldn't shoot consistently unless you adjusted it for the density of the next ball it was firing.

 

[MitchJi]

Tesla has been installing new M3 robots for a while now.

My first principle explanation is that the area identified for the Model 3 BIW line was a completely empty space on 12/20/16.

My family toured Tesla Factory on 3/29/2017 with good friends who were picking up their Red Model S 60D (75D unlockable), exactly a year and a week since I toured it 3/22/2016 when I took delivery of my Model X P90D F00041X. You can't take photographs, but I can tell everyone that there is an enormous area of the factory where the Model 3 assembly line is being built. There are Kuka robots all over the place waiting to be installed. It's a beautiful thing. One of the guys that works there said there's so much activity going on, that he and a friend challenge each other each morning to see if they can figure out what's new that day.

replied to post in q1 thread that is more general in nature below - on the topic of model 3 gross margin.

i don't know if it's as hard as you think to get those 20% gross margins on a base-ish 3. the key is that there are significant software options - especially autopilot and self-driving. it's really underappreciated how big of a software company tesla will become in the next 12 months: $4000 ap option x 250,000 vehicles x 60% up-front take rate = $600m in software revenue from model 3. then add: $5000 ap option x 100,000 s/x x 70% up-front take rate = $350m in software revenue from model s/x. that's nearly $1b in software revenue and faster growth than in most cloud computing companies.

if we assume ap is $4k at a 60% take rate and runs at a 90% gross margin (being all software), that alone is going to contribute ~ 6.2% to gross margin per (otherwise base) vehicle. so really that $35k model with nothing on it, you only need to get to around 13.8% gross margin to...

I agree that Tesla can get the margins to twenty percent. Two things:
1. I'm sure that they will reduce the AP prices on both the M3 and the MS-MX when the M3 is in production.
2. A simpler way to determine that is that Tesla's battery costs are going to be low enough to make their costs less than a conventional car.

Spiegel lightening up short position for ER. Hmmm, does that mean SP about to launch, or is he ringing the bell at the local top just like his presentation at that investor forum rang the bell at the bottom.

Interestingly, I also bought another round today. So Spiegel and I may have been buying around the same time. What are the odds?

Mark B. Spiegel‏ @markbspiegel 6h6 hours ago

Mark B. Spiegel Retweeted Mark B. Spiegel

I've lightened my $TSLA short ahead of the report just in case there's a giant spike on manipulated "profits." I plan to upsize right after.

Depending on an idiot to either get it right, or consistently get it wrong about market timing is not an intelligent strategy. He'd be one of the richest men in the world if he could do that.

That's similar to depending on the trolls on this forum to point out the risks in investing in Tesla! Just because they have a lot of experience pointing out foolish issues doesn't make them experts on anything except spewing nonsense.

 

[Lessmog]

I never understand why we must always have an assembly line with the product moving around rather than a building pad with the parts flowing around and general purpose robots coming to stationary built cars* when needed. Some robots would be generally used often such as place gasket, glue, weld, feed wires, solder, clip bolt and screw, etc., but other specialty robots could move around to give room for other specialty robots to also move around. This way, space could be used more efficiently, by having the entire 3D to 4D space used up by flowing parts. The entire floor would be nothing but parallel build pads, with each build pad being one whole vehicle. Because of the spaces involved, it would be easy to allow large size vehicles in this format. In this way, the assembly line never slows down because of something else in the chain of product assembly; the only slowdowns would be when parts become unavailable, and that just means vehicles being built that don't need that part will be the ones to complete first and the factory will output less, not stop.

* The cars would probably be mounted on robots that could move it around as needed within its build pad, but wouldn't take the car away until it was finished (or delayed).

This feels somewhat reminiscent to the way Volvo built a new factory in Kalmar some 40 years ago. It was inspired by the former CEO P G Gyllenhammar (who was recently portrayed on Swedish tv) and his prime source of pride, in that it let the auto workers actually build the whole car, as teams with their own coffee lounge etc. The product moved to the hands instead of the opposite, as I understood it from the documentary.

Gyllenhammar was ousted, perhaps because he had too extravagant plans or because he failed to communicate them efficiently to the board. First he wanted a fusion with Norway's budding shelf oil industry, later a fusion with Renault -- that's when he forgot to tell the board that the French government had a "golden share" to veto anything, but also to explain how that didn't matter. He blew their trust and became bitter. He is now over 80 and a father of a 2-year-old.

 

[ValueAnalyst]

Interesting to hear that Mark Spiegel has covered some of his short, especially with the following Letter to the Editor in today's Wall Street Journal:

“Tesla Bulls Are Betting on Musk, Not the Car Business” (Business World, April 15), Holman Jenkins wonders if Tesla’s massive market cap may perhaps be justified by its batteries becoming a “near-monopoly standard.” In fact, Tesla’s battery cells are made by Panasonic (within a roof and four walls known as the Gigafactory 1 provided by Tesla). Tesla just assembles them into packs, a business which in Q4 of 2016 (the most recent financial statement available) brought Tesla a double-digit negative gross margin. Storage batteries are in fact a near commodity produced by scores of Tesla competitors, many of which are much deeper-pocketed than Tesla (albeit nowhere near as dominant in the hype department). There will never be a “near-monopoly standard” because a kilowatt-hour of electricity is a kilowatt-hour of electricity.

This is one of myriad reasons why I’m short Tesla’s stock, with the primary one being the massive amount of automotive competition the company will soon face. Yet even before that competition arrives, Tesla will have seen four consecutive quarters (Q3 of 2016 through Q2 of 2017) of zero growth in its money-losing automotive business.


Mark Spiegel​

Can you please provide link/support for him covering some of his short?

 

[kenliles]

Bloomberg. 1 article. 15 charts. Ballgame.

The Cheap Energy Revolution Is Here, and Coal Won’t Cut It

they clearly missed a triangle in that chart--